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Megan Donohue v. Regional Adjustment Bureau

February 19, 2013

MEGAN DONOHUE
v.
REGIONAL ADJUSTMENT BUREAU, INC., ET AL.



The opinion of the court was delivered by: O'neill, J.

MEMORANDUM

Now before me are defendants Pennsylvania Higher Education Assistance Agency and the PHEAA individual defendants*fn1 (collectively, the PHEAA defendants)*fn2 motion to dismiss the second amended complaint (Dkt. No. 20), plaintiff Meghan Donohue's reply thereto (Dkt. No. 25), plaintiffs notice of recent authority in further support of her reply (Dkt. No. 31) and defendants response thereto*fn3 (Dkt. No. 32). For the following reasons I will grant PHEAA's motion.

BACKGROUND

Donohue alleges that on or about August 2, 2011, American Education Services (an alias of the PHEAA) sent her a letter concerning a loan rehabilitation program available for her federal student loans which were in default. Second Am. Compl. ¶ 29. She alleges that the letter enclosed a Rehabilitation Loan Program Agreement that required that Donohue, as a condition of rehabilitation, "remit satisfactory monthly payments for a minimum of nine consecutive months. . . ." Id. at ¶ 30. On or about September 23, 2011, AES sent a letter to Donohue concerning the loan rehabilitation program that enclosed a Rehabilitation Loan Program Agreement which reiterated that as a condition of rehabilitation Donohue was required to "remit satisfactory monthly payments for a minimum of nine consecutive months." Id. at ¶¶ 31-32.*fn4 "Also included was the following statement, '[i]n addition to wage garnishment and referral to an outside collection agency, your continued failure to repay this debt will result in the offset of any federal refunds you may be due.'" Id. at ¶ 33. Donohue further alleges that AES sent similar Term Letters to the class members concerning the loan rehabilitation program. Id. at ¶ 34. Specifically Donohue alleges that "PHEAA, by and through the individually named defendant Jeff Capello and otherwise, . . . has engaged in collection activity against plaintiff for six (6) federal student loan debts totaling $28,981.86." Id. at ¶ 35.

On or about December 16, 2011 PHEAA garnished wages for said student loans owed in the amount of approximately $600 per month, a sum that Donohue alleges "was not based on the type of consideration of a debtor's financial circumstances." Id. at ¶ 36.

In order to lift the garnishment, remove the corresponding 'I9' credit reporting comparable to bankruptcy, and prevent [Donohue's] tax return garnishment as well, PHEAA advised [Donohue] she would be required to:

a. make a down payment of 10% (approximately $3,000) and permit automatic monthly payment deductions from her bank account of $300; or , if unable to make the down payment;

b. authorize monthly payment deductions from her bank account of $600.

Id. at ¶ 37. PHEAA allegedly "promised that after nine to eleven months, the 'I9' remark would be removed from [Donohue's] credit report, and payments would continue thereafter until the debt was paid in full." Id. at ¶ 38. Donohue does not allege that she actually attempted to rehabilitate her defaulted federal student loans or that she would have been able to do so. Def.'s Motion Dismiss. ECF p. 8. Additionally, as the PHEAA defendants point out, Donohue does not allege that she justifiably relied upon PHEAA's alleged misrepresentations in electing not to rehabilitate her defaulted federal student loans. Id.

Donohue also brings suit on behalf of two classes of Pennsylvania borrowers. Second Am. Compl. at ¶ 34. Donohue defines first proposed class, Class A, as "a Class of Pennsylvania borrowers for claims under the [Fair Debt Collection Practices Act] for all federal loan debtors whose loans went into default, had no judgment obtained related to the default, and were collected upon by ERS or RAB." Second Am. Compl. ¶ 55. She alleges that the principal question is whether Defendants ERS, RAB, and PHEAA violated the FDCPA and FCEAU by failing to make required disclosures and calculations (or making disclosures and calculations that are at odds with those under the Federal student loan rehabilitation program) of required rehabilitation payments, failing to disclose the fact that nine timely payments of these new payments in 10 consecutive months would rehabilitate the loam, and providing the expedited route to removal of default from credit reports.

Id. at ¶ 57. The second proposed class is defined as "a class of Pennsylvania borrowers under the [Pennsylvania Unfair Trade Practices and Consumer Protection Law, Fair Credit Extension Uniformity Act], and common law where said federal loans went into default, had no judgment obtained related to the default, and were owned and/or serviced by PHEAA. . . ." Id. at ¶ 55. In this class the principal question is whether Defendants, excluding PHEAA, violated the UTPCPL, by failing to make required disclosures and calculations (or making disclosures and calculations that are at odds with those under the Federal student loan rehabilitation program) of required rehabilitation payments, failing to disclose the fact that nine timely payments of these new payments in 10 consecutive months would rehabilitate the loam, and providing the expedited route to removal of default from credit reports.

Id. at ¶ 58. *fn5

In Count I of her second amended complaint, Donohue asserts claims under the FDCPA on behalf of herself and the members of proposed Class A against defendants ERS, RAB and PHEAA. Id. ¶¶ 64-67. She contends that in its efforts to collect on her student loans, PHEAA was attempting to collect a "debt" as defined by the FDCP-a debt which was incurred for personal, family or household purposes. Id. at ¶ 65. Donohue asserts that PHEAA violated the FDCPA by, inter alia, 1) engaging in conduct the natural consequence of which is to harass, oppress, or abuse a person; 2) making false representations of the character, amount, or legal status of any debt; 3) representing that nonpayment of any debt will result in the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action; 4) falsely representing legal action that cannot be taken; 5) falsely representing that Donohue's nursing license could be taken; and 6) attempting to collect a debt not permitted by law. Id. at ¶ 67.

In Count II of her second amended complaint, Donohue asserts claims under the UTPCPL on behalf of herself and the members of proposed Class B against defendants ERS, RAB and the PHEAA. Id. ¶¶ 68-79. She alleges that because of the acts and omissions of the defendants in their collection contacts with her, Donohue has been deprived of lawful rehabilitation options for her student loans. Id. at ¶ 74. She claims that she "and Class A [sic] have suffered ascertainable loss by the monthly dollar differential between what she is currently paying under the onerous garnishment plan and ...


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