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Eul v. Transworld Systems

United States District Court, N.D. Illinois, Eastern Division

March 30, 2017

SHARON EUL et al., on behalf of themselves and a class, Plaintiffs,
v.
TRANSWORLD SYSTEMS et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          Chief Judge Rubén Castillo, United States District Court Judge

         Plaintiffs in this putative class action allege that the Defendants-various debt holders, debt servicers, and law firms retained to collect debt-violated multiple provisions of the federal Fair Debt Collection Practices Act (“FDCPA”), the Illinois Interest Act, the Illinois Collection Agency Act, and the Illinois Consumer Fraud and Deceptive Business Practices Act in the course of their attempts to collect on alleged student loan debt from the Plaintiffs. (R. 79, Cons. Compl.) Before the Court is Defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). (R. 72.) For the reasons set forth below, Defendants' motion is granted in part and denied in part, as set forth below.

         BACKGROUND

         Because of the wide array of conduct alleged in Plaintiffs' Consolidated Complaint, (R. 79), and the varying circumstances alleged as to each named Plaintiff, the Court sets forth only a general background of the allegations sufficient to enable an understanding of the more specific allegations that are discussed in each section of the Court's analysis.

         The Plaintiffs are 19 individuals, mostly citizens of Illinois, who all currently live in Illinois or at some relevant time in the past lived in Illinois. (R. 79, Cons. Compl. ¶¶ 3-15.) All but one of them allege that they have been sued in Cook County Circuit Court to collect on alleged student loan debts, some because they were cosigners on the loans. (Id. ¶¶ 79(a)-(m), 96-97, 100, 118, 126, 153, 167, 171, 176-77, 181, 189.) They hired lawyers and defended against those lawsuits by filing answers and asserting various defenses. (Id. ¶¶ 112, 114, 152(a), 155, 175, 185.) Many of the lawsuits were nonsuited shortly after the Plaintiffs appeared and filed answers. (Id. ¶¶ 79(a)-(m), 116, 123, 131, 150(f), 186.) These lawsuits were all brought by various “National Collegiate Trust” (“NCT”) entities, which are Delaware statutory trusts that acquire and hold a significant number of private student loans. (Id. ¶¶ 25-42.) For example, the NCT entities that are named as Defendants here are: National Collegiate Student Loan Trust 2003-1; National Collegiate Student Loan Trust 2004-1; National Collegiate Student Loan Trust 2006-2; National Collegiate Student Loan Trust 2006-3; National Collegiate Student Loan Trust 2006-4; National Collegiate Student Loan Trust 2007-1; National Collegiate Student Loan Trust 2007-2; National Collegiate Student Loan Trust 2007-3; and National Collegiate Student Loan Trust 2007-4. (Id.) These NCT entities did not originate Plaintiffs' students loans; rather they acquired the loans after they were originated by another entity. (Id. ¶ 88.) The NCT entities all have a corporate trustee, but the trustee is not involved in the filing of lawsuits in the name of the trusts, and the NCT entities have no employees and never had any. (Id. ¶¶ 27, 45.) None of the NCT entities have a bank or financial institutions charter or a license from the State of Illinois entitling them to charge interest at more than 9%. (Id. ¶ 44.)

         All the actions taken on behalf of the NCT entities against the Plaintiffs were actually performed by a “servicing agent, ” either Defendant NCO Financial Systems, Inc. (“NCO”) or its successor, Defendant Transworld Systems (“Transworld”), or by attorneys employed by these servicing agents. (Id. ¶¶ 20, 46, 55.) Transworld is a collection agency that seeks to collect on defaulted consumer debts, and it holds a collection agency license from the State of Illinois. (Id. ¶¶ 17, 18.) NCO, Transworld's predecessor, was also a collection agency and also is licensed as one by the State of Illinois. (Id. ¶¶ 20, 22.) As of approximately 2013-2014, NCO claimed to be the “servicing agent” for the NCT entities. (Id. ¶ 57.) Subsequent to corporate changes in early 2015 involving NCO and Transworld, Transworld claimed to be the servicing agent of the NCT entities. (Id. ¶¶ 58-59.) The same personnel, practices, and form documents were employed by NCO and Transworld in collecting debts for NCT entities before and after the changeover from NCO to Transworld. (Id. ¶ 63.) NCO represented on its website that it maintained an “Attorney Network” for filing suits to collect debt, including student loan debt. (Id. ¶ 65.) Transworld similarly manages “Agency and Attorney Networks, ” which are described on its website as designing and implementing “cost-effective collection solutions on behalf of clients across the country.” (Id. ¶ 64.) NCO represented in filings with the U.S. Securities and Exchange Commission that through its “Attorney Network Services, ” it “coordinate[s] and implement[s] legal collection solutions undertaken on behalf of our clients through the management of nationwide legal resources specializing in collection litigation.” (Id. ¶ 66.)

         Defendant Blitt and Gaines, P.C. (“Blitt”) is a consumer collection law firm organized as an Illinois professional corporation. (Id. ¶ 47.) Blitt is one of the firms in the Transworld/NCO “Attorney Network, ” and was hired to collect debts against some of the Plaintiffs. (Id. ¶¶ 49, 67.) Defendant Weltman, Weinberg, and Reis Co. L.P.A. (“WWR”) is a law firm organized as an Ohio professional corporation and was likewise hired to pursue debt collection litigation against some of the Plaintiffs. (Id. ¶¶ 51, 67.) NCO and Transworld selected counsel, communicated with counsel, and instructed counsel; the nominal plaintiff (as relevant here, the NCT entities) did not select, communicate with, or instruct counsel. (Id. ¶ 69.)

