As we’ve been tracking for over a year now, courts across the country have addressed the significant question of whether the federal laws governing federally owned or guaranteed student loans preempt state laws placing burdens on servicers of those loans. Last week, the Eleventh Circuit became the latest court to weigh in, holding in Lawson-Ross v. Higher Ponds High Ed. Corp. that the Higher Education Act’s (HEA) disclosure requirements do not preempt claims of affirmative misrepresentation by the loan servicer. Although court cases have come down on both sides of this dispute, this circuit-level decision marks a new chapter in the ongoing controversy.
Background
In Lawson-Ross, the court’s preemption analysis turned on the precise claims raised by the plaintiffs. The plaintiffs (who were borrowers whose student loans were serviced by Great Lakes) had asserted claims for affirmative misrepresentation, rather than an allegation of failure to disclose. Specifically, the plaintiffs alleged that Great Lakes representatives “told them they were eligible for forgiveness of their loans through the [Public Service Loan Forgiveness Program], and only later did they discover they were not eligible-after they had already made payments that could not then be counted toward the PSLF Program.” According to the plaintiffs, Great Lakes had informed them that they were eligible for the PSLF Program and would qualify for loan forgiveness after making 120 payments, when the majority of the loans for each borrower were not federal direct loans, and thus were not eligible.
The brand new plaintiffs submitted a course step complaint, asserting states to possess violation away from fiduciary duty, carelessness, unfair enrichment, breach away from a suggested offer, and you may violation out of Florida’s Individual Collection Practices Operate, all the premised with the allegation that they had invested years and work out repayments it noticed do be eligible for the brand new PSLF System, only to be told otherwise afterwards.
Great Ponds gone to live in overlook the case, competing the says was basically expressly preempted by Section 1098g out of the fresh HEA, hence preempts “any disclosure criteria of every State law.” According to Higher Ponds, all of the states had been preempted since the nondisclosure says in line with the alleged failure to disclose information regarding the new PSLF System.
Rather, just after Great Ponds registered their activity to help you write off, the brand new Institution regarding Knowledge provided its observe into , proclaiming one to “Congress intended section 1098g to help you preempt any Condition laws demanding lenders to disclose products or pointers not required because of the Federal law” and this one county rules imposing “the bans towards the misrepresentation or omission out-of topic recommendations” broken area 1098g’s share preemption supply. Great Ponds maintained the fresh borrowers’ claims had been merely restyled low-disclosure states. The newest government region court in the Fl agreed. Inside dismissing possible the newest region judge construed the new misrepresentations as a good “failure to include particular recommendations.” The fresh plaintiffs appealed.
Eleventh Circuit – Zero Preemption
With the focus, the new Eleventh Routine spotted something in a different way. Even in the event point 1098g expressly preempts state laws and regulations that want additional disclosures, the fresh legal think it is was not is realize thus generally and that “state laws factors that cause step developing off affirmative misrepresentations an effective servicer voluntarily made that did not question the subject matter of needed disclosures demand zero revelation conditions.” The newest courtroom concluded there was no express preemption, dispute preemption, or industry preemption to have such as for instance says.
The brand new legal concerned about the desired disclosures getting payment selection around the HEA’s area 1083(e). They determined that the newest affirmative misrepresentation-centered claims were different in type on revelation-oriented states. New plaintiffs were not in the standard and you can have been just requesting recommendations into the mortgage forgiveness apps, the fresh new judge reasoned. With respect title loans Ooltewah TN to the allegations on grievance, High Lakes willingly offered this new consumers untrue details about the qualifications towards the PSLF System, thus giving go up to a non-preempted claim.
