Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-00341/USCOURTS-caed-2_06-cv-00341-4/pdf.json

Parties Involved:
CT Corporation Systems
Defendant
Wendie Doyle
Defendant
EdFund
Defendant
Enterprise Recovery Systems
Defendant
General Revenue Corporation
Defendant
North Shore Agency
Defendant
Sallie Mae
Defendant
Lisa Regina Virgen
Plaintiff

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

LISA REGINA VIRGEN,

Plaintiff, No. CIV S-06-0341 FCD DAD PS

v.

SALLIE MAE, et al., FINDINGS AND RECOMMENDATIONS

Defendants.

 /

This matter came before the court on March 30, 2007, for hearing on the motion

to dismiss or for more definite statement filed by defendants Sallie Mae, Inc. and General

Revenue Corporation, and the motion to dismiss or for more definite statement filed by

defendant Edfund. Plaintiff, proceeding pro se, appeared on her own behalf. Miriam Hiser

appeared telephonically for defendants Sallie Mae, Inc. and General Revenue Corporation. John

E. Fischer and Cathy A. Reynolds appeared for defendant Edfund. The parties’ motions were

taken under submission.

Upon consideration of plaintiff’s first amended complaint, the parties’ arguments

in open court, and all written materials submitted in connection with the parties’ motions, the

undersigned recommends that defendants’ motions to dismiss be granted and this action be

dismissed with prejudice pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

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PROCEDURAL HISTORY

On February 17, 2006, plaintiff filed a complaint concerning her student loan. 

Plaintiff admitted that her loan was a valid obligation and that she did not repay the loan. She

alleged that defendants Sallie Mae, Edfund, Wendie Doyle, General Revenue Corporation,

Enterprise Recovery Systems, CT Corporation Systems, and North Shore Agency violated the

Fair Credit Reporting Act (FCRA) and the Higher Education Act (HEA) in the collection

process. Plaintiff requested that a negative report on her credit record be removed and that her

$40,000 debt be eliminated entirely or reduced to $20,000.

Magistrate Judge Mueller denied plaintiff’s application to proceed in forma

pauperis. Plaintiff paid the filing fee on May 16, 2006.

In July 2006 plaintiff voluntarily dismissed defendants Enterprise Recovery

Systems and North Shore Agency. In August 2006 defendants Sallie Mae and General Revenue

Corporation filed their first motion to dismiss or for more definite statement. In the same month,

defendant Edfund filed its first motion to dismiss or for more definite statement.

Magistrate Judge Mueller filed an order of recusal on September 28, 2006, and the

case was reassigned to the undersigned.

Defendants’ pending motions to dismiss were heard on November 3, 2006. By

order filed December 21, 2006, defendants Wendie Doyle and CT Corporation Systems were

dismissed at plaintiff’s request, and the remaining defendants’ motions to dismiss were granted. 

Plaintiff’s claims under the HEA were dismissed with prejudice because there is no private right

of action under the HEA. Plaintiff was granted leave to amend her FCRA claim. As explained

in the December 21, 2006 order, plaintiff’s original complaint

does little more than reference the FCRA in general and an

assortment of its provisions in particular. No discernible,

cognizable claim is alleged. . . . [T]he court has serious doubts as

to whether plaintiff can allege any cognizable claim against the

defendants under FCRA, given the apparently undisputed facts

leading to this lawsuit. Nonetheless, considering plaintiff’s pro se

status, her representations at the hearing that she prepared the

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initial complaint somewhat hastily, and the court’s inability to look

beyond the pleadings at this early stage, plaintiff will be given an

opportunity to file an amended complaint setting forth her FCRA

claim against defendants Sallie Mae, General Revenue Corporation

and Edfund only.

(Order filed Dec. 21, 2006, at 4.) Plaintiff was cautioned that her amended complaint “must

include clear and concise factual allegations describing the events which underlie her claim.” 

(Id.)