         Plaintiffs allege that the NCT entities, NCO/Transworld, Blitt, and WWR engaged in a variety of misconduct in the process of attempting to collect alleged student loan debt from the Plaintiffs, including violating multiple provisions of the federal Fair Debt Collection Practices Act, the Illinois Interest Act, the Illinois Collection Agency Act, and the Illinois Consumer Fraud and Deceptive Business Practices Act. The Plaintiffs define various classes of individuals on whose behalf they bring suit.[1] (Id. ¶¶ 209-10.)

         The Defendants presently move to dismiss most Counts of the Consolidated Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (R. 72.) Defendants offer numerous arguments in support of their motion, which are addressed below.

         LEGAL STANDARD

         A complaint must set forth a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). To survive a motion to dismiss, a complaint must “contain sufficient factual matter, accepted as true, ‘to state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. “Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679. In deciding a motion to dismiss under Rule 12(b)(6), the Court must accept the factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Kubiak v. City of Chi., 810 F.3d 476, 480-81 (7th Cir. 2016), cert. denied, 137 S.Ct. 491 (2016). In deciding a motion to dismiss, the Court may consider the complaint itself, “documents that are attached to the complaint, documents that are central to the complaint and are referred to in it, and information that is properly subject to judicial notice.” Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013). The purpose of considering such documents is “to prevent parties from surviving a motion to dismiss by artful pleading or by failing to attach relevant documents.” 188 LLC v. Trinity Indus., Inc., 300 F.3d 730, 735 (7th Cir. 2002).

         ANALYSIS

         I. Count I - Usury (FDCPA)

         Count I, captioned “FDCPA Usury - Class Claim, ” is asserted by six of the Plaintiffs as representatives of the putative “Usury FDCPA” class against Defendants NCO and Transworld. (R. 79, Cons. Compl. ¶¶ 216-17.) Plaintiffs[2] allege in Count I that Defendants violated §§ 1692e and 1692f of the FDCPA, 15 U.S.C. §§ 1692e and 1692f, by collecting and attempting to collect interest on the Plaintiffs' students loans that exceeds state law limits, as well as by filing and prosecuting state court lawsuits that sought to collect such interest on those loans. (Id. ¶¶ 218-20.) In support of Count I, Plaintiffs allege that “[e]ach of the[ir] loans had a variable rate formula that produced a rate in excess of the 9% maximum under Illinois law, 815 Ill. Comp. Stat. 205/4, or the 8% maximum under Ohio law, Ohio R.C. §1343.01 . . . or, to the extent relevant because a national bank was the purported originator of the loans, . . . any rate allowable under 12 U.S.C. §85.” (Id. ¶ 80.) Plaintiffs allege that collecting or attempting to collect interest that is usurious under state law constitutes both “false, deceptive, or misleading representation or means” in violation of § 1692e and “unfair or unconscionable means” of collecting debt in violation of § 1692f. (Id. ¶¶ 216-20.)

         Section 1692e of the FDCPA prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. Section 1692f prohibits debt collectors from using “unfair or unconscionable means to collect or attempt to collect any debt.” 15 U.S.C. § 1692f. Both provisions include numerous subsections setting forth nonexhaustive examples of prohibited conduct. See 15 U.S.C. §§ 1692e(1)-(16), 1692f(1)-(8). Defendants argue that Count I must be dismissed because the FDCPA cannot be used to police violations of other federal and state laws. (Id. at 13-14.)

         The U.S. Court of Appeals for the Seventh Circuit has explained repeatedly that “[t]he FDCPA is not an enforcement mechanism for matters governed elsewhere by state and federal law.” Bentrud v. Bowman, Heintz, Boscia & Vician, P.C., 794 F.3d 871, 875 (7th Cir. 2015); see also Evory v. RJM Acquisitions Funding L.L.C., 505 F.3d 769, 778 (7th Cir. 2007) (“[A] violation of state law is not in itself a violation of the federal [FDCPA] Act[.]”); Butler v. J.R.S-I, Inc., No. 15 C 6059, 2016 WL 1298780, at *6 (N.D. Ill. Apr. 4, 2016) (“[T]he Seventh Circuit has repeatedly held that the FDCPA is not an enforcement mechanism for matters governed elsewhere by state and federal law.” (citation and internal quotation marks omitted)); Fick v. Am. Acceptance Co., LLC, No. 3:11-cv-229, 2012 WL 1074288, at *3 (N.D. Ind. Mar. 28, 2012) (“Because Section 1692f is not a piggyback jurisdiction clause, plaintiff cannot use its prohibition[s] . . . as an enforcement mechanism for Indiana's state licensing law” (citation and internal quotation marks omitted)); Washington v. N. Star Capital Acquisition, LLC, No. 08 C 2823, 2008 WL 4280139, at *2 (N.D. Ill. Sept. 15, 2008) (“The FDCPA was designed to provide basic, overarching rules for debt collection activities; it was not meant to convert every violation of a state debt collection law into a federal violation.”).

         This principle is well illustrated by Beler v. Blatt, Hasenmiller, Leibsker & Moore, LLC, 480 F.3d 470 (7th Cir. 2007). In Beler, the plaintiff claimed that the debt-collector defendant violated § 1692f by serving a citation to discover assets that caused the plaintiff's bank to freeze her checking account for three weeks. 480 F.3d at 473. The plaintiff asserted that the federal Social Security Act and corresponding Illinois law exempted the account from attachment or other legal execution because her income consisted solely of Social Security disability payments. Id. at 472. She argued that because the debt collector's conduct violated the Social Security Act and Illinois law, it was thereby “unfair and unconscionable” under § 1692f. Id. at 473-74 (“[H]er argument is that we should use § 1692f to enforce existing state and federal laws exempting certain assets from execution[.]”). The Seventh Circuit rejected this argument in broad terms, describing it as improperly attempting to bootstrap § 1692f “to enforce other legal rules.” Id. at 473. Section 1692f, the court explained, “does not so much as hint at being an enforcement mechanism for other rules of state and federal law.” Id. at 474. The court affirmed summary judgment for the debt collector, reasoning that “[i]f the [debt collector] violated the Social Security Act, that statute's rules should be applied, ” and “[l]ikewise if [it] violated Illinois law.” Id.

