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Federal Register / Vol. 86, No. 153 / Thursday, August 12, 2021 / Rules and Regulations such matters as the application of State usury laws, see 20 U.S.C. 1078d, of State statutes of limitation, see 20 U.S.C.
1091aa2, of the State-law defense of infancy, see 20 U.S.C. 1091ab2, of State wage garnishment laws, see 20
U.S.C. 1095aa, of State laws on certain costs and charges, see 20 U.S.C.
1091ab, and of State disclosure requirements, see 20 U.S.C. 1098g.
These provisions, granular as they are, reinforce the point that Congress consciously opted to displace State authority only in these limited particulars and did not intend or provide for broad field preemption of State laws governing student loan servicing. See, e.g., Nelson, 928 F.3d at 650 The number of those provisions and their specificity show that Congress considered preemption issues and made its decisions. Courts should enforce those provisions, but we should not add to them on the theory that more sweeping preemption seems like a better policy. They also undermine any broad finding of express preemption, which requires courts to identify the domain expressly preempted by that language. Medtronic, Inc. v. Lohr, 518
U.S. 470, 484 1996. In the HEA, Congress identified a series of pinpoints rather than casting a wide blanket over the entire area, and its actions must be respected in determining the scope of preemption of State law. See id. at 485
intent of Congress is the ultimate touchstone of preemption analysis.
The 2018 interpretation put special emphasis on the HEA provision addressing State disclosure requirements. See 83 FR 10621. It observed that this provision specified what information must be provided in the context of the Federal loan programs, and expanded upon the provision by stating that it also nullified any State prohibitions on misrepresentation or the omission of material information. Id. But the courts have generally rejected this approach.
First, this provision of the HEA covers information conveyed to the borrower before the disbursement of loan proceeds, before repayment of the loans begins, and during repayment of loans.
The information disclosed is intended to ensure that consumer-borrowers have accurate, relevant information and can make their own informed choices about their financial affairs. Nelson, 928 F.3d at 647. Notably, the HEA provision on disclosure requirements does not cover affirmative misrepresentations, which are not about conveying either more or less information, but instead are simply about conveying accurate information so as not to mislead or defraud the
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borrower. The courts found this distinction to be deeply grounded in basic principles of the common law of torts, which sharply distinguish failureto-disclose claims from claims for affirmative misrepresentation. See, e.g., Lawson-Ross, 955 F.3d at 91719;
Nelson, 928 F.3d at 64749.
Second, the 2018 interpretation purported to rely on the Ninth Circuits decision in the Chae case, which concerned the failure to disclose information in the specific ways required in Federal law, such as in billing statements. But the findings in Chae do not preclude State regulation of affirmative misrepresentation about information that the servicer was not required to disclose. Nor can such conduct plausibly be reframed as a mere failure to disclose correct information. Pennsylvania v. Navient Corp., 967 F.3d 273, 28990 3d Cir.
2020. The Chae court drew this same distinction, holding that the use of fraudulent and deceptive practices apart from the billing statements are not preempted by Federal law. See Chae, 593 F.3d at 943; see also Lawson-Ross, 955 F.3d at 919 discussing Chae;
Nelson, 928 F.3d at 64950 same.
For these reasons, the Department finds that, except in the limited and specific instances set forth in the HEA
itself, State measures to engage in oversight of Federal student loan servicers are not expressly preempted by the HEA. Accordingly, in reconsidering the issue of express preemption the Department does not find the conclusions reached in the 2018 interpretation to be persuasive.
Likewise, the courts have not been persuaded when these issues have been presented to them. See, e.g., Student Loan Servicing Alliance, 351 F. Supp.
3d at 5155; Lawson-Ross, 955 F.3d at 91620; Nelson, 928 F.3d at 64750.
D. Conflict Preemption When, as here, both the Federal government and the States have legitimate interests in the same areas of governance, courts typically implement constitutional principles of federalism by seeking to balance and respect those mutual interests as much as possible.
Where the two exercises of authority collide in irremediable conflict, then State law must yield to the superior force of the Supremacy Clause. But courts traditionally have understood their duty to harmonize Federal and State power to the greatest extent they can do so. Therefore, implied conflict preemption only nullifies State action if it is impossible for a private party to comply with both state and federal law or if State law stands as an obstacle
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to the accomplishment and execution of the full purposes and objectives of Congress. Crosby v. National Foreign Trade Council, 530 U.S. 363, 373 2000
quoting Hines v. Davidowitz, 312 U.S.
52, 67 1941.
Although the 2018 interpretation laid out some generalized grounds on which Federal and State regulations of student loan servicers could be found to clash, the courts have rejected these arguments. They have noted the Supreme Courts overarching point that where the enacted legislation explicitly addressed the issue of preemption, as is true of the HEA, there is no need to infer congressional intent to preempt State laws from the substantive provisions of the legislation. Cipollone, 505 U.S. at 517; see also Navient, 967
F.3d at 29293; Lawson-Ross, 955 F.3d at 920; Nelson, 928 F.3d at 648.
When the court in Student Loan Servicing Alliance considered the District of Columbias procedures for protecting privacy, resolving complaints, and mandating compliance with timelines, it concluded that upon closer inspection of the state and federal provisions, it is apparent that there is no actual conflict on the grounds of impossibility. 351 F. Supp.
3d at 60. The court determined that each objection raised by the plaintiff about the supposed inability to harmonize Federal and State procedures posited a false conflict and could be accommodated by officials who are willing to work together in taking reasonable steps to do so. Id. at 6061.
The most recent courts to consider these issues under the rubric of conflict preemption have consistently determined that the HEA places no emphasis on maintaining uniformity in Federal student loan servicing and thus they have upheld State authority to root out fraud and affirmative misrepresentations in the Federal student aid program. See, e.g., Navient, 967 F.3d at 29294; Lawson-Ross, 955
F.3d at 92023; Nelson, 928 F.3d at 650
51.
Courts have found conflict preemption to apply to State laws requiring licensing of the Departments student loan servicers in the limited circumstances where the licensing scheme purported to disqualify a Federal contractor from working within the States boundaries. It is wellestablished that States cannot impede the Federal Governments selection of contractors through the imposition of a licensing requirement. In Leslie Miller Inc. v. Arkansas, 352 U.S. 187 1956
per curiam, the Supreme Court held that Federal bidding statutes and regulations requiring the selection of
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