Plaintiff filed her first amended complaint on January 17, 2007. The motions now

before the court were filed on February 7, 2007.

The court has not yet issued a scheduling order in this case.

STANDARDS FOR MOTIONS TO DISMISS PURSUANT TO RULE 12(b)(6)

A motion to dismiss pursuant to Rule 12(b)(6) tests the sufficiency of the

complaint. North Star Int’l v. Arizona Corp. Comm’n, 720 F.2d 578, 581 (9th Cir. 1983). 

Dismissal of the entire complaint or any claim within it “can be based on the lack of a cognizable

legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri

v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). See also Robertson v. Dean Witter

Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984).

In considering a motion to dismiss for failure to state a claim, the court must

accept as true all material allegations in the complaint and construe those allegations, as well as

the reasonable inferences that can be drawn from them, in the light most favorable to the

plaintiff. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Hospital Bldg. Co. v. Trustees of

Rex Hosp., 425 U.S. 738, 740 (1976); Love v. United States, 915 F.2d 1242, 1245 (9th Cir.

1989). The court must “presume that general allegations embrace those specific facts that are

necessary to support the claim.” NOW, Inc. v. Scheidler, 510 U.S. 249, 256 (1994) (quoting

Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992)).

In a case where the plaintiff is pro se, the court has an obligation to construe the

pleadings liberally. Bretz v. Kelman, 773 F.2d 1026, 1027 n.1 (9th Cir. 1985) (en banc). 

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However, the court’s liberal interpretation of a pro se complaint may not supply essential

elements of a claim that are not pled. Pena v. Gardner, 976 F.2d 469, 471 (9th Cir. 1992); Ivey v.

Bd. of Regents of Univ. of Alaska, 673 F.2d 266, 268 (9th Cir. 1982). The court must resolve

doubts in the plaintiff’s favor, Jenkins v. McKeithen, 395 U.S. 411, 421 (1969), but need not

accept as true conclusory allegations, unreasonable inferences, or unwarranted deductions of fact,

Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981).

A motion to dismiss for failure to state a claim should be granted if it appears

beyond doubt that the plaintiff can prove no set of facts in support of the claims that would

entitle her to relief. NOW, Inc., 510 U.S. at 256; Hishon, 467 U.S. at 73; Cervantes v. City of

San Diego, 5 F.3d 1273, 1274-75 (9th Cir. 1993); Palmer v. Roosevelt Lake Log Owners Ass’n,

651 F.2d 1289, 1294 (9th Cir. 1981).

STANDARDS APPLICABLE TO MOTIONS FOR MORE DEFINITE STATEMENT

Rule 12(e) of the Federal Rules of Civil Procedure is designed to strike at

unintelligibility rather than want of detail. See Woods v. Reno Commodities, Inc., 600 F. Supp.

574, 580 (D. Nev. 1984); Nelson v. Quimby Island Reclamation Dist., 491 F. Supp. 1364, 1385

(N.D. Cal. 1980). The rule permits a party to move for a more definite statement “[i]f a pleading

is so vague that a party cannot reasonably be required to frame a responsive pleading.” Fed. R.

Civ. P. 12(e). The function of such a motion is thus not to require the pleader to disclose details

of the case, see Boxall v. Sequoia Union High Sch. Dist., 464 F. Supp. 1104, 1114 (N.D. Cal.

1979), or to provide the evidentiary material that may properly be obtained by discovery, see

Famolare, Inc. v. Edison Bros. Stores, Inc., 525 F. Supp. 940, 949 (E.D. Cal. 1981). A motion

for more definite statement should be denied if the pleading provides a “short and plain

statement” of the claim showing that the pleader is entitled to relief. See Fed. R. Civ. P. 8(a)(2).