         The Seventh Circuit applied and reiterated this principle more recently in Bentrud v. Bowman, Heintz, Boscia & Vician, P.C., 794 F.3d 871 (7th Cir. 2015). There, a debt collector had previously sued the plaintiff in state court to collect on the plaintiff's credit card debt. Bentrud, 794 F.3d at 872. During the state court lawsuit, the plaintiff invoked the arbitration provision of his credit card agreement, which allowed him to force arbitration of the dispute. Id. When the debt collector subsequently filed a motion for summary judgment in the state court lawsuit, the plaintiff filed a federal suit alleging violation of the FDCPA. Id. at 872-73. The plaintiff argued that the debt collector's summary judgment motion in state court was an “unfair or unconscionable” means of collecting debt under § 1692f because the arbitration provision of the credit card agreement, once invoked, precluded further litigation. Id. at 873-74. The Seventh Circuit rejected this claim and affirmed summary judgment for the debt collector, explaining that the plaintiff was “seek[ing] to transform the FDCPA into an enforcement mechanism for the arbitration provision in his credit card agreement.” Id. at 875. The court reiterated that the FDCPA “is not an enforcement mechanism for matters governed elsewhere by state and federal law.” Id. If the plaintiff objected to the debt collector's resumption of the state court litigation after he elected arbitration, the court reasoned, “his remedy sounds in breach of contract, not the FDCPA.” Id. The court explained further that “[a] contrary ruling would require [the court] to declare that adherence to an arbitration provision in a contract . . . is essential to fair debt collection. This we will not do.” Id. (internal citation omitted).

         The same principle applies here. As in Beler and Bentrud, Plaintiffs are attempting to use the FDCPA as a vehicle for enforcing matters governed by state law-in this case, state usury laws.[3] See Bentrud, 794 F.3d at 875; Beler, 480 F.3d at 473-74. However, while the Seventh Circuit in both Beler and Bentrud broadly rejected using the FDCPA as an enforcement mechanism for other laws, it did so only in the context of § 1692f claims. Bentrud, 794 F.3d at 874-76; Beler, 480 F.3d at 473-74. The Seventh Circuit has not, so far as this Court is aware, applied the same principle to claims under § 1692e. See Fick, 2012 WL 1074288, at *3 (“[N]either of these Seventh Circuit cases hold that a violation of state law cannot create liability under Section 1692e.”) In the absence of similar authority regarding § 1692e, the Court believes the correct approach is to apply this principle only to Plaintiffs' claim under § 1692f. See Id. (“Defendants' position is that a violation of state law may never form the basis for a violation of the FDCPA[.] However, the court believes that [since] . . . there is no Seventh Circuit precedent that is dispositive on the issue of whether a state law violation can form the basis of a Section 1692e claim, the best approach, an approach taken by numerous district and appellate courts, is to determine if the alleged violation of state law is also a violation of [§ 1692e].”). Count I therefore fails to state a claim under § 1692f and is dismissed in part, but only as to any claim under § 1692f. Bentrud, 794 F.3d at 875. Because Defendants do not argue that Count I insufficiently alleges a violation of § 1692e, the Court declines to dismiss Count I as to any § 1692e claim.

         II. Count II - Usury (Illinois Interest Act)

         Count II, captioned “Interest Act - Individual and Class Claim, ” is asserted by two of the Plaintiffs individually against particular Defendants, [4] and by nine of the Plaintiffs as representatives of the putative “Interest Act” class against all Defendants. (R. 79, Cons. Compl. ¶¶ 221-24.) Count II asserts that Defendants have committed usury in violation of Illinois law. More specifically, Plaintiffs allege that Defendants violated the Illinois Interest Act (“IIA”), 815 III. Comp. Stat. 205/4, by contracting for and collecting interest at rates in excess of the 9% statutory limit under the IIA. (Id. ¶¶ 80, 225.)

         Defendants argue that Plaintiffs' IIA usury claim must be dismissed for two principal reasons. First, Defendants argue that the National Bank Act (“NBA”), 12 U.S.C. §§ 85-86, preempts any state-law claim of usury because all of Plaintiffs' loans were originated by JP Morgan Chase (“Chase”), a national bank. (R. 73, Defs.' Mem. at 5-6.) Defendants' second argument is that, as assignees of the Plaintiffs' student loan debts, they are permitted to charge and collect interest at the same rate as the original lender. (Id. at 1, 6-7.) Defendants contend that since the original lender was authorized to charge the interest rates provided for in Plaintiffs' student loans-or, at least, since there is no plausible allegation to the contrary-Defendants are too. (Id.) These arguments are addressed in turn.

