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Fleischer v. AccessLex Institute

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

August 26, 2019

Jeffrey Fleischer, Plaintiff,
AccessLex Institute, Conduent Education Services, LLC, and F.H. Cann & Associates, Defendants.


          Manish S. Shah United States District Judge

         When he had trouble making his student loan payments in late 2011, plaintiff Jeffrey Fleischer applied for forbearance from his loan servicer, defendant AccessLex Institute (doing business as Access Group). Based on a phone conversation with an Access Group representative, Fleischer believed it had accepted his application and that he could forgo payments for up to three years. Access Group, however, has no record of a forbearance agreement and continued to send Fleischer monthly statements (though Fleischer did not receive them). Access Group transferred its loan obligations to defendant Conduent, and by 2017, defendant F.H. Cann was sending Fleischer collection notices. Fleischer now brings Illinois Consumer Fraud Act, Breach of Contract, and Fair Debt Collection Practices Act claims, among others, based on defendants' administration of his loan and collection efforts. Defendants move for summary judgment, and for the reasons discussed below, their motions are granted.

         I. Legal Standards

         Summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and he is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A genuine dispute as to any material fact exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). I construe all disputed facts in favor of the nonmoving party. Mollet v. City of Greenfield, 926 F.3d 894, 896 (7th Cir. 2019).

         II. Background

         A. Fleischer's Loan

         Plaintiff Jeffrey Fleischer consolidated several undergraduate and graduate student loans with defendant Access Group sometime around June 1, 2004. [167] ¶ 2.[1]In signing his promissory note, Fleischer agreed he had read and understood the terms and conditions, including the Borrower's Rights and Responsibilities, which stated that he was required by law to notify his lender in writing if he changed his permanent address, email, phone number, or employment status. [162] ¶ 6; [165] ¶¶ 6-7. Kentucky Higher Education Student Loan Corporation serviced Fleischer's consolidated loan from 2004 through March 2009, when it transferred loan servicing to Access Group. [162] ¶¶ 7-8.[2] Fleischer made his payments on time until January 2011, when Access Group sent him a notice that his loan was one payment past due. [162] ¶ 9-10.[3] The next month, Fleischer prepaid the amount due on his loan through the end of the year. [162] ¶ 11.

         Fleischer moved from his parents' home to an apartment on Pratt Street in Chicago in January 2011, and he provided his new address to Access Group. [162] ¶ 37; [165] ¶ 8. He moved again ten months later to an apartment on North Sheridan Road. [165] ¶ 9. Fleischer notified the post office of the latter change of address, received forwarded mail there, and was not aware of any issues with his mail being forwarded. [165] ¶ 10; [172] ¶ 8. Fleischer never notified Access Group or Conduent in writing that he had a new address. [165] ¶ 27. Fleischer used a phone number with an 847 area code from 2002 up until June 2011, and he switched to a number with a 773 area code in December. [165] ¶¶ 11-12. He never updated his phone number with either Access Group or Conduent. [165] ¶ 40.

         In late October or early November 2011, Fleischer mailed a forbearance application to Access Group. [165] ¶ 13. When he didn't hear anything, he called Access Group a few weeks later, in late November, to follow up. [165] ¶ 14. According to Fleischer, an Access Group representative told him that his forbearance request was approved for up to three years, that interest would continue to accrue on the loan at 2.5%, and that Access Group had mailed the response to Fleischer's parents address (though at that time, Access Group had Fleischer's Pratt Street apartment address in Fleischer's file, not his parent's address). [162] ¶¶ 17, 36; [165] ¶ 15. Fleischer never asked his parents if they received the forbearance agreement. [162] ¶ 35.