PLAINTIFF’S FIRST AMENDED COMPLAINT

Plaintiff alleges in a conclusory manner that defendants Sallie Mae, General

Revenue Corporation, and Edfund failed to apply student loan payments properly, engaged in

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deceptive and abusive debt collection practices, acted negligently, engaged in a conspiracy, and

failed to acknowledge that plaintiff disputes the amount due on her loan. Plaintiff alleges

generally that all three defendants are subject to suit under the FCRA and the Fair Debt

Collection Practices Act (FDCPA). In violation of the court’s order dismissing plaintiff’s HEA

claim with prejudice, plaintiff realleges violations of the HEA. Plaintiff seeks unspecified

damages and declaratory relief.

Allegations that may pertain to plaintiff’s FCRA and FDCPA claims are as

follows: General Revenue Corporation violated 15 U.S.C. § 1692g(a)(3) with regard to the

amount for which Edfund acquired plaintiff’s debt from Sallie Mae in 2005; in 2006, an Edfund

customer service representative violated 15 U.S.C. § 1692e(5) by telling plaintiff her wages

would be garnished if she did not make payments on her loan; the Edfund representative’s threat

of imminent garnishment and his accusations of irresponsibility and negligence violated

unspecified provisions of the FDCPA prohibiting threats and deceptive or misleading

representations; in September 2005, Edfund failed to cease collection actions when plaintiff

“asked if Edfund could send her Sallie Mae records”; Edfund deleted information from plaintiff’s

credit record and reinserted information without certifying that it was correct, as required by

FCRA § 611(a)(5)(B)(I); in 2006, an Edfund representative violated FDCPA § 1692(g) by

offering to refinance plaintiff’s loan despite the fact that Edfund still had not provided plaintiff

with verification of the amount of her debt. (Pl.’s First Am. Compl.)

THE PARTIES ARGUMENTS

I. Defendants’ Motions

A. Defendants Sallie Mae, Inc. and General Revenue Corporation

Defendants Sallie Mae, Inc. and General Revenue Corporation contend that

plaintiff’s first amended complaint ignores each admonition in the court’s December 21, 2006

order because plaintiff again brings a claim under the HEA, again attempts to bring a claim under

the FCRA but fails to allege the elements necessary to that cause of action, and fails to state any

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other actionable claim. Defendants ask the court to dismiss the first amended complaint and to

impose sanctions for having realleged a claim that was dismissed with prejudice.

Defendants state that the first amended complaint does not cite the FCRA

provisions referenced in plaintiff’s original complaint but substitutes a conclusory allegation that

defendants “are subject to suit under Federal Fair Credit Reporting Act” and a citation to

“611(a)(5)(B)(I)” in connection with plaintiff’s contention that information deleted from a

consumer’s file cannot be reinserted unless the person furnishing the information certifies that

the information is accurate. (Defs.’ Mot. to Dismiss at 3 (citing First Amended Compl. at 2 &

9).) Defendants assert that the court previously found plaintiff’s original allegations insufficient

to state a claim under FCRA and that, instead of curing the defect by augmenting her insufficient

allegations, plaintiff has presented vague and conclusory allegations.

Defendants argue that the only private right of action that can be brought against a

furnisher of credit information under the FCRA exists under 15 U.S.C. § 1681s-2(b), which

requires the consumer to allege that she informed a credit reporting agency of allegedly incorrect

information and that the furnisher of the information, upon receipt of notice from the credit

reporting agency, failed to conduct a reasonable investigation and report its results to the credit

reporting agency. Defendants point to plaintiff’s allegations that she assumed her student loan

was on her credit report and therefore sent a letter to Equifax instructing it to remove the student

loan from her record, but Equifax did not respond. Defendants contend that plaintiff’s

allegations fail to state a FCRA claim under 15 U.S.C. § 1681s-2(b) and that her FCRA claim

should be dismissed with prejudice.

