HARRISBURG – Student loan giant Navient has failed to get a dismissal of the lawsuit filed against it in Pennsylvania by the Consumer Financial Protection Bureau (CFPB).

Sued earlier this year by the CFPB, Navient sought dismissal on the grounds that the agency, created by the Dodd-Frank Wall Street Reform and Consumer Protection Act to regulate the financial services agency, is unconstitutional.

A federal appeals court in Washington, D.C., has made that determination in a separate case, but Judge Robert Mariani, of the U.S. District Court for the Middle District of Pennsylvania, ruled differently.

Attorney Theodore R. Flo of the law firm of Ballard Spahr told the Pennsylvania Record that the court erred in failing to dismiss the case.

“This court relied on the overly deferential and poorly reasoned decisions of other district courts," Flo said. "It analyzed each objectionable feature of the CFPB's structure individually and, unlike the panel of the D.C. Circuit, declined to assess how they function when combined.”

Flo’s employer, Ballard Spahr LLP, represents Navient in other cases not related to this one.

On Jan. 18, the CFPB filed suit against Navient Corp. alleging the company violated the Consumer Financial Protection Act, the Fair Debt Collection Practices Act and Regulation V of the Fair Credit Reporting Act. 

Navient services more than 6 million federal student loans.

On March 24, Navient filed a motion to dismiss or for a more definite statement. Specifically, Navient argued that "(1) Counts I-VIII should be dismissed because the Bureau lacks Authority to bring suit under the CFP Act without first engaging in rulemaking to declare specific acts or practices unfair, deceptive, or abusive; (2) the entire complaint should be dismissed because the structure of the CFPB is unconstitutional and therefore the Director of the Bureau was acting without authority when he authorized the present suit; (3) Counts I-IV and Counts Vll-X fail to state a claim for which relief can be granted; and (4) Count VI is so vague that Navient is unable to respond to it by way of an answer."

The court denied Navient’s motion in its entirety, ruling the brief was unspecific and vague and that, “The Bureau's complaint provides multiple specific examples of payment processing errors and then alleges that Navient failed to have policies and procedures in place to identify and prevent the same processing errors from occurring month after month. These allegations are specific enough for Navient to respond to by way of an answer.”

Flo has written about this case on the firm's blog

“The decision was particularly disappointing in two ways," he said. "First, the court did not address Navient's argument that the company had no way of knowing that the CFPB considered some of the conduct at issue to be illegal. Second, in my view, the court wrongly affirmed the constitutionality of the CFPB's structure.

“What was surprising was the court's reluctance to engage on a serious issue in the case and its almost rote analysis of the constitutional issues.”  

Navient is most likely not through fighting, he said. 

“I expect that Navient will continue to defend the case vigorously at trial and, if necessary, on appeal," Flo said.

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