Court Opinion

ID: 2828218
Source: CourtListenerOpinion
Date Created: 2015-08-18 22:01:07.217084+00
Date Added: 2024-06-11T12:13:52.574604
License: Public Domain

In the

    United States Court of Appeals
                For the Seventh Circuit
                    ____________________
No. 14-1806
BRYANA BIBLE,
Individually and on Behalf of the
Proposed Class,
                                               Plaintiff-Appellant,
                                v.

UNITED STUDENT AID FUNDS, INC.,
                                              Defendant-Appellee.
                    ____________________

        Appeal from the United States District Court for the
         Southern District of Indiana, Indianapolis Division.
      No. 13-CV-00575-TWP-TAB — Tanya Walton Pratt, Judge.
                    ____________________

    ARGUED OCTOBER 2, 2014 — DECIDED AUGUST 18, 2015
                ____________________

   Before FLAUM, MANION, and HAMILTON, Circuit Judges.
    HAMILTON, Circuit Judge. Plaintiff Bryana Bible obtained a
student loan under the Federal Family Education Loan Pro-
gram. She defaulted in 2012 but promptly agreed to enter
into a rehabilitation agreement that required her to make a
series of reduced monthly payments. She timely made all of
the payments that were required of her under this agree-
2                                                 No. 14-1806

ment, and she remains current on her loan payments. Alt-
hough Bible complied with her obligations under the re-
payment agreement, a guaranty agency assessed over $4,500
in collection costs against her.
    The terms of Bible’s loan were governed by a form doc-
ument known as a Federal Stafford Loan Master Promissory
Note (MPN). This form has been approved by the U.S. De-
partment of Education and is used in connection with many
student loans across the country. The MPN incorporates the
Higher Education Act and its associated regulations. In per-
tinent part, the MPN provides that Bible must pay “reason-
able collection fees and costs, plus court costs and attorney
fees” if she defaults on her loan. As we will see, “reasonable
collection fees and costs” are defined by regulations issued
by the Secretary of Education under the authority expressly
conferred by the Higher Education Act. The MPN provided
that Bible would owe only those collection costs that are
permitted by the Higher Education Act and its regulations.
    Bible sued the guaranty agency (defendant United Stu-
dent Aid Funds, Inc.) alleging breach of contract and a viola-
tion of the Racketeer Influenced and Corrupt Organizations
Act (RICO), 18 U.S.C. § 1961 et seq. Her breach of contract
theory is that the MPN incorporated federal regulations that
prohibit the guaranty agency from assessing collection costs
against her because she timely entered into an alternative
repayment agreement and complied with that agreement.
Her RICO claim alleges that the guaranty agency, in associa-
tion with a debt collector and a loan service provider, com-
mitted mail fraud in violation of 18 U.S.C. § 1341 and wire
fraud in violation of 18 U.S.C. § 1343 when it assessed collec-
tion costs of more than $4,500 against her despite its repre-
No. 14-1806                                                    3

sentations that her “current collection cost balance” and
“current other charges” were zero and that these costs
would be “reduced” once she completed the rehabilitation
process.
    The district court granted the guaranty agency’s motion
to dismiss Bible’s first amended class action complaint (we
call this the “amended complaint”) under Federal Rule of
Civil Procedure 12(b)(6) for failure to state a claim for relief.
The district court held that both claims were “preempted”
by the Higher Education Act. It reasoned that both claims
depend on alleged violations of the Act and should not be
permitted because the Act does not provide a private right of
action. The district court held in the alternative that the
amended complaint failed to state a claim that is plausible
on its face. It concluded that the breach of contract claim
failed because both the MPN and the Higher Education Act
expressly permit imposing collection costs against borrowers
who default on their loans. The district court also concluded
that the RICO claim failed because Bible’s amended com-
plaint “has not shown participation in a scheme to defraud;
commission of an act with intent to defraud; or the use of
mails or interstate wires in furtherance of a fraudulent
scheme.” Bible v. United Student Aid Funds, Inc., No. 1:13-CV-
00575-TWP-TAB, 2014 WL 1048807, at *10 (S.D. Ind. Mar. 14,
2014).
    We reverse. Neither of Bible’s claims is preempted by the
Higher Education Act. Bible’s state law breach of contract
claim is not preempted because it does not conflict with fed-
eral law. The contract at issue simply incorporates applicable
federal regulations as the standard for compliance. Accord-
ingly, the duty imposed by the state law is precisely congru-
4                                                    No. 14-1806