Turning to plaintiff’s citation to the FDCPA, defendants argue that plaintiff’s first

amended complaint fails to state a cause of action for any violation of that statute. Defendants

assert that the amended complaint contains no charging allegations against defendant Sallie Mae

under the FDCPA and that the charging allegations against defendant General Revenue

Corporation contradict the existence of a claim under the FDCPA. Defendants cite plaintiff’s

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admissions that (1) she received a letter from General Revenue Corporation giving her written

notice that, unless she disputed the validity of the debt or any portion thereof within thirty days

after receiving the notice, the debt would be assumed to be valid by the debt collector, (2) she did

not dispute the validity of the debt within thirty days, and (3) she herself believed it was too late

to dispute the debt after thirty days passed and therefore did not even try to dispute it. 

Defendants argue that these admissions preclude a claim that General Revenue Corporation

violated 15 U.S.C. § 1692g(a)(3). Defendants argue further that plaintiff cannot state a claim

under 15 U.S.C. § 1692g(b) because no claim can be brought under that section unless the

consumer provided the debt collector with written notification of a dispute within thirty days

after receipt of the initial notice of the debt, and plaintiff’s own allegations demonstrate that she

did not provide General Revenue Corporation with written notification of a dispute and did not

provide any kind of notification within thirty days after receiving the initial notice.

Defendants contend that plaintiff has had more than sufficient time to allege any

possible claim she might have against them and therefore all claims should be dismissed without

leave to amend.

B. Defendant Edfund

Defendant Edfund seeks dismissal of plaintiff’s first amended complaint on the

grounds that (1) most of plaintiff’s allegations are barred because there is no private right of

action under the HEA, (2) Edfund is not a debt collector for purposes of the FDCPA, (3) plaintiff

did not report any irregularity to a credit reporting agency, as required for a claim under the

FCRA, and (4) the pleading is unintelligible as to any other claim against defendant Edfund. 

Defendant contends plaintiff’s claims against it should be dismissed with prejudice because

plaintiff has demonstrated her inability to allege any claim for relief against defendant Edfund.

With regard to plaintiff’s FDCPA claim, defendant Edfund explains that it is a

guaranty agent operating under the Federal Family Education Loan Program (FFELP) and, as

such an agent, was a guarantor of plaintiff’s federally insured student loan obligation. Upon

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plaintiff’s default on her loan, Edfund was required under the HEA to pay the lender’s claim and

attempt to collect on the defaulted debt.

Defendant argues that the FDCPA is applicable only to “debt collectors,” defined

by the statute as

any person who uses any instrumentality of interstate commerce or

the mails in any business the principal purpose of which is the

collection of any debts, or who regularly collects or attempts to

collect, directly or indirectly, debts owed or due or asserted to be

due to another.

15 U.S.C. § 1692a(6). The statutory definition excludes “[a]ny officer or employee of the United

States or any state to the extent that collecting or attempting to collect any debt is in the

performance of his official duties.” 15 U.S.C. § 1692a(6)(C). The definition also excludes

“[a]ny person collecting or attempting to collect any debt owed or due or asserted to be owed or

due another to the extent such activity is incidental to a bona fide fiduciary obligation.” 15

U.S.C. § 1692a(6)(F).

Defendant asserts that the Ninth Circuit has recognized the application of the

FDCPA “government actor” exception to individual government officials and employees who

collect debt as part of their government employment responsibilities, although the court has held

that the government actor exemption does not apply to private guaranty agencies. (Def. Edfund’s

Second Mot. to Dismiss at 6 (citing Brannan v. United Student Aid Funds, Inc., 94 F.3d 1260,

1263 (9th Cir. 1996).) Defendant contends that it is an auxiliary corporation of a state agency,

the California Student Aid Commission, created pursuant to California Education Code § 69522,

and is not subject to liability under the government actor exception. 

