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

Heading: hea preemption of the oregon udcpa

Text: 11 USA Funds contends and the district court held that the HEA preempts the application of the Oregon UDCPA. Or.Rev.Stat. § 646.639. We agree. Although the HEA does not preempt all state law governing lenders and guarantors of student loans, it does preempt state law inconsistent with the GSL regulations governing a third-party debt collector's pre-litigation collection activities. See 55 Fed.Reg. at 40121-2. 12
13 The Supremacy Clause of Article VI of the Constitution provides Congress with the power to preempt state law. Independent Energy Producers Ass'n, Inc. v. California Pub. Util. Comm'n, 36 F.3d 848, 853 (9th Cir.1994). Preemption can occur in a number of circumstances, including  'where the state law stands as an obstacle to the accomplishment and execution of the full objectives of Congress.'  Id. (quoting Louisiana Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 368-69, 106 S.Ct. 1890, 90 L.Ed.2d 369 (1986)).  'Preemption may result not only from action taken by Congress itself; a federal agency acting within the scope of its congressionally delegated authority may pre-empt state regulation.'  Id. (quoting Louisiana Pub. Serv. Comm'n, 476 U.S. at 369, 106 S.Ct. at 1898-99). 14 The Secretary of Education has promulgated an official interpretation stating that regulations issued under 20 U.S.C. § 1082(a) preempt inconsistent state law governing pre-litigation collection activities by third-party debt collectors. We defer to the specific policy decisions of an administrative agency unless they are arbitrary, capricious or manifestly contrary to statute. United States v. Strong, 79 F.3d 925, 928 (9th Cir.1996) (citation omitted). We must give substantial deference to an agency's interpretation of its own regulations. Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, ----, 114 S.Ct. 2381, 2386, 129 L.Ed.2d 405 (1994) (citations omitted). Our task is not to decide which among several competing interpretations best serves the regulatory purpose. Rather, the agency's interpretation must be given 'controlling weight unless it is plainly erroneous or inconsistent with the regulation.'  Id.
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
21 One of the HEA's express purposes was to stabilize the GSL program by cutting the significant losses to the U.S. Treasury due to the costs and occurrences of defaults in the program. H.R.Rep. No. 383, 99th Cong., 2nd Sess. 4, reprinted in 1986 U.S.C.C.A.N. 2606. To this end, Congress directed the Secretary to establish minimum uniform due diligence requirements for loan collection, 20 U.S.C. § 1078, and authorized the Secretary to prescribe such regulations as may be necessary to carry out the purposes of the GSL program. 20 U.S.C. § 1082(a)(1). Because Congress has delegated to the Secretary its authority to implement the provisions of the HEA, the Secretary 22 is uniquely qualified to determine whether a particular form of state law 'stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,' ... and therefore, whether it should be preempted. Medtronic, Inc. v. Lora Lohr, --- U.S. ----, ----, 116 S.Ct. 2240, 2255, 135 L.Ed.2d 700 (1996) (citation omitted). 23 The Secretary's implementation of congressional intent is not arbitrary, capricious, or manifestly contrary to statute. The Secretary's regulations and interpretation ensure that loan collectors will be governed by one uniform standard for pre-litigation loan collection. If student loan guarantors were exposed to liability under fifty different sets of statutes, regulations and case law, conducting diligent pre-litigation collection activity could be an extremely uncertain and risky enterprise. Exposure to liability under state law would provide a significant disincentive to pursue loan collection, and the cost advantages gained by concentrating GSL loan collection in a centrally-administered system would be lost. Preemption does deprive some defaulters of the ability to receive damages under state law; however, the congressional purpose in enacting the HEA was not to make it easier for defaulters to get money from loan collectors, but to protect the millions of students who would suffer irremediable loss if Congress had to shut down the GSL program. 24 Subsequent developments in the GSL program have shown the full force of the government's commitment to stabilize the GSL program by strengthening loan collection activity. In 1992, Congress amended § 1082(a)(1) to make its stated purpose even more explicit in the law-the Secretary's power to prescribe necessary regulations now expressly includ[es] regulations applicable to third party servicers. Then, after years of hemorraghing, see, Stopping Loan Defaults, Wash. Post, at A22 (quoting the Secretary), in 1993 the government credited tougher collection methods as a main reason for a rapid decline in loan defaults. Student Loan Defaults Down Due to Collection Methods, Portland Oregonian, July 20, 1993, at A6; see also College Loan Defaults are Down, Chicago Tribune, July 20, 1993, at 8. Collection rates have continued to improve as the government has taken even stronger collection measures against defaulters. Stopping Loan Defaults, Wash. Post, at A22. Clearly, maximizing the potential liability of loan collectors has not been a significant purpose behind GSL reform. 