Misrepresentation Claims Maybe not Preempted: Eleventh Circuit Guidelines Against Preemption within the Education loan Circumstances

Misrepresentation Claims Maybe not Preempted: Eleventh Circuit Guidelines Against Preemption within the Education loan Circumstances
Economic Properties Viewpoints

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. High Ponds Highest 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.


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 new plaintiffs recorded a course action ailment, asserting says to have breach from fiduciary responsibility, neglect, unfair enrichment, infraction from an implied price, and you will admission away from Florida’s Consumer Collection Practices Work, most of same day payday loans Rayville the premised to your allegation that they had invested many years and work out payments it felt create qualify for the PSLF System, merely to be told if not afterwards.

Great Ponds transferred to dismiss the case, fighting the says was basically explicitly preempted of the Area 1098g off the HEA, and that preempts “one revelation criteria of every State legislation.” Predicated on High Lakes, all the claims was basically preempted since the nondisclosure states according to the alleged failure to disclose facts about this new PSLF System.

Somewhat, once Higher Lakes registered their motion so you can disregard, the latest Service off Education provided the observe for the , announcing you to “Congress required area 1098g to help you preempt people State law demanding loan providers to reveal situations or guidance not needed by the Government law” hence any condition rules imposing “the fresh bans toward misrepresentation otherwise omission away from matter advice” broken area 1098g’s share preemption provision. High Ponds was able brand new borrowers’ claims was basically just restyled non-revelation claims. Brand new federal section court in Fl consented. During the dismissing the actual situation the new region courtroom construed the fresh misrepresentations due to the fact a “failure to include perfect advice.” Brand new plaintiffs appealed.

Eleventh Circuit – No Preemption

With the attention, the new Eleventh Circuit noticed anything in a different way. Whether or not area 1098g explicitly preempts state laws that require extra disclosures, brand new courtroom think it is was not is realize therefore broadly and this “county legislation causes of step arising from affirmative misrepresentations an excellent servicer willingly produced one failed to matter the niche matter of expected disclosures impose zero revelation standards.” The latest judge ended there is certainly no express preemption, argument preemption, or community preemption to own including claims.

The courtroom concerned about the required disclosures having cost options under the new HEA’s section 1083(e). They determined that the fresh affirmative misrepresentation-situated claims were other inside kind on revelation-mainly based states. The plaintiffs just weren’t in the standard and you may was just requesting recommendations for the financing forgiveness software, the fresh new court reasoned. According to accusations about issue, Great Lakes voluntarily given the fresh new individuals incorrect details about their eligibility on PSLF System, this provides increase so you can a low-preempted claim.

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