Defendant contends that it is also exempt from liability under the exception for

bona fide fiduciaries. Defendant asserts that, with respect to funds collected from defaulted

borrowers on FFELP loans, it acts in the capacity of a fiduciary of the United States Department

of Education. Defendant cites a federal regulation requiring the guaranty agency to “exercise the

level of care required of the fiduciary charged with the duty of investing the money of others

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when it invests the assets of the reserve fund.” 34 C.F.R. 682.410(a)(5). Defendant also cites

favorable district court decisions.

Defendant asserts further that plaintiff’s own allegations demonstrate her failure

to contact any credit reporting agency upon noting an alleged error in the report defendant

submitted to a credit reporting agency about plaintiff’s student loan. Defendant argues that

plaintiff cannot state a FCRA claim on these facts because a private right of action against a

furnisher of credit arises only if the consumer provides notice of an alleged error to a credit

reporting agency.

Finally, defendant points to the list of claims included in the caption of plaintiff’s

first amended complaint: failure to accurately credit account, negligence, failure to cease

collection during investigation of disputed amount, false and misleading statements, failure to

determine hardship, credit collection abuse, and declaratory relief. Defendant argue that the

listed claims do not relate to any factual allegations against defendant Edfund. Defendant

Edfund therefore concludes that plaintiff has not articulated any cognizable claim against it.

II. Plaintiff’s Opposition

Plaintiff denies alleging an HEA claim and asserts that her complaint is about “the

amount of the loan and the handling of the loan” and “violation of fundamental principles that

transcends the realm of student loans and education finance to all financial transactions.” 

Plaintiff argues that she has never “admitted to defaulting on an accurate loan,” asserts that she

“need[s] the court to determine the amount, if any owed,” and asks for leave to amend her

pleading a second time.

Plaintiff reveals that her claim for declaratory relief concerns defendant Sallie

Mae and its alleged failure to accurately credit her payments. Although it appears that plaintiff is

in possession of her Sallie Mae payment records, she makes no showing that she can amend her

complaint to allege facts that support her conclusory claim that Sallie Mae did not properly credit

her loan payments during the time she was receiving the benefits of the APLE scholarship. 

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Plaintiff contends erroneously that she is entitled to “declaratory judgment on the pleadings”

pursuant to Fed. R. Civ. P. 12(c) based solely on her own pleading.

Plaintiff appears to argue that she is stating a claim of negligence against

defendant Edfund on the basis of alleged violations of the HEA. She asserts that she has not

alleged HEA violations “as a claim” but merely “for background knowledge” to support other

claims.

In one of several sections titled “Negligence,” plaintiff discusses the FCRA. She

complains of the conduct of a non-party and justifies her failure to cite specific FCRA provisions

in her first amended complaint by stating that she expected defendants’ attorneys to read the

entire statute and figure it out themselves. Plaintiff argues vaguely that all defendants neglected

to address her concerns and compelled her to bring their negligence to the court’s attention.

In another section titled “Negligence,” plaintiff asserts that she told General

Revenue Corporation she did not agree with the amount of her loan balance and believed she

owed no money to Sallie Mae. Plaintiff claims that, under the less sophisticated borrower rule,

her oral assertion of a dispute was sufficient to require defendant General Revenue Corporation

to inform defendant Edfund that the amount of the debt was disputed. Plaintiff argues that

defendant General Revenue Corporation violated the FDCPA, 15 U.S.C. § 1692g(a)(3), by

failing to inform Edfund of the dispute. Plaintiff argues that she is entitled to damages under 15

U.S.C. § 1692k(a). 

With regard to the alleged failure to cease collection during the investigation of a

disputed amount, plaintiff argues that defendant Edfund should have stopped collections after she

informed the defendant in September 2005 that she did not agree with the amount of the debt and

subsequently asked if Edfund could send her copies of her Sallie Mae records. Plaintiff asserts

that these constitute HEA violations and a violation of “1692(g) of the FDCPA.”