ent with the federal requirements. A state law claim that
does not seek to vary the requirements of federal law does
not conflict with federal law.
    We apply the Secretary of the Education’s interpretation
of the applicable statutes and regulations, which is con-
sistent with Bible’s. (The Secretary accepted our invitation to
file an amicus brief addressing the question.) The Secretary
interprets the regulations to provide that a guaranty agency
may not impose collection costs on a borrower who is in de-
fault for the first time but who has timely entered into and
complied with an alternative repayment agreement. Nor is
Bible’s RICO claim preempted. RICO is a federal statute and
thus is not preempted by another federal statute, and we see
no conflict between RICO and the Higher Education Act. On
the merits, both the breach of contract and RICO claims sat-
isfy the plausibility standard under Rule 12(b)(6).
I. Factual and Procedural Background
    We review de novo a district court’s decision to grant a
motion to dismiss under Rule 12(b)(6). E.g., CEnergy-
Glenmore Wind Farm No. 1, LLC v. Town of Glenmore, 769 F.3d
485, 487 (7th Cir. 2014). We accept as true all factual allega-
tions in the amended complaint and draw all permissible
inferences in Bible’s favor. E.g., Fortres Grand Corp. v. Warner
Bros. Entertainment Inc., 763 F.3d 696, 700 (7th Cir. 2014). To
avoid dismissal under Rule 12(b)(6), Bible’s amended com-
plaint “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 Atlantic
Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial
plausibility when the plaintiff pleads factual content that al-
lows the court to draw the reasonable inference that the de-
No. 14-1806                                                                 5

fendant is liable for the misconduct alleged.” Id. “Plausibil-
ity” is not a synonym for “probability” in this context, but it
asks for “more than a sheer possibility that a defendant has
acted unlawfully.’” Olson v. Champaign County, 784 F.3d 1093,
1099 (7th Cir. 2015), quoting Iqbal, 556 U.S. at 678.
    In deciding a Rule 12(b)(6) motion, the court may consid-
er documents attached to a complaint, such as contract doc-
uments, without converting the motion into one for sum-
mary judgment. See Fed. R. Civ. P. 10(c). Bible attached the
following documents to her amended complaint: (1) the
promissory note or MPN, (2) an April 12, 2012 letter to Bible
from General Revenue Corp. (GRC), which we call the “de-
fault letter,” (3) an application for loan rehabilitation sent by
GRC on April 27, 2012, which we call the “rehabilitation
agreement,” (4) a copy of Bible’s payment history with the
defendant guaranty agency United Student Aid Funds, Inc.,
and (5) a copy of a contract between USA Funds and Sallie
Mae Corp.1

    1  Bible also attached to her amended complaint a legal brief filed by
the Secretary of Education in Educational Credit Mgmt. Corp. v. Barnes, No.
NA 00-0241-C-B/S (S.D. Ind.); GRC’s interrogatory responses in Bible v.
General Revenue Corp., No. 12-CV-01236 (D. Minn.), and a June 26, 2008
newspaper article from The Chronicle of Higher Education concerning a
contract between USA Funds and Sallie Mae. The brief was included as
persuasive authority on a legal question. These two exhibits are not evi-
dence, of course. When offered by a party opposing a Rule 12(b)(6) mo-
tion, however, and without converting the motion to one for summary
judgment, such documents may be used to illustrate facts the party
would be prepared to prove at the appropriate stage of the proceedings.
A party opposing such a motion is free to elaborate upon the facts in a
brief. See, e.g., Chavez v. Illinois State Police, 251 F.3d 612, 650 (7th Cir.
2001) (court reviewing dismissal under Rule 12(b)(6) will consider new
factual allegations on appeal provided they are consistent with com-
6                                                            No. 14-1806

