DFPI's Suit Against PHEA Finds No Purchase

Allen Matkins
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Allen Matkins

The California Student Loan Servicing Act (the "CSLSA") requires all student loan servicers that service student loans in California to be licensed by the California Department of Financial Protection and Innovation (fka the Department of Business Oversight).  Cal. Fin. Code § 28102.  Last April, the DBO filed suit against the Pennsylvania Higher Education Assistance Agency (aka the "PHEAA").  The DFPI's lawsuit asserted two causes of action.  The first sought a court order requiring the PHEAA to provide certain information.  The second sought a judicial declaration that the CSLSA is not preempted by federal law.

Earlier this month, U.S. District Court Judge Maxine N. Chesney dismissed the DFPI's lawsuit, ruling that state licensing statutes cannot be applied to federal contractors. California v. Pa. Higher Educ. Assistance Agency, 2020 U.S. Dist. LEXIS 184281.  In support of her ruling, Judge Chesney cited both Supreme Court (Leslie Miller, Inc. v. Arkansas, 352 U.S. 187 (1956)) and Ninth Circuit precedents (Gartrell Constr. Inc. v. Aubry, 940 F.2d 437 (1991).  The DFPI has until the end of this week to file an amended complaint asserting any non-preempted claims that it may have.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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