         A. National Bank Act Preemption

         Defendants' first argument is that the NBA entirely preempts Plaintiffs' state-law usury claim. (R. 73, Defs.' Mem. at 5-6.) Section 85 of the NBA provides that a national bank[5] may “take, receive, reserve, and charge on any loan . . . interest at the rate allowed by the laws of the State, Territory, or District where the bank is located.” 12 U.S.C. § 85. Section 86 provides that knowingly charging interest at a higher rate than permissible in § 85 is “deemed a forfeiture of the entire interest” and allows borrowers who have paid more interest than is allowed to recover damages for twice the excess amount. 12 U.S.C. § 86. In Beneficial National Bank v. Anderson, 539 U.S. 1 (2003), the U.S. Supreme Court held that §§ 85 and 86 of the NBA provide the exclusive cause of action for usury claims against national banks. Id. at 9-11. The Court explained that those provisions “supersede both the substantive and the remedial provisions of state usury laws and create a federal remedy for overcharges that is exclusive.” Id. at 11. As a consequence, “there is, in short, no such thing as a state-law claim of usury against a national bank.” Id.; see also City of Chi. v. Comcast Cable Holdings, L.L.C., 384 F.3d 901, 905 (7th Cir. 2004) (noting that NBA “knocks out all state regulation of national banks' interest charges, so that any claim must rest on federal law alone”); Bank of Am., N.A. v. Shelbourne Dev. Grp., Inc., 732 F.Supp.2d 809, 820 (N.D. Ill. 2010) (“[Defendant's] IIA affirmative defense and counterclaim accuse [Bank of America] of charging fees that exceeded those allowed by law. As such, they are based on usury and preempted by the NBA.”).

         Plaintiffs acknowledge in their complaint that Chase was the “purported originator” of their student loans and that Chase is a national bank. (R. 79, Cons. Compl. ¶ 80-81.) Nevertheless, the Court is not persuaded at this time that the NBA preempts Plaintiffs' IIA claim as a matter of law. First, Plaintiffs are not suing a national bank. Were they suing Chase itself for usury under the IIA there is little doubt the claim would preempted. See Beneficial Nat'l Bank, 539 U.S. at 11. But Plaintiffs' IIA claim is not against Chase, the purported original lender; it is rather against the assignees of their student loans, who are not national banks.[6] (R. 79, Cons. Compl. ¶ 88 (alleging that Plaintiffs' student loans were “sold to a non-bank ‘National Collegiate Trust' entity” after being made).) However, it is not so clear that NBA preemption applies to assignees of loans originated by national banks. While neither party addresses this proposition, the only U.S. Court of Appeals to have squarely addressed the issue held recently that such assignees are not entitled to NBA preemption simply by virtue of the loan originating with a national bank. Madden v. Midland Funding, LLC, 786 F.3d 246, 249-53 (2d Cir. 2015), cert. denied, 136 S.Ct. 2505 (2016).

         In Madden v. Midland Funding, LLC, the plaintiff alleged that the buyers of her Bank of America credit card debt violated New York state usury laws by attempting to collect interest on the debt at 27%. Id. at 247-48. The debt buyers argued that preemption applied-that, as assignees of a loan originated by a national bank (Bank of America), they too were covered by the NBA so as to preempt the plaintiff's state law usury claim. Id. at 250. The U.S. Court of Appeals for the Second Circuit rejected this argument, concluding that the reasons justifying preemption for national banks did not apply to the debt buyers because the debt buyers were not “a subsidiary or agent of a national bank, or . . . otherwise acting on behalf of a national bank” and “application of the state law on which [the plaintiff's] claims rely would not significantly interfere with any national bank's ability to exercise its powers under the NBA.” Id. at 247, 249.[7]The Second Circuit reversed the district court's contrary holding that NBA preemption applied to the debt buyers, explaining that the district court misapprehended the case law to suggest that “once a national bank has originated a credit, the NBA and the associated rule of . . . preemption continue to apply to the credit, even if the bank has sold the credit and retains no further interest in it.” Id. at 252 n.2. Defendants rely on the same proposition here-that the NBA applies to them and serves to preempt Plaintiffs' IIA claim because the loans originated with a national bank. In light of persuasive authority from the Second Circuit rejecting this proposition-and the absence of any other authority that squarely addresses the issue-the Court is not persuaded that NBA preemption applies here as a matter of law.

         A second reason persuades the Court that NBA preemption does not apply here: Plaintiffs have alleged that Chase was not in fact the true originator of their student loans. Plaintiffs have alleged that “[e]ach loan purported to be originated in the name of JP Morgan Chase- sometimes using the name of Bank One”-but that the true lender was “First Marblehead, ” a non-bank entity that acted behind the scenes and effectively “rented” Chase's banking charter to make loans. (R. 79, Cons. Compl. ¶¶ 81, 83 (emphasis added).) Plaintiffs allege that First Marblehead supplied all the loan application documents, reviewed the loan applications, determined which loans to make and on what terms, designated who would administer the loans, designated the servicer that borrowers would send payments to, and directed who the loans would be sold to after origination. (Id. ¶¶ 84-90.) Plaintiffs allege that Chase “never had any economic interest in the loans, instead receiving small ‘marketing' and ‘origination' fees totaling a few hundred dollars for allowing its name to be used in connection with originating the loans.” (Id. ¶ 82.) Accepting these allegations as true, as this Court must, NBA preemption would not apply even if assignees of loans originated by national banks were entitled to NBA preemption, because Plaintiffs' student loans allegedly were not originated by a national bank. (Id. ¶ 84.)