    A. The Higher Education Act and Regulatory Background
    Congress enacted the Higher Education Act of 1965 (HEA
or the Act), now codified as amended at 20 U.S.C. § 1001 et
seq., “to keep the college door open to all students of ability,
regardless of socioeconomic background.” Rowe v. Education-
al Credit Management Corp., 559 F.3d 1028, 1030 (9th Cir. 2009)
(citation and internal quotation marks omitted); see also 20
U.S.C. § 1070(a) (identifying purpose of the statute). Among
other things, the Act created the Federal Family Education
Loan Program (FFELP), “a system of loan guarantees meant
to encourage lenders to loan money to students and their
parents on favorable terms.” Chae v. SLM Corp., 593 F.3d 936,
938–39 (9th Cir. 2010) (footnote omitted). The Secretary of
Education administers the FFELP and has issued regulations
to carry out the program.
   In general, the FFELP regulates three layers of student
loan transactions: (1) between lenders and borrowers, (2) be-
tween borrowers and guaranty agencies, and (3) between
guaranty agencies and the Department of Education. See
Chae, 593 F.3d at 939. Under the program, lenders use their
own funds to make loans to students attending post-
secondary institutions. These loans are guaranteed by guar-

plaint); American Inter-Fidelity Exchange v. American Re-Insurance Co., 17
F.3d 1018, 1022 (7th Cir. 1994) (plaintiff may point to facts consistent
with complaint to show ability to prevail); Early v. Bankers Life & Casualty
Co., 959 F.2d 75, 79 (7th Cir. 1992) (plaintiff may allege additional facts
without evidentiary support to oppose motion to dismiss). There is no
reason she may not also add even non-evidentiary materials (such as
newspaper articles) to illustrate what she plans to prove, especially in
light of the post-Iqbal uncertainty about the federal pleading standard of
“plausibility.”
No. 14-1806                                                   7

anty agencies and reinsured by the federal government. See
20 U.S.C. § 1078(a)–(c). Because of the reinsurance commit-
ment, the federal government serves as the ultimate guaran-
tor on each loan.
    This lawsuit deals primarily with the second layer of
transactions—the relationship between a student borrower
who has defaulted for the first time and her guaranty agen-
cy. When a borrower defaults on a loan and the lender is un-
able to recover the amount despite due diligence, the lender
notifies the guaranty agency of the default and the guaranty
agency purchases the loan from the lender. See Chae, 593
F.3d at 939. Once the lender has transferred the debt to the
guaranty agency, that agency may recover its losses from the
Department of Education. See 20 U.S.C. § 1078(c)(1)(A), (E);
34 C.F.R. § 682.406(a). The guaranty agency must then take
numerous steps to collect the defaulted student loan. The
regulations at issue here relate to this stage of the process.
    To understand these regulations, some background is
helpful. In the mid-1980s, Congress grew concerned that
federal taxpayers were effectively footing the bill for the
costs of collecting defaulted student loans. In 1986 Congress
amended the HEA to require guaranty agencies to assess col-
lection costs against borrowers to prevent these costs from
being passed on to federal taxpayers. See Black v. Educational
Credit Mgmt. Corp., 459 F.3d 796, 799 (7th Cir. 2006). The rele-
vant statutory provision provides simply that “a borrower
who has defaulted on a loan … shall be required to pay …
reasonable collection costs.” 20 U.S.C. § 1091a(b)(1). Con-
gress chose not to define the meaning of “reasonable collec-
tion costs” in the statute and instead “left it up to the Secre-
tary [of Education] to interpret that term through regula-
8                                                          No. 14-1806

tions.” Black, 459 F.3d at 799; 20 U.S.C. § 1082(a)(1) (delegat-
ing authority to the Secretary of Education to “prescribe
such regulations as may be necessary to carry out the pur-
poses” of FFELP).
    The regulations define “reasonable collection costs.” Two
regulations are central to this lawsuit.2 We describe these
regulations in detail below, and we ultimately agree with the
interpretation of the Secretary of Education, which is con-
sistent with Bible’s. In short, 34 C.F.R. § 682.405 provides that
guaranty agencies must create loan rehabilitation programs
for all borrowers who have enforceable promissory notes,
and 34 C.F.R. § 682.410 establishes fiscal, administrative, and
enforcement requirements that a guaranty agency must sat-
isfy to participate in the FFELP. One requirement is that a
guaranty agency must give a borrower who has defaulted
notice and the opportunity to enter into a repayment agree-
ment before it assesses collection costs or reports the default
to    a    consumer        reporting      agency.    34     C.F.R.
§ 682.410(b)(5)(ii)(D). The guaranty agency is not permitted
to charge collection costs to the borrower if (1) this is the first
time the borrower has defaulted, (2) she enters into a repay-
ment agreement within 60 days of receiving notice that the
guaranty agency has paid the default claim, and (3) she

