U.S. Court of Appeals for the Third Circuit Agrees to Hear Interlocutory Appeal in CFPB Enforcement Action against Student Loan Trusts

On April 29, 2022, the U.S. Court of Appeals for the Third Circuit granted a petition for permission to attraction in Client Monetary Safety Bureau v. The Nationwide Collegiate Grasp Student Loan Trusts filed by defendants The Nationwide Collegiate Student Loan Trusts (the “Trusts”) and sure interveners in the motion.1  The Third Circuit agreed to hear two licensed questions from the district court docket in the attraction: (1) whether or not, beneath the Client Monetary Safety Act (“CFPA”), the Trusts are “covered persons” topic to the CFPB enforcement authority; and (2) whether or not, after Collins v. Yellen, the CFPB was required to ratify the enforcement motion earlier than the three-year statute of limitations ran out.2

The Third Circuit’s grant of permission to attraction permits the Trusts’ attraction to be docketed and the points will likely be totally briefed over the coming months.  The district court docket has stayed the CFPB’s enforcement motion pending the Third Circuit’s overview.3

As mentioned in earlier articles,4 the CFPB initiated an enforcement motion immediately against the Trusts in 2017, alleging that the Trusts had violated the CFPA by participating in unfair and misleading practices in reference to the servicing and assortment of scholar loans.  The Trusts and sure interveners in the motion filed a movement to dismiss, arguing that the Trusts aren’t “covered persons” beneath the CFPA as a result of they’re “passive securitization vehicles that take no action related to the servicing of student loans or collecting debt” and, thus, aren’t topic to the CFPB’s enforcement authority.5  The Trusts additional argued that the motion was premature as a result of the CFPB failed to ratify the swimsuit earlier than the statute of limitations expired, rendering the motion time-barred.6 

Choose Stephanos Bibas, a visiting choose from the Third Circuit sitting by designation in the District of Delaware, rejected each arguments and denied the movement to dismiss.  On December 23, 2021, the Trusts and sure interveners filed a movement for interlocutory attraction of the district court docket’s order denying the movement to dismiss. On February 11, 2022, the district court docket granted the movement, ruling that (1) the questions raised in the Trusts’ movement contain “a controlling question of law”; (2) there’s “substantial ground” for a distinction of opinion in the interpretation of the controlling legislation; and (3) the interlocutory attraction would “advance the ultimate termination of the litigation.”7     

As we have now beforehand famous,8 the district court docket’s interpretation of “covered person” beneath the CFPA is noteworthy and creates a brand new line of potential publicity for entities, together with securitization trusts and different complete mortgage consumers, that purchase client loans on a servicing-retained foundation or enter into servicing agreements with third-party providers appearing as unbiased contractors.  If interlocutory overview is granted, the Third Circuit will likely be the first federal court docket of appeals to opine on the scope of the CFPA’s “covered person” definition as utilized to securitization trusts, with essential implications for any secondary market purchaser of a mortgage, together with hedge funds and institutional buyers (e.g., pension plans), with the chance that every one of them might turn out to be topic to the CFPB supervisory and enforcement jurisdiction to the extent such entities buy client loans.

We’ll proceed to monitor this motion and others for authorized developments beneath the CFPA affecting the secondary market.

Victor Celis additionally contributed to this text.


  1. Order at 2, No. 22-8010, ECF No. 19 (3d Cir. Apr. 29, 2022).

  2. Petition for Permission to Appeal at 2, N. 22-8010, ECF No. 1 (3d Cir. Feb. 2, 2022); Order at 1, No. 17-1323, ECF No. 397 (D. Del. Feb. 11, 2022).

  3. Order, supra observe 2, at 1.

  4. See, e.g., Ellen Holloman et al.District Court Grants Interlocutory Appeal in CFPB Enforcement Action against Student Loan Trusts and Stays Case Pending Appellate Evaluate, Cadwalader, Wickersham & Taft LLP (Feb. 16, 2022), https://www.cadwalader.com/resources/clients-friends-memos/district-court-grants-interlocutory-appeal-in-cfpb-enforcement-action-against-student-loan-trusts-and-stays-case-pending-appellate-review; Ellen Holloman et al.Federal Court Holds That Student Loan Trusts Are Topic to CFPB Enforcement Authority: What This Means for Client Securitizations and Different Entire Loan Patrons, Cadwalader, Wickersham & Taft LLP (Dec. 15, 2021), https://www.cadwalader.com/resources/clients-friends-memos/federal-court-holds-that-student-loan-trusts-are-subject-to-cfpb-enforcement-authority–what-this-means-for-consumer-securitizations-and-other-whole-loan-buyers#_ftnref2; Ellen Holloman et al.CFPB Swimsuit Against Student Loan Trusts Dismissed, Cadwalader, Wickersham & Taft LLP (Apr. 1, 2021), https://www.cadwalader.com/resources/clients-friends-memos/cfpb-suit-against-student-loan-trusts-dismissed#_ftnref7; Ellen Holloman et al.Ahead Motion in the Bureau of Client Monetary Safety’s Student Loan Litigation: What This Means for Securitization, Cadwalader, Wickersham & Taft LLP (Nov. 2, 2018), https://www.cadwalader.com/resources/clients-friends-memos/forward-movement-in-the-bureau-of-consumer-financial-protections-student-loan-litigation-what-this-means-for-securitization.

  5. Memorandum Opinion at 8, No. 17-1323, ECF No. 380 (D. Del. Dec. 13, 2022).

  6. Id. at 5-6.

  7. Id. at 3-4, 6-7.  Additional supporting this conclusion, Choose Bibas recalled that the beforehand assigned choose, Choose Maryellen Noreika, “expressed ‘some doubt’ that the Trusts are covered persons ‘under the plain language of the statute.’”  Id. at 5.

  8. Holloman, Federal Court Holds That Student Loan Trusts Are Topic to CFPB Enforcement Authority: What This Means for Client Securitizations and Different Entire Loan Patronssupra observe 4.

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