         Defendants argue that the Court cannot credit Plaintiffs' so-called “rent-a-charter” scheme as plausible, because exhibits should trump allegations when they conflict and the Plaintiffs' loan documents themselves-attached to and referenced in the complaint-list Chase or its subsidiary, Bank One, as the lender. (R. 76, Defs.' Reply at 7-8; R. 84, Defs.' Resp. at 2-8.) It is true that the Plaintiffs' loan documents all appear to identify Chase or Bank One as the lender. Plaintiffs Clark's and McCool's loan documents, for example, list “Bank One (JP Morgan Chase Bank, N.A.)” as the lender. (R. 79-1, Cons. Comp., App. 5 at 31-32; id., App. 12 at 87-88.) And under Federal Rule of Civil Procedure 10, “[a] copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes.” Fed.R.Civ.P. 10(c). However, “Rule 10(c) does not require a plaintiff to adopt every word within the exhibits as true for purposes of pleading simply because the documents were attached to the complaint.” N. Ind. Gun & Outdoor Shows, Inc. v. City of S. Bend (“Indiana Gun”), 163 F.3d 449, 455 (7th Cir. 1998). Favoring a written instrument attached to a complaint over a complaint's allegations makes sense, for example, in a breach of contract claim where the contract clearly does not provide what the plaintiff alleges. See Ogden Martin Sys. of Indianapolis, Inc. v. Whiting Corp., 179 F.3d 523, 529 (7th Cir. 1999) (“The inconsistency between the complaint and the actual terms of the contract substantially undermines [plaintiff's] argument that the parties' contract was not a transaction in goods . . . . As we have explained: ‘[W]here the allegations of a pleading are inconsistent with the terms of a written contract attached as an exhibit, the terms of the latter . . . must prevail[.]'”). But it does not make sense, as the Seventh Circuit has explained, to credit as true all assertions in “letters written by the opposition for what could be self-serving purposes” just because they are attached as exhibits to a complaint. Indiana Gun, 163 F.3d at 455.

         Here, it is plausible to infer from Plaintiffs' allegations that the identification of Chase or Bank One as lender on the loan documents was a self-serving statement, insofar as it facilitated the alleged “rent-a-charter” scheme. To disregard Plaintiffs' express allegations in favor of the lender listed on the face of the loans would require the Court to draw a factual inference against the Plaintiffs-that Chase was in fact the originator of the loans-which it may not do at the pleading stage. See Kubiak, 810 F.3d at 480-81; see also Ubaldi v. SLM Corp., 852 F.Supp.2d 1190, 1194-95 (N.D. Cal. 2012) (rejecting argument on a motion to dismiss that because a national bank was listed “as the lender on the loan documents, [the NBA] expressly preempts Plaintiff's state law claims” finding that the “imprimatur of a national bank on the loan documents” does not “automatically trigger[] preemption” and “foreclos[e] inquiry into the real nature of the loan, or whether the debtor may invoke the protection of state consumer laws if she proves that the actual lender in substance is not a national bank”). Because Plaintiffs allege that Chase was not the true originator of their loans, the Court is not persuaded that NBA preemption applies here.

         B. Defendants' Rights as Assignees

         Defendants' second argument is that, as assignees of the Plaintiffs' student loan debts, they are permitted to charge and collect interest at the same rate at the original lender. (R. 73, Defs.' Mem. at 1, 6-7.) Since the original lender was authorized to charge and collect the interest prescribed for the Plaintiffs' loans, Defendants contend they were too. (Id.)

         Defendants are correct that under the Illinois Interest Act, an assignee of debt can charge and collect interest at the same rate as the original lender, even if the assignee would not otherwise be permitted to charge such a rate. See Olvera v. Blitt & Gaines, P.C., 431 F.3d 285, 289 (7th Cir. 2005); accord PRA III, LLC v. Hund, 846 N.E.2d 965, 968-69 (Ill.App.Ct. 2006). This principle is based on the common law rule that an “assignee steps into the shoes of the assignor.” Olvera, 431 F.3d at 288; see also Hund, 846 N.E.2d at 968 (“The assignee, by acquiring the same rights as the assignor, stands in the shoes of the assignor.” (citation omitted)). In Olvera, the Seventh Circuit dealt squarely with the question of “whether the assignee of a debt in Illinois is free to charge the same interest rate that the assignor-the original creditor- charged . . . rather than constrained to the lower [IIA] statutory rate, even if the assignee does not have a license that expressly permits the charging of a higher rate.” 431 F.3d at 286. The court answered in the affirmative because “the Illinois Interest Act does not affect the common law rights of assignees, ” which “puts the assignee in the assignor's shoes.” Id. at 289; see also Hund, 846 N.E.2d at 968 (agreeing with holding of Olvera).

         Plaintiffs allege that “[n]one of the ‘National Collegiate Trusts' had a bank or financial institutions charter, or license from the State of Illinois entitling it to charge interest at more than 9% per annum.” (R. 79, Cons. Compl. ¶ 44.) Plaintiffs also allege, however, that the NCT Defendants are assignees of Plaintiffs' student loan debts. (Id. ¶¶ 84, 88 (“The loans were . . . sold to a non-bank ‘National Collegiate Trust' entity after being made. The . . . originating bank did not retain any interest in the loans.”).) By virtue of being assignees, Defendants can charge and collect interest on those debts at the same rate as the original lender, even if that rate exceeds the 9% that Defendants might otherwise be limited to under the IIA. Olvera, 431 F.3d at 289; Hund, 846 N.E.2d at 968-69. However, Defendants' argument does not address whether the original lender was permitted to charge rates in excess of 9%. As noted, Plaintiffs have alleged that the non-bank entity “First Marblehead” was the true lender acting behind the scenes for their loans, notwithstanding that the Plaintiffs' loan documents identify Chase or Bank One as the “lender.” (R. 79, Cons. Compl. ¶¶ 81, 83 (emphasis added).) At this stage, the Court must credit Plaintiffs' allegations of a “rent-a-charter” scheme, and it is plausible to infer from these allegations that the non-bank entity “First Marblehead” was not authorized to charge in excess of the 9% limit under the IIA. If, as is plausibly alleged, First Marblehead could not exceed the 9% statutory cap, Defendants' argument regarding the common law rights of assignees simply does not apply. For these reasons, the Court declines to dismiss Count II.

