Opinion ID: 725553
Heading Depth: 3
Heading Rank: 2

Heading: the gsl regulations and state law

Text: 15 The Secretary concludes that the GSL regulations governing pre-litigation collection activity preempt all inconsistent state law, including case law, statutes and regulations. 55 Fed.Reg. at 40120-21 (citing 20 U.S.C. §§ 1078(c), 1080(a),(b); 34 C.F.R. §§ 682.410(b)(4)(i)-(vi), (xii), 682.411(c)-(h)). According to the Secretary, state law is inconsistent with the GSL regulations when it would prohibit, restrict, or impose burdens on pre-litigation collection activity by third parties. Thus, the scope of preemption extends to any State law that would hinder or prohibit any activity taken by these third parties. Id. at 40121 (emph. added). 16 The Secretary notes that preemption in this area expressly serves the congressional intention implemented in these regulations: that the Secretary establish an effective due diligence standard for collection activity. Id. Subjecting lenders and loan collectors to state law restrictions on pre-litigation collection activity would make GSL loan holders reluctant to exercise due diligence in loan collection. Id. In fact, the Secretary adds, exposure to lawsuits under fifty separate sets of laws and court systems could make lenders reluctant to make new federally-guaranteed student loans. Id. 17 The Secretary emphasizes that this narrow sphere of preemption has disadvantaged neither the states nor the public interest. The preemption of state law restrictions on pre-litigation collection activity imposed no added costs on States and did not infringe on state sovereignty in the conduct of litigation or the enforcement of judgments. Id. The subject of regulation-GSL loan collection-did not intrude into transactions in which the Federal Government had no direct involvement, but was instead narrowly tailored to apply to situations in which the federal government alone had already given financial benefits to borrowers and was in a position to incur even greater costs because of default. Id. Moreover, preemption did not leave borrowers without remedy should debt collectors engage in improper loan collection activity; while the GSL regulations preclude liability under inconsistent state law, significant Federal protection for GSL debtors remains under the FDCPA. Id. 18 The Secretary recognizes that there are some competing state interests, but he makes clear that in accordance with the congressional intent embodied in the HEA, the public interest in having a stable student loan program is greater. For years, high default rates have been a serious threat to the continued viability of the GSL program. The interpretation concludes that 19 [g]iven the strength of the public interest in preventing the need for Federal payments on defaulted loans, and in recovering those amounts after payment has been made, the Secretary believed at the time these regulations were promulgated, and continues to believe, that any balancing of interests between appropriate State regulation of collection actions on private debts and the need for a uniform minimum national standard of collection action on publicly-financed loan debts tips decidedly in favor of diligent student loan collection. Id. 20