         The representative did not specify whether the forbearance would last for any definite minimum period. [162] ¶ 19. Fleischer never received a written response, did not learn any other details of the forbearance agreement, and the representative did not read the response to him over the phone. [162] ¶ 18; [165] ¶¶ 16-17. Fleischer gave the representative his new Sheridan Road address and she read it back to him to confirm. [165] ¶ 18. Access Group's records do not indicate that it received any phone calls from Fleischer in November 2011 or that it ever received a call from Fleischer relating to a forbearance at any point before transferring its servicing obligations on Fleischer's loan to Conduent in February 2012. [162] ¶¶ 20-21; [165] ¶ 4. It also has no record of ever receiving a forbearance application from Fleischer or of mailing him a response while it was servicing his loan. [162] ¶¶ 15, 22. During the time when it serviced Fleischer's loans, Access Group required that borrowers submit supporting documentation when applying for a forbearance. [162] ¶ 23. Fleischer does not recall whether he submitted supporting documents or what application form he used, but both forms available at the time stated that a forbearance is granted in 12-month increments and required borrowers to reapply each year. [162] ¶¶ 14, 25. When granting a forbearance, Access Group mailed a confirmation letter providing the terms and conditions, it generally did not grant forbearances over the phone. [162] ¶¶ 26-27.

         Access Group mailed Fleischer monthly statements to Fleischer in December, January, and February, indicating his loan was not in forbearance and that his next payment was due. [162] ¶¶ 39-43. It also sent him notices that his loan was past due and later delinquent. [162] ¶¶ 43-44. It sent these documents to the address it had on file, the apartment on Pratt Street. [162] ¶ 45. Fleischer did not receive them, but he did not expect to receive any documentation while his loan was in forbearance. [172] ¶ 13.

         When transferring its servicing obligations to Conduent, Access Group informed Conduent that Fleischer's loans were in repayment and past due, and none of the documents Conduent received from Access Group mentioned a November 2011 forbearance. [165] ¶¶ 21-22. Conduent did not receive any other information referencing a November 2011 forbearance, and Fleischer never contacted Conduent about it. [165] ¶¶ 19, 23.[4] Access Group sent a co-branded letter to Fleischer, notifying him of the transfer, but Fleischer never received it. [162] ¶¶ 49-50. Records of Fleischer's account indicate a forbearance “beginning 1/7/12 and ending 2/7/12, ” during which time Conduent was servicing Fleischer's loan. [172] ¶ 28. Conduent mailed two notices to Fleischer's Pratt Street address on February 20, 2012. [165] ¶ 24.[5] Three days later, Conduent received a national change of address notice and updated Fleischer's account to add his Sheridan address. [165] ¶ 26. Conduent sent notices to Fleischer's Sheridan address from March through November 11, 2012, when it sent a final demand for payment. [165] ¶¶ 28-39. Conduent called Fleischer at his 847 number and left voicemails from May through October. [165] ¶¶ 40-61. Fleischer did not receive these notices or voicemails. [175] ¶¶ 3-5.[6]

         In June 2013, Fleischer got a job as a contractor, and he did not notify Access Group or Conduent of his employment change. [165] ¶¶ 63-64. On November 8, 2013, Delta Management Associates, Inc. sent Fleischer a letter at his Sheridan address stating his loan was in default and owned by American Student Assistance. [167] ¶ 4; [172] ¶ 17. Before receiving that letter, Fleischer had not heard of Delta, American Student Assistance, or Conduent, and he was confused about who owned his loan. [172] ¶¶ 15-16. Fleischer called Delta and informed it that his loan should have been in forbearance and that he disputed the amount owed. [172] ¶¶ 18-20. He also called Access Group; it told Fleischer to call Conduent. [165] ¶ 66.[7] Fleischer did not do so. [165] ¶ 67. That same day, Fleischer filed a complaint to the Consumer Financial Protection Bureau. [165] ¶ 68. The complaint listed only Delta in the “Consumer Identified Company Name” field; it did not mention Conduent anywhere in the complaint. [165] ¶¶ 68-69. Because Conduent was not the subject of the complaint, Fleischer did not expect Conduent to respond to it. [165] ¶ 72. Conduent did not have notice of Fleischer's 2013 complaint until after Fleischer filed this lawsuit in 2017. [165] ¶ 74. In the winter of 2017, Fleischer sent a letter to U.S. Senators Richard Durbin and Tammy Duckworth regarding the circumstances of his default. [165] ¶ 75. Conduent received a copy, and that was the first complaint Conduent received from Fleischer. [165] ¶ 76. On March 29, 2017, the bureau responded to Fleisher's letter and included Conduent's response, which asked Fleischer to provide support for his claim. [165] ¶¶ 77-78. Fleischer never contacted Conduent about its request for additional support. [165] ¶ 79.