    2 The FFELP regulations have been revised several times since 2006,
when Bible signed the MPN. Her MPN provides that any amendment to
the HEA and its associated regulations “governs the terms of any loans
disbursed on or after the effective date of such amendment, and such
amended terms are hereby incorporated into this MPN.” App. 122. The
amended complaint does not specify when disbursements to Bible took
place. In the absence of any dispute, and because Bible defaulted in 2012,
we apply the regulations that were in effect between July 1, 2010 and
June 30, 2014.
No. 14-1806                                                    9

complies with that agreement. Imposing collection costs on a
borrower under these circumstances would be “unreason-
able” within the meaning of 20 U.S.C. § 1091a(b)(1).
   B. Bible’s Loan, Default, and Decision to Enter into the Reha-
      bilitation Agreement
    In June 2006, Bible obtained a student loan. The written
agreement governing her loan is the Federal Stafford Loan
Master Promissory Note (MPN), which identifies Citibank as
the “Lender” and defendant United Student Aid Funds
(USA Funds) as the “Guarantor, Program, or Lender.” The
MPN expressly incorporates the Higher Education Act and
its associated regulations into the terms of the contract:
“Loans disbursed under this MPN are subject to the annual
and aggregate loan limits specified in the Higher Education
Act of 1965, as amended, 20 U.S.C. [§] 1070, et seq., and ap-
plicable U.S. Department of Education regulations (collec-
tively referred to as the ‘Act’).”
   The contract term covering “late charges and collection
costs” states:
      The lender may collect from me: (i) a late
      charge for each late installment payment if I
      fail to make any part of a required installment
      payment within 15 days after it becomes due,
      and (ii) any other charges and fees that are per-
      mitted by the Act for the collection of my loans. If I
      default on any loans, I will pay reasonable col-
      lection fees and costs, plus court costs and at-
      torney fees.
(Emphasis added.) The “governing law and notices” term
provides: “The terms of this MPN will be interpreted in ac-
 10                                                     No. 14-1806

 cordance with the applicable federal statutes and regula-
 tions, and the guarantor’s policies. Applicable state law, ex-
 cept as preempted by federal law, may provide for certain
 borrower rights, remedies, and defenses in addition to those
 stated in this MPN.”
     In 2012, Citibank determined that Bible was in default
 and transferred the debt to USA Funds, which paid Citi-
 bank’s default claim. To comply with its obligations under
 the HEA and its associated regulations, USA Funds, through
 its agent General Revenue Corp. (GRC), mailed Bible a form
 letter dated April 12, 2012 saying that her loan was in default
 and identifying several options for resolving her debt, in-
 cluding the opportunity for loan rehabilitation. This default
 letter included a table with the following information:
        Current     Current    Current        Current      Current

        Principal   Interest   Collection     Other        Interest
                               Cost Balance   Charges      Rate

Citi-   6556.64     32.94      0.00           0.00         6.800%
bank,
N.A.
Citi-   6934.09     34.83      0.00           0.00         6.800%
bank,
N.A.
Citi-   2186.35     11.07      0.00           0.00         6.800%
bank,
N.A.
Citi-   2295.07     11.61      0.00           0.00         6.800%
bank,
N.A.
  No. 14-1806                                                        11

  The letter noted that Bible’s current total amount due was
  $18,062.60.
      Between April 12 and April 25, Bible and her attorney
  spoke to GRC on the phone three times to negotiate a loan
  rehabilitation agreement. Bible and GRC agreed on a reha-
  bilitation plan requiring monthly payments of $50. On April
  27, GRC faxed Bible a form rehabilitation agreement. Bible
  promptly signed the agreement and returned it by fax on
  April 30, 2012.
     The rehabilitation agreement included another table,
  identical to the one displayed in the default letter except for
  the current interest column:
          Current     Current    Current         Current   Current
          Principal   Interest   Collection      Other     Interest Rate
                                 Cost     Bal-   Charges
                                 ance

Citibank, 6556.64     51.24          0.00           0.00       6.800%
N.A.
Citibank, 6934.09     54.18          0.00           0.00       6.800%
N.A.
Citibank, 2186.35     17.22          0.00           0.00       6.800%
N.A.
Citibank, 2295.07     18.06          0.00           0.00       6.800%
N.A.

