SFA Submits Brief to Third Circuit Appellate in CFPB v. NCSLT Case

SFA SUBMITS BRIEF TO THIRD CIRCUIT APPELLATE IN CFPB V. NCSLT CASE Supporting Trusts Arguments that Passive Securitization Trusts Are Not Under CFPB Enforcement Authority

Overview

On Friday, September 30^th, SFA submitted an amicus brief to the Third Circuit Appellate Court in Consumer Financial Protection Bureau (CFPB) v. The National Collegiate Master Student Loan Trusts.  Our brief serves to inform the court on the negative impact if the court were to find that securitization trusts are “covered persons” under the Consumer Financial Protection Act resulting in these passive financing structures being under the enforcement authority of the CFPB.

Background

On May 3, 2022, the Third Circuit Court of Appeals granted an appeal in the Consumer Financial Protection Bureau (CFPB) v. The National Collegiate Master Student Loan Trusts case.  The appeal was filed by the Trusts and two intervenors – Ambac, an insurer on certain Trust securities, and Transworld Systems, Inc., a servicer to the Trust – both of whom successfully intervened in 2017 when the case was initiated by the CFPB.

The Appellate Court has agreed to review two legal rulings by the District Court in relations to two separate Motions to Dismiss filed by the Defendants and certain Intervenors:

1. Whether the Trusts are “covered persons” under the Consumer Financial Protection Act and therefore under the enforcement authority of the CFPB, and
2. Whether the CFPB failed to timely ratify the litigation action against the Trusts before reaching the three-year statute of limitations – given that the CFPB structure was found to be unconstitutional when the litigation was initiated.

“When establishing the CFPB and its enforcement authority over originators and servicers of consumer products and services, SFA does not believe it was Congress’ intent in the CFPA to extend that authority to passive financing vehicles – and therefore scoping in the underlying debt investors including pension plans, mutual funds and savers of these structures,” said SFA President Kristi Leo.   So SFA submitted a brief in support of the Securitization Trusts who are asking for the lower court ruling to be overturned.

SFA Brief Highlights

Our brief covers three key areas:

• Informs the Court about the purpose and mechanics of securitization, including details around their design to isolate and allocate risk, and, in particular, the role of the trust.
• Describes how the district court’s ruling poses a material threat to the securitization market, emphasizing how the interpretation adopted by the District Court would harm bond investors and increase costs for consumers.
• Outlines how the district court erred in holding that the defendant securitization trusts are “covered persons” under the Act.