SFA Submits Amicus Brief to the Supreme Court on NCSLT v. CFPB Case

On September 19^th, the Structured Finance Association (SFA) and the Securities Industry and Financial Markets Association (SIFMA) submitted an amicus brief to the U.S. Supreme Court. The brief supports a petition for writ of certiorari filed by the National Collegiate Master Student Loan Trust, et al., that urged the Court to review a Third Circuit decision that grants the Consumer Financial Protection Bureau (CFPB) enforcement authority over student loan securitization trusts.

In its brief, SFA disputes the Third Circuit’s granting of CFPB’s enforcement authority, emphasizes critical points about the securitization market, and addresses the potentially destabilizing implications of this decision. Some of the key arguments include:

1. Trusts are passive entities and do not “engage” in the provision of financial products or services: Securitization Trusts have no employees, no management, no operations, and no ability to control or supervise what servicers do. Trusts are also legally separate from the third parties that service the loans.
2. Underlying investors in securitization trusts should not be held liable for the actions of third parties: By bringing enforcement actions against passive securitization trusts for the alleged misconduct of the third-party loan servicers, the CFPB is breaking the fundamental structure of the securitization market.
3. Treating securitization trusts as “covered persons” could destabilize the consumer finance market: The use of passive trusts is what allows the securitization market to lower the cost and expand the availability of credit for households and businesses. Through the CFPB’s enforcement actions, consumers may find their future loans, leases, and other financial products to be more expensive and less available.

While the SFA supports the importance of protecting consumers from unfair, deceptive, or illegal practices, targeting innocent investors is not the proper means of achieving that objective.