  The agreement also said that Bible’s current total amount
  due was $18,112.85. Accumulating interest accounted for the
  $50.25 increase in Bible’s total balance. The figures for her
12                                                 No. 14-1806

“current collection cost balance” and “current other charges”
remained at all times $0.
    Five paragraphs above the signature line, toward the end
of the rehabilitation agreement, the following language ap-
pears:
        Once rehabilitation is complete, collection costs
        that have been added will be reduced to 18.5%
        of the unpaid principal and accrued interest
        outstanding at the time of Loan Rehabilitation.
        Collection costs may be capitalized at the time
        of the Loan Rehabilitation by your new lender,
        along with outstanding accrued interest, to
        form one new principal amount.
The paragraph immediately above the signature line states:
“By signing below, I understand and agree that the lender
may capitalize collection costs of 18.5% of the outstanding
principal and accrued interest upon rehabilitation of my
loan(s).”
    After signing the rehabilitation agreement, Bible made
nine on-time payments of $50. Although she fully complied
with her obligations under this agreement, USA Funds as-
sessed collection costs against her in the amount of $4,547.44.
It applied her monthly payments toward the collection costs
rather than the principal. When Bible filed this lawsuit, she
had not completed the rehabilitation process. (Her loan had
not yet been sold to an eligible lender.) She remains current
on her loan under the terms of the rehabilitation agreement.
     C. Procedural History
   Bible filed a complaint individually and on behalf of a
proposed class of other borrowers who had entered into loan
No. 14-1806                                                   13

agreements under the HEA but defaulted, later entered into
similar rehabilitation agreements, and were assessed collec-
tion costs. She moved to certify the class and then filed an
amended complaint alleging breach of contract under Indi-
ana law and a violation of RICO, 18 U.S.C. § 1962(c). USA
Funds moved to dismiss. The district court granted the mo-
tion to dismiss and entered a final judgment dismissing both
claims with prejudice. It also denied as moot Bible’s motion
for class certification. Bible appeals the district court’s deci-
sion regarding both claims. After oral argument, we invited
the Secretary of Education to file an amicus brief addressing
his interpretation of the relevant statutory framework and
federal regulations. He did so, and the parties have respond-
ed to those views.
II. Analysis
    We conclude that (A) Bible has stated a viable breach of
contract claim under Indiana law; (B) federal law does not
preclude Bible from pursuing this state-law claim; and (C)
Bible has stated a viable RICO claim under federal law,
though it remains to be seen whether she can support that
claim with evidence of fraudulent intent.
   A. Breach of Contract Claim
    “Under Indiana law, the elements of a breach of contract
action are the existence of a contract, the defendant’s breach
thereof, and damages.” U.S. Valves, Inc. v. Dray, 190 F.3d 811,
814 (7th Cir. 1999), citing Fowler v. Campbell, 612 N.E.2d 596,
600 (Ind. App. 1993). The parties agree that the MPN is a val-
id contract and that it governs the terms of Bible’s loan, in-
cluding the consequences of her default. They disagree,
14                                                          No. 14-1806

however, about whether the amended complaint has ade-
quately pled a breach of the MPN and resulting damages.3
         1. Breach
            a. Incorporation by Reference
    Bible alleges that USA Funds breached the MPN by as-
sessing collection costs even though she timely entered into
a repayment agreement and complied with her obligations
under that agreement. She argues that the MPN incorpo-
rated federal regulations that prohibit guaranty agencies
from imposing collection costs against first-time defaulters
who promptly agree to repay their loans within 60 days of
receiving notice from the guaranty agency that it has paid
the lender’s default claim and who have complied with that
agreement. She relies on 34 C.F.R. §§ 682.405 and 682.410 and
language in the MPN to the effect that the guaranty agency
can collect from the borrower only “charges and fees that are
permitted by the Act.”
    We agree with Bible that the MPN incorporated the HEA
and its associated regulations. “Other writings, or matters
contained therein, which are referred to in a written contract
may be regarded as incorporated by the reference as a part
of the contract and, therefore, may properly be considered in
the construction of the contract.” I.C.C. Protective Coatings,
Inc. v. A.E. Staley Mfg. Co., 695 N.E.2d 1030, 1036 (Ind. App.
1998); see also, e.g., Jones v. City of Logansport, 436 N.E.2d
1138, 1148 (Ind. App. 1982) (contract incorporated federal