         III. Count III - Time-Barred Debts (FDCPA)

         Count III, captioned “FDCPA - Time-Barred Debts, ” is asserted by four of the Plaintiffs (Rosen, Patel, and both Castanos) as representatives of the putative “Time Bar FDCPA” class against Defendants Transworld, NCO, Blitt, and WWR. (R. 79, Cons. Compl. ¶¶ 210, 229-30.) Count III alleges that Defendants violated the FDCPA, 15 U.S.C. §§ 1692e, 1692e(2), and 1692e(10), by filing debt collection lawsuits against Plaintiffs that were barred by the applicable statute of limitations. (Id. ¶ 231.)

         The FDCPA prohibits debt collectors from using any “false, deceptive, or misleading representation or means” in the collection of any debt. 15 U.S.C. § 1692e. In this Circuit, filing a time-barred debt collection lawsuit, in and of itself, violates this prohibition because such a suit falsely implies that the debt collector has legal recourse to collect the debt. Phillips v. Asset Acceptance, LLC, 736 F.3d 1076, 1079 (7th Cir. 2013); see also Owens v. LVNV Funding, LLC, 832 F.3d 726, 730 (7th Cir. 2016) (“[O]ur case law hold[s] that the FDCPA prohibits creditors from filing lawsuits to collect on stale debts.”), pet. for cert. docketed, No. 16-315 (Sept. 12, 2016).

         Defendants argue that Count III fails to state a claim under the FDCPA because the allegedly prohibited debt collection lawsuits were timely under the applicable statute of limitations, which Defendants contend is 10 years. (R. 73, Defs.' Mem. at 8-13.) Defendants argue that the 10-year limitations period applies because the debts are based on promissory notes, written contracts, or other written evidence of indebtedness under 735 Ill. Comp. Stat. 5/13-206. (Id.) Plaintiffs do not dispute that Defendants' debt collection suits were timely if the correct limitations period is 10 years, but argue that the agreements underlying their student loans do not qualify as promissory notes, written contracts, or other written evidence of indebtedness under the statute. (R. 75, Pls.' Resp. at 20-31.) Consequently, Plaintiffs contend, the shorter 5-year limitations period for actions on unwritten or oral contracts applies, under which Defendants' suits were untimely and Plaintiffs have stated a claim of violating the FDCPA. (Id.) Thus, the principal dispute between the parties is whether Illinois' 5- or 10-year statute of limitations applies to Plaintiffs' student loan debts.

         Illinois law provides a 10-year statute of limitations for suits on “promissory notes, ” “written contracts” and “other evidences of indebtedness in writing”:

Except as provided in Section 2-725 of the “Uniform Commercial Code”, actions on . . . promissory notes, . . . written contracts, or other evidences of indebtedness in writing . . . shall be commenced within 10 years next after the cause of action accrued; but if any payment or new promise to pay has been made, in writing, on any . . . note, . . . contract, or other written evidence of indebtedness, within or after the period of 10 years, then an action may be commenced thereon at any time within 10 years after the time of such payment or promise to pay.

735 Ill. Comp. Stat. 5/13-206. The limitations period for actions on unwritten or oral contracts, by contrast, is five years:

Except as provided in Section 2-725 of the “Uniform Commercial Code” . . . and Section 11-13 of “The Illinois Public Aid Code” . . . actions on unwritten contracts, expressed or implied . . . shall be commenced within 5 years next after the cause of action accrued.

735 Ill. Comp. Stat. 5/13-205.

         Two issues warrant preliminary discussion. First, Plaintiffs attached a number of documents to their Consolidated Complaint relating to their respective student loans, including the complaints in the allegedly prohibited state court debt collection lawsuits and the agreements underlying their student loans. (E.g., R. 79-1, Cons. Compl., App. 1 at 2-5; id., App. 19 at 136-40.) In some cases, however, the attachments were evidently incomplete, and Defendants attached some of the omitted materials to their present motion. (R. 79-1, Cons. Compl., App. 1 at 2-5 (attaching state court complaint, without attached affidavit or exhibits); R. 72-1, Defs.' Mot., Ex. A at 2-8 (attaching state court complaint, with attached affidavit and exhibits).) The Court concludes as a preliminary matter that it properly may consider the documents attached by both Plaintiffs and Defendants-the student loan agreements in particular-because they are referenced in Plaintiffs' complaint and are central to Plaintiffs' allegations as to Count III. See Williamson, 714 F.3d at 436; see also Langone v. Miller, 631 F.Supp.2d 1067, 1070 (N.D. Ill. 2009) (noting that in the context of a Rule 12 motion, “‘[w]ritten instrument' is construed broadly to include such things as affidavits, letters, contracts, and loan documents”); Walker v. Rieth-Riley Const. Co., No. 2:03-cv-507, 2005 WL 1799535, at *2 (N.D. Ind. July 25, 2005) (“Here, the Plaintiffs attached portions of the Handbook as an exhibit to their complaint and repeatedly refer to that Handbook throughout Count VII. Accordingly, the Court shall consider the entirety of the Handbook in its analysis.”). Plaintiffs' Consolidated Complaint repeatedly refers to and quotes the agreements underlying their student loans. (E.g., R. 79, Cons. Compl. ¶¶ 103-04, 106-09.) The agreements are also central to Plaintiff's allegations: Count III is premised on the Defendants' debt collection suits being untimely under the 5-year statute of limitations. If a 10-year limitations period applies instead-because the underlying loan agreements qualify as promissory notes, written contracts, or other written evidence of indebtedness under the statute- then the suits were concededly timely. Without looking to the agreements themselves, it is impossible for the Court to determine whether a 5- or 10-year limitations period applies and, consequently, whether Plaintiffs have stated a claim that Defendants filed lawsuits prohibited by the FDCPA. The documents themselves are therefore central to Plaintiffs' allegations and the Court may consider them.

