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Smith v. Pennsylvania Higher Education Assistance Agency

United States District Court, E.D. Michigan, Southern Division

July 17, 2019

ANGELA SMITH, Plaintiff,
v.
PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY and UNITED STATES DEPARTMENT OF EDUCATION, Defendants.

          ORDER (1) GRANTING DEFENDANT UNITED STATES DEPARTMENT OF EDUCATION'S MOTION FOR SUMMARY JUDGMENT, AND (2) GRANTING IN PART AND DENYING IN PART DEFENDANT PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY'S MOTION FOR SUMMARY JUDGMENT

          TERRENCE G. BERG UNITED STATES DISTRICT JUDGE.

         Plaintiff Angela Smith was the victim of identity theft in January 2014 when someone used her name, social security number, and date of birth to obtain four educational loans to attend Indiana Institute of Technology. Defendant Pennsylvania Higher Education Assistance Agency, d/b/a FedLoan (“Defendant FedLoan”) serviced the loans until November 2016, when they were transferred to Defendant United States Department of Education (“Defendant USDOE”) for servicing.

         On January 15, 2018, Plaintiff filed this lawsuit against Defendants for violating the Fair Credit Reporting Act (“FCRA”) and the Michigan Regulation of Collection Practices Act (“MRCPA”) based on the Defendants' conduct surrounding Plaintiff's dispute of the debts. Defendants have each moved for summary judgment on separate grounds. Defendant USDOE argues that it is immune from suit pursuant to the doctrine of sovereign immunity. Defendant USDOE's Motion for Summary Judgment, ECF No. 71. Defendant FedLoan argues that Plaintiff cannot recover because she has not sustained any damages or, alternatively, that its investigation of Plaintiff's dispute was reasonable as a matter of law. Defendant FedLoan's Motion for Summary Judgment, ECF No. 72.

         For the reasons below, Defendant United States Department of Education's Motion for Summary Judgment (ECF No. 71) will be GRANTED. Defendant FedLoan's Motion for Summary Judgment (ECF No. 72) will be GRANTED in part and DENIED in part.

         I. Facts[1]

         In March 2015, Plaintiff received a letter in the mail from Defendant Fedloan that listed student loan debts that Plaintiff did not recognize. Plaintiff's Response to Defendant FedLoan's Motion for Summary Judgment, ECF No. 81 PageID.2333. Plaintiff has never had any student loans. Id. Plaintiff obtained a copy of her credit report and contacted Defendant FedLoan via telephone to tell them that the debts did not belong to her. Plaintiff's Deposition, ECF No. 72-6 PageID.1484. After that call, on FedLoan's advice, Plaintiff filed a police report for identity theft. Id. FedLoan then sent Plaintiff a packet of documents to fill out to support her claim of identity theft and requesting a copy of the police report she filed, noting that “[f]ailure to enclose a copy of the police report will result in us taking no further action on your claim of identity theft.” Fraud Packet, ECF No. 72-8. FedLoan sent an identical set of documents to Plaintiff again in August 2015. Plaintiff's Deposition, ECF No. 72-6 PageID.1485. Plaintiff did not return either fraud packet and she did not send a copy of the police report to Defendant FedLoan. Id.

         Plaintiff did, however, continue to dispute that the debts listed on her credit report in fact belonged to her. She sent two letters to Defendant FedLoan on May 12, 2017 and August 22, 2017 stating: “I do not have an account with you. I have never had an account with you . . . These are not my accounts.” ECF No. 72-11 PageID.1607; PageID.1534. On the same dates, Plaintiff also sent dispute letters to Defendant USDOE with similar information, stating “I did not sign, apply [for] or authorize [] this loan, ” Id. at PageID.1600, and “I did not borrow any money to attend school nor do I know who did . . . nor do I have any idea what dates they allegedly attended . . . I did not borrow anything from you and I did not sign anything authorizing these debts.” Id. at PageID.1604. In her second letter to Defendant USDOE, Plaintiff specifically states that she is not alleging that the loans were fraudulently obtained. Id. In this letter, she also states that she did not file a police report alleging fraud, although a police report from March 2015 is in the record. Id. On June 12, 2015, Defendant FedLoan informed Plaintiff in writing that it had verified that the debts listed did belong to her.