With regard to the alleged failure to determine a hardship, plaintiff appears to

merge this claim with her claim of false and misleading statements. She offers several pages of

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frivolous arguments concerning HEA violations, while repeating over and over “no claim

implied.” Plaintiff concludes the hardship section with an argument that false and misleading

representations were made, causing her to believe she had to keep paying interest on her debt. 

She contends that defendant Edfund violated 15 U.S.C. § 1692e, entitling her to damages and

injunctive relief under 15 U.S.C. § 1692d.

Plaintiff argues that her claim of credit collection abuse by defendant Edfund

states a claim under the FDCPA because Edfund’s representative threatened actions that “were

clearly not intended to be taken by defendants, at least not within the time frame threatened.”

She contends that she is entitled to punitive damages on this claim.

Plaintiff concludes with a lengthy argument in opposition to defendant Edfund’s

assertion that it is exempt from the FDCPA. Plaintiff argues that Edfund, as a private guaranty

agency under contract with the federal Department of Education to guarantee student loans, is not

a government actor and is a debt collector subject to the FDCPA.

III. Defendants’ Replies

A. Defendants Sallie Mae, Inc. and General Revenue Corporation

Defendants argue that plaintiff continues to litigate HEA claims by alleging HEA

violations, purportedly as background, and then arguing that those violations constitute violations

of other statutes. Defendants cite several example, including plaintiff’s argument that defendant

Sallie Mae, Inc. failed to apply payments properly, a claim that would arise, if at all, under the

HEA.

Defendants observe that plaintiff’s opposition conflates her claim of negligence

with a claim for violation of the FCRA. Defendants reiterate that the only private right of action

that can be brought against a furnisher of credit information under the FCRA exists under 15

U.S.C. § 1681s-2(b) and that plaintiff has failed to allege facts that state such a claim.

Defendants note that plaintiff now suggests that most of her claims arise under the

FDCPA, yet she fails to address defendants’ contentions that she has not alleged any FDCPA

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claim against Sallie Mae and cannot state an FDCPA claim against General Revenue Corporation

because she did not make a timely written request for verification of her debt. Defendants object

to plaintiff’s attempt to add a claim under 15 U.S.C. § 1692e(8) where there is no allegation in

the first amended complaint that any defendant communicated false information to a credit

bureau.

Defendants conclude that plaintiff should not be granted leave to amend after

failing to state any valid claim against any defendant on her second attempt to do so. 

B. Defendant Edfund

Defendant Edfund states that plaintiff’s opposition clarifies that all claims against

defendant Edfund are based on alleged violations of the FDCPA. Defendant notes that plaintiff’s

opposition addresses the government actor exemption but fails to address the bona fide fiduciary

exemption. Defendant argues that the court in Brannan did not consider the argument advanced

here and by the defendant in Pelfrey v. Educational Credit Management Corp., 71 F. Supp. 2d

1161 (N.D. Ala. 1999), that a guaranty agency operating pursuant to regulations promulgated

under the HEA pursuant to the FFELP is exempt from liability under the FDCPA because the

agency’s effort to collect a debt is “incidental to a bona fide fiduciary obligation.” Defendant

requests that the first amended complaint be dismissed with prejudice as to the FDCPA claim

against defendant Edfund.

DISCUSSION

The HEA claim alleged in plaintiff’s original complaint was dismissed with

prejudice because there is no private right of action under the HEA. 20 U.S.C. § 1082(a)(2);

Parks School of Business, Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995) (“There is no

express right of action under the HEA except for suits brought by or against the Secretary of

Education.”); see also McCulloch v. PNC Bank Inc., 298 F.3d 1217, 1221 (11th Cir. 2002)

(listing cases that found no express private right of action under the HEA). In violation of the

court’s December 21, 2006 order, plaintiff has alleged HEA violations in her first amended

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complaint. Plaintiff’s argument that she alleged violations of the HEA merely as “background

knowledge” is unpersuasive because the alleged violations do not support a claim under any

other statute and do not provide any background applicable to other federal claims. The alleged

violations of HEA provisions are irrelevant and will be disregarded.