         The second preliminary matter is which agreements to consider. Count III is asserted by four Plaintiffs as representatives of the putative “Time Bar FDCPA” class. (R. 79, Cons. Compl. ¶ 229.) In their briefing on the motion to dismiss, both Plaintiffs and Defendants essentially treat Plaintiff Patel's student loan agreement as representative of the others; the parties do not separately address the agreements signed by Rosen and the Castanos. (See R. 75. Pls.' Resp. at 20-22, 27 (referencing Plaintiff Patel's agreement at Appendix 19).) Importantly, the parties do not argue that there are any material differences between the agreements that warrant addressing them individually or treating them differently. Consequently, the Court considers and discusses Plaintiff Patel's student loan agreement as representative of the others.

         The Court first considers whether the Plaintiffs' student loan agreements qualify as a “written contract” under 735 Ill. Comp. Stat. 5/13-206. To be clear, Plaintiffs do not dispute the existence of contracts governing their student loans; they merely dispute whether “all the essential terms” were in writing, so as to implicate the 10-year statute of limitations. “For statute of limitations purposes a contract is considered to be written if all the essential terms of the contract are in writing and are ascertainable from the instrument itself.” Brown v. Goodman, 498 N.E.2d 854, 856 (Ill.App.Ct. 1986). “If parol evidence is needed to make the contract complete, then the contract is treated as being oral under the statute of limitations.” Id. at 857.

         The parties' dispute centers on two documents: a “Non-Negotiable Credit Agreement” (the “Credit Agreement”) and a “Note Disclosure Statement” (the “Disclosure Statement”). (R. 79-1, Cons. Compl., App. 19 at 136-37; 72-1, Defs.' Mot., Ex. A at 7.) The Credit Agreement is a four-page document Dated: the first page by the borrower (and co-borrower, if applicable). (R. 79-1, Cons. Compl., App. 19 at 136-39.) The first page identifies the lender and borrower(s) by name and discloses parameters of the loan that are specific to the transaction. (Id. at 136.) Plaintiff Patel's Credit Agreement, for example, identifies “Bank One, N.A.” as the lender, “Rupali R. Patel” as the borrower, “Education One® Education One Undergraduate Loan” as the loan type, “DEPAUL UNIVERISTY” as her educational institution, “09/2004 - 07/2005” as the academic period for which the loan is made, the “Origination Fee” as 8%, and “Interest Only Repayment with Deferred Principal” as the repayment option. (Id.) The first page also lists a dollar amount for the loan, denoting it as the “Loan Amount Requested, ” as well as the interest rate (or margin over an index, in the case of a variable rate loan). (Id. (“Loan Amount Requested: $8500.00”; “Deferral Period Margin: 4.65”; “Repayment Period Margin: 4.65”).) The remaining three pages set forth detailed terms and conditions, including a commitment by the borrower to repay: “PROMISE TO PAY: I promise to pay to your order, upon the terms and conditions of this Credit Agreement, all principal, interest, and other charges set forth herein.” (Id. at 137.) Page 1 is signed by the borrower(s) underneath a certification that states: “By my signature, I certify that I have read, understand and agree to the terms of and undertake the obligations set forth on all four (4) pages of this Loan Request / Credit Agreement.” (Id. at 136.)

         The Credit Agreement also explains that the disbursement check for the loan will be accompanied by a “statement disclosing certain information about the loan in accordance with the federal Truth-in-Lending Act (the ‘Disclosure Statement'), ” which will “tell [the borrower] the amount of [the] disbursement and the amount of the Loan Origination Fee.” (R. 79-1, Cons. Compl., App. 19 at 137.) The Disclosure Statement is a one page document that lists the names of the “Student” and the “Borrower(s), ” the “Amount Financed, ” the dollar amount of the “Origination Fee, ” the date of disbursement of the loan that the Disclosure Statement relates to, the “Annual Percentage Rate” of the loan, the number and schedule of the payments for the loan, and the “Finance Charge”-which is the estimated “dollar amount the credit will cost” the borrower over the life of the loan. (R. 72-1, Defs.' Mot., Ex. A at 7.)

         Defendants argue that the Credit Agreement sets forth all the essential terms of the agreement between the borrower and lender and therefore qualifies as a “written contract” to which the 10-year statute of limitations applies. (R. 73, Defs.' Mem. at 10-11.) Plaintiffs do not dispute that the Credit Agreement provides many essential terms of the loan, but argue that two are not present: the amount and repayment terms. (R. 75, Pls.' Resp. at 26-27.) Plaintiffs contend that parol evidence, in the form of additional documents and the subsequent course of dealing between the borrower and lender, would be necessary to identify both terms. (Id. at 28.)

         Plaintiffs argue that the amount actually loaned is not ascertainable from the Credit Agreement itself because: (1) the dollar amount on page 1 is identified only as a “Loan Amount Requested”; and (2) the Credit Agreement expressly allows the lender to loan less than the “Loan Amount Requested.” (Id.) Plaintiffs argue that either the Disclosure Statement or a cancelled loan disbursement check would be needed to determine the amount actually loaned and that both constitute parol evidence. (Id. at 27-28.) They contend that the need to examine outside documents for this essential loan term means not “all the essential terms” of the contract are in writing, and so the 5-year statute of limitations applies.