     3 USA Funds argues that the rehabilitation agreement is not a valid
contract because it was not supported by consideration. We do not reach
this issue because Bible’s breach of contract claim alleges a breach of the
MPN, not the rehabilitation agreement.
No. 14-1806                                                 15

occupational safety and health regulations). The page of the
contract that sets out the terms of the loan refers to the HEA
and its regulations no fewer than 16 times, though once
would be enough. In addition to the more general governing
law provision, which provides that the terms of the contract
“will be interpreted in accordance with the applicable feder-
al statutes and regulations,” the specific term covering “late
charges and collection costs” states that “[t]he lender may
collect from me … any other charges and fees that are per-
mitted by the Act.” And the contract defines “the Act” as the
HEA “and applicable U.S. Department of Education regula-
tions.”
    USA Funds relies on a sentence in the MPN granting it
the right to impose “reasonable collection fees and costs,
plus court costs and attorney fees.” USA Funds reads this
language in isolation to mean that it can impose collection
costs at any time after the borrower has defaulted. This in-
terpretation fails to give weight to the preceding sentence,
which limits the lender’s power to impose only those charg-
es and fees “that are permitted by the Act.” Basic principles
of contract law require a court to consider a contract’s provi-
sions together and in a way that harmonizes them. E.g., Hinc
v. Lime–O–Sol Co., 382 F.3d 716, 720 (7th Cir. 2004) (Indiana
law). If USA Funds charged Bible collection costs in violation
of the HEA and its regulations, then it breached the contract.
          b. Requirements for Imposing Collection Costs
   Bible has plausibly alleged a breach of the MPN by alleg-
ing that USA Funds assessed collection costs that were not
authorized by the Higher Education Act and its regulations.
This conclusion is supported by two independent grounds.
The author of this opinion agrees with the Secretary of Edu-
16                                                No. 14-1806

cation and Bible that under the best interpretation of the
statutes and regulations, the collection costs assessed here
were prohibited. Cf. Perez v. Mortgage Bankers Ass’n, 575 U.S.
—, 135 S. Ct. 1199, 1208 n.4 (2015) (“Even in cases where an
agency’s interpretation receives Auer deference, however, it
is the court that ultimately decides whether a given regula-
tion means what the agency says.”).
    Second, this author and Judge Flaum agree that even if
this were not the best interpretation of the statutes and ac-
companying regulations, it is at least a reasonable one, and
we defer to that interpretation because it reflects the rea-
soned position of the Secretary of Education, who is tasked
with administering the program. See Chevron, U.S.A., Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837, 843
(1984); Auer v. Robbins, 519 U.S. 452, 461 (1997).
          i. The Statutory and Regulatory Requirements
   Beginning with interpretation without deference to the
agency, Bible acknowledges that guaranty agencies are re-
quired to impose collection costs on borrowers who have de-
faulted in certain circumstances. Both the HEA itself and the
implementing regulations make this clear. See 20 U.S.C.
§ 1091a(b)(1) (“[A] borrower who has defaulted on a loan …
shall be required to pay … reasonable collection costs.”); id.
§ 1078-6(a)(1)(D)(i)(II)(aa) (upon successful rehabilitation, a
guaranty agency may, in order to defray collection costs,
“charge to the borrower an amount not to exceed 18.5 per-
cent of the outstanding principal and interest at the time of
the loan sale”); 34 C.F.R. § 682.410(b)(2) (“[T]he guaranty
agency shall charge a borrower an amount equal to reasona-
No. 14-1806                                                             17