         During this time, Plaintiff also sent lengthy dispute letters to various credit reporting agencies, which she included in her direct correspondence with both Defendants. These letters to the credit reporting agencies are dated April 1, 2016, December 3, 2016, February 25, 2017, May 12, 2017, and August 22, 2017. Correspondence, ECF No. 72-11 PageID.1535-1607. In her letters to the credit reporting agencies, Plaintiff disputed numerous aspects of the information listed on her credit report, including her address, date of birth, and educational history, and always stating that the four FedLoan debts on her credit report did not belong to her. Id.

         In response to Plaintiff's dispute letters sent directly to the credit reporting agencies, each agency generated an electronic report of the dispute called an Automated Consumer Dispute Verification (“ACDV”). Leslie Harris' Deposition, ECF No. 72-4 PageID.1195-96. Each ACDV was forwarded to Defendant FedLoan. Id. None of the ACDVs used the dispute code for an allegation of identity theft or fraud. Instead, the ACDVs in the record use dispute codes 001-“loan not his/hers” or 002- “belongs to another individual with the same or similar name.” ACDVs, ECF No. 72-13. Defendant FedLoan “reviewed the underlying loan document and confirmed that it contained Plaintiff's correct date of birth, name and social security number” when it received the ACDVs. FedLoan's Motion for Summary Judgment, ECF No. 72 PageID.879-80 (citing Leslie Harris' Deposition, ECF No. 72-4 PageID.1306; ACDVs, ECF No. 72-13 response code section). Because the underlying loan document did contain Plaintiff's correct information, Defendant FedLoan concluded that Plaintiff's dispute was unfounded and continued to report the disputed debts. Id. FedLoan performed the same investigation in response to each of Plaintiff's disputes. ECF No. 72 PageID.888. In May 2018, Defendant USDOE informed Defendant FedLoan that the debts were fraudulently obtained. Plaintiff's Declaration, ECF No. 81-2 PageID.2360. Based on that information, Defendant FedLoan requested that the credit reporting agencies delete the debt from Plaintiff's credit report. Id.

         Defendant FedLoan communicated with Plaintiff several times regarding the fraudulent loans and Plaintiff's purported obligation to pay them. On March 12, 2015, Defendant sent Plaintiff two letters, one notifying her that her payments were “past due, ” ECF No. 81-6 PageID.2525, and one stating that “[FedLoan] may negatively credit report you, ” ECF No. 81-7 PageID.2529. Defendant sent similar letters on June 26, 2015 and August 11, 2015. ECF No. 81-8-81-9. On July 11, 2016, Defendant sent Plaintiff a letter stating that Plaintiff had ignored Defendant's “repeated attempts to resolve the delinquency” and as a result “must now pay the loans IN FULL.” ECF No. 81-11 PageID.2545. On August 12, 2016, Defendant sent Plaintiff a final letter stating that her loans had defaulted. This letter states:

Your failure to pay your federal student loans is a severe violation of the terms and conditions of your federal student loan agreement. Defaulted federal student loans are not released or forgiven. The U.S. Government pursues defaulted borrowers until the owed amounts are collected.
Consequences of default include ineligibility for federal student financial aid. In addition, you account may soon be sent to the U.S. Department of Education's Default Resolution Group for additional collection activities, which may include:
. Wage garnishment.
. Offset your federal student loan debt against your federal tax return.
. Possible legal action by the United States Department of Justice.
. Assessment of collection costs and fees
.Credit bureaus will be notified, and your credit rating may suffer.
Please contact our experienced loan counselors immediately to take the appropriate action. We may still be able to offer assistance before the negative ...

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