Student Defense Statement on U.S. Department of Education’s Finalized Notice of Interpretation on Preemption of State Consumer Protection Laws Over Student Loan Servicers
FOR IMMEDIATE RELEASE
July 21, 2023
MEDIA CONTACT
press@defendstudents.org | 202-734-7495
The Department of Education today announced the issuance of a final notice of interpretation on the scope of federal preemption over state consumer protection laws, as applied to student loan servicing companies. In response, Student Defense Vice President and Chief Counsel Dan Zibel issued the following statement:
“We’re glad to see the Department of Education take a final step to establish that federal student loan servicers are not immune from state-level oversight and accountability. We appreciate the Department’s work on this front and are pleased to see our litigation, advocacy, and policy recommendations incorporated into this policy.”
Background Information:
In 2018, former education secretary Betsy DeVos issued a Notice of Interpretation that severely limited states’ ability to regulate and take enforcement action against student loan servicers. That same interpretation sought to prohibit borrowers from using state consumer protection laws to remedy shoddy servicing practices.
In 2021, relying heavily on two landmark federal appellate court cases argued by Student Defense Vice President and Chief Counsel Dan Zibel, the Department revoked its 2018 interpretation. Those court decisions made clear that the DeVos-era interpretation was incompatible with the law and cemented the rights of borrowers and state attorneys generals to use state laws to police student loan servicers. The decisions have also been relied upon by countless other state and federal courts across the country, making clear that student loan servicers are not above the law.
Today’s announcement follows the 2021 revocation, which also sought public comments on the topic. A copy of Student Defense’s comments can be found here. The revised notice issued today incorporates those comments and finalizes the Department’s interpretation.