CFPB vs NCSLT vs PHEAA dba AES update: Copy of Granted Proposed Order resolving Trust residuals ownership issue filed in Delaware federal court

All eyes are focused on the leadership struggle over the CFPB in Washington, and the first steps being taken by President Trump's appointee to emasculate the consumer watch dog.

Meanwhile in Delaware, Daniel M. Silver (McCARTER & ENGLISH, LLP), counsel claiming to represent the 15 National Collegiate Student Loan Trusts in the pending CFPB enforcement action against the Trusts yesterday (12/5/2017) filed a copy of the Trusts' proposed Chancery court order resolving the ownership/control issue in their favor. The issue arose in the Trusts' suit against PHEAA / AES, which accused the servicer of dereliction of duties in servicing the student loans and sought judicial support for an audit of PHEAA's performance.

The order is electronically stamped GRANTED and has an attachment e-signed by Judge Slights, Joseph, but is still denominated PROPOSED ORDER, and the actual signature line for Vice Chancellor Joseph R. Slights III on it is blank. The Delaware judiciary website does not reflect that an opinion order was issued in the case. All rather strange. Only minimal docket information is available to the public via the Internet.

In the federal case, the copy of the Proposed Order was filed as an exhibits to a "Notice of Additional Authority" and there is no express motion or request to the federal judge presiding over the CFPB v NCSLT action for judicial notice of the order issued in the parallel state court proceeding. Instead, the filing merely refers to Local Rule 7.1.2, which governs motion practice.

The "Notice of Additional Authority" explains the import of the Chancery Court order as follows:

The Order is relevant to the issues currently before this Court because Proposed Intervenor Wilmington Trust Company informed the Court that on July 5, 2017, it refused to execute a consent order proposed by the Consumer Financial Protection Bureau in part because of the “Ownership Dispute” raised in the Delaware Chancery Action. (D.I. 31 ¶ 3.) That dispute has now been resolved, with the Owners who directed Wilmington Trust Company to execute the consent decree recognized in the Delaware Chancery Action as the Owners of the beneficial interests of the Trusts. 

Numerous other entities have filed motions to intervene in the federal case, including PHEAA, the servicer of student loans that handles accounts that are current or only moderately delinquent, and Transworld Systems Inc, (TSI), which handles collection litigation of defaulted loans through a network of attorneys. All of the intervenors object to the Proposed Consent Judgment (PCJ) between the CFPB and the Trusts. See earlier post on National Collegiate Trust Spat in Delaware.
 
A securities industry trade association, Structured Finance Industry Group, Inc. (SFIG) has filed an amicus brief in CFPB v NCSLT. It sees a threat to its members' interests because of the costs associated with monetary penalties and other remedies stemming from enforcement, and argues that the CFPB does not even have the legal authority to take enforcement actions against the Trusts because they are not covered entities.

The resolution of the ownership-and-control issue is only one part of the show, or of the show-down, as the case may be.