         F.H. Cann sent Fleischer a letter attempting to collect on his account on April 4, 2017. [167] ¶ 5. Fleischer was confused that “F.H. Cann was involved at all [because he] never heard of this company prior” and that F.H. Cann was “making the same claims that had been made by ASA in the past.” [167] ¶¶ 7-8. An attorney told Fleischer to send a letter to F.H. Cann disputing the debt, and Fleischer did so on April 27. [167] ¶¶ 10-11. F.H. Cann provided Fleischer with documents to validate his debt on May 10, 2017. [167] ¶ 12. When it did not hear anything else from Fleischer, F.H. Cann sent a collection letter on June 1. [167] ¶ 13.

         B. Additional Background

         In 2003, Federal Student Aid entered into contract with Conduent, which required it to switch to a certain debt collection management system, and it upgraded that system in 2011. [175] ¶¶ 6-8.[8] Because of deficiencies and operational issues with the system used to track and service defaulted and federal loans, Federal Student Aid issued a cure notice to Conduent in February 2012. [175] ¶ 9. In December, Conduent and Federal Student Aid entered a settlement agreement extending the contract through June 2014. [175] ¶ 10. An independent auditor's report dated November 2012, concluded that the debt collection system was unable to accept some debt accounts transferred from loan servicers and that Federal Student Aid was unable to receive collections or process rehabilitated loans. [175] ¶ 11. A month later, the Office of the Inspector General issued an alert memorandum informing Federal Student Aid of these problems and noting that since the upgrade, more than $1.1 billion in debt accounts should have been transferred into the collection management system but were not because of functional issues. [175] ¶ 12. Federal Student Aid terminated its contract with Conduent in 2012. [175] ¶ 13. The Government Accounting Office issued a report in 2014 stating that because of problems with the collection management system, “Education was unable to provide most borrowers who completed loan rehabilitation with timely benefits, such as removing defaults from their credit reports, for more than a year following the October 2011 upgrade.” [175] ¶ 14. The report further noted that Conduent had an unreliable performance history. [175] ¶ 17. A 2015 study of two-year colleges in Iowa found that Conduent had a 73.1% default rate for the 2011 fiscal year. [175] ¶ 18.

         A 2005 report from investment advisor Nomura Fixed Income Research noted that federal student loan processors, like Access Group, are process-oriented, meaning they are less concerned than private loan processors with ensuring their activities result in payment. [172] ¶¶ 22-23. Access Group disclosed to investors in 2010 that it could be negatively impacted by the elimination of the Federal Family Education Loan Program, and according to the CFPB, the wind-down of that program eliminated the primary source of new servicing volume for many specialty student loan market participants. [172] ¶¶ 24-25. A credit rating agency downgraded Access Group's loans in late 2011, due at least in part to the risk of disruption during the transfer to Conduent. [172] ¶¶ 26-27.

         The Department of Education provided debt-collection monitoring and guidance for all private collection agencies it worked with to ensure companies provided borrowers accurate information regarding their loans. [174] ¶ 11, 13.[9] For example, it provided a manual containing guidelines, policies, and procedures to private collection agencies, which included guidelines for accurately communicating the benefits of rehabilitating a loan to borrowers. [174] ¶¶ 1, 7.[10] Before updating the manual, it terminated five private collection agencies (F.H. Cann was not one of them) largely because of their misrepresentations concerning the effects of rehabilitation on a borrower's credit report. [174] ¶¶ 9-10, 12.

         III. Analysis

         A. Rule 56(d)

         Fleischer does not respond to the merits of Conduent's and Access Group's motions. Instead, he asserts he cannot present facts essential to justify his opposition and asks for additional discovery. See Fed. R. Civ. P. 56(d). “If a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition, the court may: (1) defer considering the motion or deny it; (2) allow time to obtain affidavits or declarations or to take discovery; or (3) issue any other appropriate order.” Fed.R.Civ.P. 56(d). In his declaration, Fleischer asserts he needs access to the metadata of defendants' documents to find out whether they were made or compiled at the time of the events; at what point defendants' systems were operable and whether they might have been impaired; whether the entries were automated and who made them; when the entries were created and whether they were ever revised or deleted, when, and by whom; ...

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