The FCRA claim alleged in plaintiff’s original complaint was dismissed with

leave to amend. In the first amended complaint, plaintiff alleges that all defendants are subject to

FCRA, that information deleted from a consumer’s file cannot be reinserted unless the person

furnishing the information certifies that the information is accurate, and that Equifax did not

respond to plaintiff’s letter concerning removal of her student loan from her credit record. 

Plaintiff’s FCRA claim is founded on the assumption that her student loan was on her credit

report at some point. She infers that the loan was deleted from her record at one time and was

subsequently “reinserted” on her record by defendant Edfund without certifying that the

information was accurate. A private right of action exists under 15 U.S.C. § 1681s-2(b) only if

the consumer informs a credit reporting agency of incorrect information on the consumer’s credit

report and then the furnisher of the information, upon receipt of notice from the credit reporting

agency, fails to conduct a reasonable investigation and report back to the credit reporting agency. 

Plaintiff’s allegations fail to state a claim against any defendant under § 1681s-2(b). The FCRA

claim should be dismissed with prejudice as to all defendants because plaintiff’s own allegations

and arguments demonstrate that she cannot cure the defects of the claim.

Plaintiff has attempted to state a claim under the FDCPA based on the allegation

that she disputes the amount of her debt. Plaintiff has alleged no facts that implicate defendant

Sallie Mae, Inc. in this claim. With regard to defendant General Revenue Corporation, plaintiff’s

allegations include admissions that she received written notice of the amount of debt asserted by

defendant General Revenue Corporation and did not dispute the validity of the debt in writing

within thirty days. Plaintiff’s first amended complaint therefore fails to state a claim under 15

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U.S.C. § 1692g(a)(3) or 15 U.S.C. § 1692g(b). Plaintiff’s admissions demonstrate that the

defects of the FCRA claim cannot be cured by amendment.

With regard to defendant Edfund, the undersigned finds that defendant falls within

the general definition of “debt collector” as set forth in the FDCPA, 15 U.S.C. § 1692a(6), and is

not a government actor for purposes of the exemption provided by § 1692a(6)(C). See Brannan

v. United Student Aid Funds, Inc., 94 F.3d 1260, 1263 (9th Cir. 1996) (holding that the

government actor exemption “applies only to an individual government official or employee who

collects debts as part of his government employment responsibilities” and a private nonprofit

organization with a government contract is not a government agency or employee).

The Ninth Circuit has not considered whether the fiduciary exemption provided

by § 1692a(6)(F) is applicable to private non-profit guaranty agencies. A district court in this

circuit and district courts in other circuits have held that the exemption does apply to such

agencies. See Rowe v. Educ. Credit Mgmt. Corp., 465 F. Supp. 2d 1101, 1103 (D. Or. 2006)

(holding that the defendant, a non-profit student loan guarantor agency, is a fiduciary to the

United States Department of Education and subject to FDCPA’s “fiduciary obligation” exception

through operation of the regulations that govern the FFELP); Seals v. Nat’l Student Loan

Program, No. Civ. A.5:02 CV 101, 2004 WL 3314948, at *4 (N.D. W. Va. Aug. 16, 2004)

(applying the fiduciary exemption to a non-profit student loan guaranty agency), aff’d, 124 F.

App’x 182 (4th Cir. 2005); Montgomery v. Educ. Credit Mgmt. Corp., 238 B.R. 806, 810 (D.

Minn. 1999) (deciding that non-profit student loan guaranty agency acts incident to a fiduciary

obligation when attempting to collect on a defaulted student loan and is exempt from FDCPA);

Pelfrey v. Educ. Credit Mgmt. Corp., 71 F. Supp. 2d 1161, 1179-80 (N.D. Ala. 1999) (finding

non-profit student loan guaranty agency exempt from the FDCPA), aff’d, 208 F.3d 945 (11th Cir.