25 Upholding the Secretary's interpretation of congressional intent and the GSL regulations is not inconsistent with our holding in Keams v. Tempe Technical Institute, Inc., 39 F.3d 222 (9th Cir.1994). The issue in Keams was whether the HEA preempted state tort suits against accrediting agencies. The Secretary's regulations with respect to accreditors were far more limited in scope than those governing loan collectors; the accreditor regulations merely provided a procedure for determining whether to place an accrediting agency on the approved list. Id. at 226. The Secretary had not been charged with establishing minimum standards for how accrediting agencies conduct their activity, and the Secretary had not issued any interpretation stating that the accreditor regulations preempt state law. Accordingly, we reasoned that state lawsuits could assist the Secretary in evaluating particular accrediting agencies, which would be operating under state law standards. Because state law did not stand  'as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress' , it was not preempted by the HEA. Id. (quoting California v. ARC America Corp., 490 U.S. 93, 101, 109 S.Ct. 1661, 1665, 104 L.Ed.2d 86 (1989)). 26 The present case concerns a different set of circumstances. Here, Congress has explicitly authorized the Secretary to prescribe such regulations as may be necessary to establish a uniform national standard for debt collection activity. 20 U.S.C. § 1082(a)(1). Consistent with the congressional charge, the Secretary has issued a regulatory framework for pre-litigation loan collection and has explained why recognizing liability under inconsistent state law would thwart the congressional intention implemented in [the GSL] regulations. 55 Fed.Reg. at 40121. Because the Secretary's regulations and interpretation are reasonable and not inconsistent with the statute, we defer to the Secretary's policy determinations. 27 The Supreme Court's recent Medtronic holding also does not preclude preemption. See --- U.S. at ----, 116 S.Ct. at 2257 (statutory and regulatory language at issue in Medtronic do not preclude general state requirements from ever being preempted). Like the GSL regulations, the FDA regulations were issued in accordance with the congressional grant of authority under the relevant statute. See id. at ----, 116 S.Ct. at 2255. In contrast, however, the FDA regulations expressly state that they do  'not preempt State or local requirements that are equal to, or substantially identical to, requirements imposed by or under the act.'  Id. at ----, 116 S.Ct. at 2256 (citing 21 C.F.R. § 808.1(d)(2)(1995)). The FDA regulations also expressly provide that the coordinate statute does not preempt State unfair trade practices law. Id. at ----, 116 S.Ct. at 2257. 28 The interests addressed by the FDA regulations differ substantially from those of the GSL regulations. The GSL regulations concern a federal student loan program which requires uniformly administered collection standards in order to remain viable. In contrast, the FDA regulations touch upon purely private interests: the liability of manufacturers for defects in privately-produced goods.
29 Whereas the GSL regulations establish what the loan collector must do in order to show due diligence, the Oregon UDCPA consists entirely of restrictions and prohibitions on collection activity. 34 C.F.R. §§ 682.410(b)(4)(i)-(vi),(xii), 682.411(c)-(h); Or.Rev.Stat. § 646.639(2). For example, the GSL regulations establish that the debt collector shall diligently attempt to collect the loan by telephone and in writing throughout the first three forty-five day periods after default. 34 C.F.R. § 682.410(b)(4)(i)-(v). Then, in the fourth forty-five day period, the agency must send a written notice forcefully demanding payment. 34 C.F.R. § 682.410(b)(4)(vi). In contrast, the Oregon UDCPA consists of a list of collection practices that [i]t shall be unlawful for a debt collector to do. Or.Rev.Stat. § 646.639(2). 30 The preemptive effect of the GSL regulations is clear. The GSL regulations preempt State law that would prohibit, restrict, or impose burdens on the sequence of pre-litigation contacts required by the GSL regulations; thus, preemption includes any State law that would hinder or prohibit any activity taken by third-party debt collectors prior to litigation. 55 Fed.Reg. at 41021 (emph. added). Because the Oregon UDCPA consists of nothing but prohibitions, restrictions and burdens on collection activity, it is preempted. If a student loan defaulter in Oregon believes that a third-party debt collector has engaged in unfair pre-litigation debt collection activity, her remedy lies in the FDCPA, not the Oregon UDCPA. Id. (while the GSL regulations preempt inconsistent State laws regarding pre-litigation collection activity, significant Federal protection for GSL debtors remains under the FDCPA).