         Based on the language in the Credit Agreement, Plaintiffs appear to be correct that it does not fix the amount actually loaned, and that one would need to look to either the Disclosure Statement or a cancelled loan disbursement check to ascertain that amount. However, the Disclosure Statement is not parol evidence because it is expressly incorporated into the Credit Agreement. It is axiomatic that “parties to a contract may incorporate by reference another document if that intention is clearly shown on the face of the contract.” Jago v. Miller Fluid Power Corp., 615 N.E.2d 80, 82 (Ill.App.Ct. 1993); see also Unifund CCR Partners v. Shah, 946 N.E.2d 885, 891 (Ill.App.Ct. 2011) (“It is a fundamental principal of contract law that ‘an instrument may incorporate all or part of another instrument by reference.'” (citation omitted)). If outside documents are so incorporated, they “become as much a part of the contract as if they were expressly written in it.” Wilson v. Wilson, 577 N.E.2d 1323, 1329 (Ill.App.Ct. 1991). The Credit Agreement specifies that “[t]he Disclosure Statement is part of this Credit Agreement.” (R. 79-1, Cons. Compl., App. 19 at 137.) This language plainly evinces an intention to incorporate by reference, rendering the Disclosure Statement “as much a part of” the Credit Agreement as if the Disclosure Statement had been physically a part of it. Wilson, 577 N.E.2d at 1329. Thus, the amount actually loaned is in writing and does not require parol evidence to ascertain.

         Plaintiffs also contend that “terms on which the loan is to be repaid” are essential but not provided for in the Credit Agreement. (R. 75, Pls.' Resp. at 2, 22-23.) Specifically, Plaintiffs argue that parol evidence would be needed to ascertain (1) the duration of the loan and (2) the date when the borrower was obligated to begin repayment. (Id. at 25, 27.) This argument is also not persuasive. First, Plaintiffs cite no authority for the proposition that duration or repayment start date is an essential term of a loan; in fact, a case that they cite suggests otherwise. See Kranzler v. Saltzman, 942 N.E.2d 722, 726 (Ill.App.Ct. 2011) (holding that a written and signed loan “memo” that did not specify a rate of interest or a repayment date or schedule nevertheless included all essential terms for purposes of the statute of limitations). Second, even if these terms of repayment are essential, the Credit Agreement discloses them. The first page identifies the “Repayment Option” elected by the borrower, and the terms on page 2 explain each possible Repayment Option in elaborate detail. (R. 79-1, Cons. Compl., App. 19 at 136-37.) For Plaintiff Patel, for example, the Repayment Option is identified as “Interest Only Repayment with Deferred Principal, ” which is explained on page 2 as requiring “payments each month during the Deferment Period equal to the accrued interest on the outstanding balance of this Credit Agreement.” (Id.) The terms further explain that “interest payments will begin 30-60 days after the disbursement of [the] loan, the ‘Deferment End Date' will be the date the Student graduates or ceases to be enrolled at least half-time in the School . . . and principal and interest payments will begin 30-60 days after that date.” (Id. at 137.) The terms also explain that “[t]he Repayment Period is 20 years, unless monthly payments equal to the minimum monthly payment amount (See Paragraph E.4) will repay all amounts owed in less than 20 years, ” and that during the Repayment Period, the “monthly repayment amount will equal the amount necessary to pay in full, over the number of months remaining in the Repayment Period, the amount I owe in equal monthly installments of principal and interest at the Variable Rate in effect at the time of the calculation.” (Id.) The terms of repayment are sufficiently “in writing and are ascertainable from” the Credit Agreement. Brown, 498 N.E.2d at 856. Plaintiffs' argument to the contrary is meritless.

         Plaintiffs rely heavily on Portfolio Acquisitions, LLC v. Feltman, 909 N.E.2d 876 (Ill.App.Ct. 2009), which held that an agreement governing use of a bank credit card was not a contract wholly in writing for purposes of the statute of limitations. Id. at 884. However, Portfolio Acquisitions relied on the “unique nature” of credit cards, explaining that Illinois courts have held that “the issuance of a credit card . . . is a standing offer to extend credit that may be revoked at any time.” Id. at 881. The court explained that “[w]hen the cardholder makes a purchase, the bank advances funds to the merchant and this arrangement constitutes a loan between the bank and cardholder.” Id. “Therefore, each time the credit card is used, a separate contract is formed between the cardholder and bank.” Id. However, Portfolio Acquisitions is not persuasive here because this case does not involve credit card debt or even debt incurred through a revolving credit line (which is the broader category that credit cards fall under). The Plaintiffs' student loan agreements are fundamentally different from the “standing offer[s] to extend credit that may be revoked at any time, ” id. at 881, at issue in Portfolio Acquisitions.

         Plaintiffs make one last argument for why the contract should be deemed unwritten for purposes of the statute of limitations. They suggest that since the Disclosure Statement is not itself signed by the borrower(s), parol evidence in the form of a borrower's receipt and acquiescence to the Disclosure Statement would be necessary to demonstrate mutuality of obligation between the parties, thus rendering the contract partly unwritten. (R. 81, Pls.' Sur-Reply at 3-4.) It is true that the Disclosure Statement is not itself signed by the borrower(s); however, a contract will still be deemed in writing for purposes of the statute of limitations even “where mutuality is established by [extrinsic] proof of the acceptance of [a] writing.” Memory v. Niepert, 23 N.E. 431, 433 (Ill. 1890); see also Stanley v. Chastek, 180 N.E.2d 512, 520 (Ill.App.Ct. 1962) (citing Neipert for the proposition that “[t]hough parole evidence may be necessary to show delivery of a writing and its acceptance and adoption by a party, the contract is, notwithstanding, a written contract”). In Memory v. Niepert, the Illinois Supreme Court rejected an argument similar to the Plaintiffs' here. The sales contract sought to be enforced in Niepert was signed only by the defendant, and the plaintiffs argued that it was unwritten for statute of limitations purposes because extrinsic proof would be required to show the plaintiff's receipt and acquiescence. The Illinois Supreme Court rejected this argument, noting that “[t]he delivery of a writing, and its acceptance and adoption by the party to whom it is delivered, are necessarily facts [outside] the writing itself.” Id. Notwithstanding the resort to such extrinsic evidence, the court held, the contract was still entirely written and subject to a 10-year statute of limitations. Id.; see also Moloney v. ...


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