2000); Davis v. United Student Aid Funds, Inc., 45 F. Supp. 2d 1104, 1109 (D. Kan. 1998)

(holding that the defendant, a non-profit student loan guaranty agency, owes a fiduciary duty to

Secretary of Education and fits within the fiduciary exemption to the FDCPA). The reasoning of

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these cases is persuasive. The undersigned finds that defendant Edfund fits within the fiduciary

exemption to the FDCPA and plaintiff’s FDCPA claim should also be dismissed with prejudice.

Plaintiff’s first amended complaint fails to state any federal claim upon which

relief may be granted. Defendants’ motions to dismiss the first amended complaint should

therefore be granted. The remaining consideration is whether the pleading should be dismissed

without leave to amend, as defendants request, or whether plaintiff should be granted leave to

amend a second time, as she requests in opposition to defendants’ motions.

Plaintiff has not indicated what claims she would seek to bring if permitted to

amend a second time. As set forth in these findings and recommendations, plaintiff’s own

allegations and admissions demonstrate that she cannot cure the defects of her FCRA and

FDCPA claims. Her HEA claim has already been dismissed with prejudice. The first amended

complaint does not suggest any other federal claim that plaintiff could state if permitted to amend

a second time. Indeed, the first amended complaint demonstrates plaintiff’s inability or

unwillingness to omit claims that have been dismissed with prejudice.

“Valid reasons for denying leave to amend include undue delay, bad faith,

prejudice, and futility.” California Architectural Bldg. Prod. v. Franciscan Ceramics, 818 F.2d

1466, 1472 (9th Cir. 1988). Prejudice to the opposing party is the most important factor. See

Jackson v. Bank of Hawaii, 902 F.2d 1385, 1387 (9th Cir. 1990) (citing Zenith Radio Corp. v.

Hazeltine Research, 401 U.S. 321, 330-331 (1971) and 6 C. Wright, A. Miller and M. Kane,

Federal Practice and Procedure: Civil 2d § 1487 (1990)). See also Klamath-Lake Pharm. Ass’n

v. Klamath Med. Serv. Bureau, 701 F.2d 1276, 1293 (9th Cir. 1983) (holding that, while leave to

amend shall be freely given, the court does not have to allow futile amendments). In the instant

case, it would be futile to grant plaintiff leave to file a second amended complaint, and it would

be prejudicial to defendants to require them to defend a third time against the same defective

claims. The undersigned will recommend that defendants’ motions to dismiss be granted without

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leave to amend. The request to impose sanctions on plaintiff for realleging HEA claims will be

denied in light of the recommendation that this action be dismissed.

Accordingly, IT IS HEREBY RECOMMENDED that:

1. The February 7, 2007 motion to dismiss filed by defendants Sallie Mae, Inc.

and General Revenue Corporation be granted and their motion in the alternative for more definite

statement be denied as moot;

2. Defendant Edfund’s February 7, 2007 motion to dismiss be granted and its

motion in the alternative for more definite statement be denied as moot;

3. To the extent that plaintiff has alleged any supplemental state claim not

preempted by the federal statutes relied upon by plaintiff, all state claims be dismissed pursuant

to 28 U.S.C. § 1367(c)(3); and

4. This action be dismissed with prejudice for failure to state any claim upon

which relief may be granted.

These findings and recommendations are submitted to the United States District

Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within ten (10)

days after being served with these findings and recommendations, any party may file and serve

written objections with the court. Such a document should be titled “Objections to Magistrate

Judge’s Findings and Recommendations.” Any reply to objections shall be filed and served

within ten (10) days after the objections are served. The parties are advised that failure to file

objections within the specified time may, under certain circumstances, waive the right to appeal

the District Court’s order. See Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

DATED: May 23, 2007.

DAD:kw

ddad1\orders.prose\virgen0341.mtd2.f&r

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