ble costs incurred by the agency in collecting a loan.”).4 Bible
argues, however, that the regulations prohibit USA Funds
from imposing collection costs in her circumstances: a first-
time defaulter who she promptly agreed to enter into a re-
habilitation agreement within 60 days of receiving notice
that USA Funds had paid her lender’s default claim, and
who has complied with that agreement. She contends that
imposing collection costs in these circumstances is “unrea-
sonable” under 20 U.S.C. § 1091a(b)(1).
    Two key regulations define the phrase “reasonable collec-
tion costs” in § 1091a(b)(1). The first regulation, 34 C.F.R.
§ 682.405, requires guaranty agencies to create loan rehabili-
tation programs for all borrowers that have enforceable
promissory notes. These programs are designed to give eli-
gible borrowers an opportunity to rehabilitate defaulted
loans so that, upon successful rehabilitation, the loans may
be purchased by eligible lenders and removed from default
status. 34 C.F.R. § 682.405(a).5
    A loan is considered rehabilitated only after two re-
quirements are met: (1) the borrower has timely made nine
out of ten payments required under a monthly repayment
agreement, and (2) the loan has been sold to an eligible lend-
er. 34 C.F.R. § 682.405(a)(2)(i)–(ii). Subsection (b) of this regu-
lation then establishes specific requirements for terms that

    4 Again, this opinion cites and quotes the versions of the statutes and
regulations applicable to Bible’s loan. For example, the 18.5% cap on col-
lection costs has since been reduced to 16%.
    5 Some loans, such as loans for which a judgment has already been
obtained, are exempted from this provision. See 34 C.F.R. § 682.405(a)(1).
None of these exemptions is relevant here.
18                                                   No. 14-1806

must be included in the rehabilitation agreement. For exam-
ple, the guaranty agency must provide the borrower with a
written statement confirming the borrower’s “reasonable
and affordable payment amount” and “inform[ing] the bor-
rower of the amount of the collection costs to be added to the
unpaid principal at the time of the sale.” 34 C.F.R.
§ 682.405(b)(1)(vi).
   The second regulation, 34 C.F.R. § 682.410, is even more
specific. It establishes fiscal, administrative, and enforcement
requirements that a guaranty agency must satisfy to partici-
pate in the FFELP. Paragraph (b)(2) addresses collection
costs:
       Collection charges. Whether or not provided
       for in the borrower’s promissory note and sub-
       ject to any limitation on the amount of those
       costs in that note, the guaranty agency shall
       charge a borrower an amount equal to reason-
       able costs incurred by the agency in collecting
       a loan on which the agency has paid a default
       or bankruptcy claim. These costs may include,
       but are not limited to, all attorney’s fees, collec-
       tion agency charges, and court costs. [Subject
       to certain exceptions not relevant here], the
       amount charged a borrower must equal the
       lesser of—
          (i) The amount the same borrower
          would be charged for the cost of collec-
          tion under the formula in 34 C.F.R. [§]
          30.60; or
No. 14-1806                                                   19

          (ii) The amount the same borrower
          would be charged for the cost of collec-
          tion if the loan was held by the U.S. De-
          partment of Education.

34 C.F.R. § 682.410(b)(2). This paragraph makes clear that
guaranty agencies must charge a borrower reasonable collec-
tion costs, and it establishes a cap on the maximum amount
that can be charged by the guaranty agency. Paragraph
(b)(2), however, does not specify the circumstances under
which these costs may be assessed. That issue is addressed
by other portions of § 682.410, which create procedural safe-
guards for student borrowers.
    First, some context. Guaranty agencies have two primary
ways of pushing student-borrowers to repay their defaulted
loans: (1) reporting the delinquent account to a consumer
reporting agency (which lowers the borrower’s credit rating)
and (2) assessing collection costs against the borrower. Be-
cause the Department of Education was concerned about re-
cent graduates facing these adverse consequences without
first being given an opportunity to cure their defaults, it cre-
ated protections in § 682.410(b)(5)(ii). It provides that guar-
anty agencies must take certain actions before either report-
ing the default or assessing collection costs:
       The guaranty agency, after it pays a default
       claim on a loan but before it reports the default to
       a consumer reporting agency or assesses collection
       costs against a borrower, shall, within the
       timeframe specified in paragraph (b)(6)(ii) of
       this section, provide the borrower with—
20                                                No. 14-1806

          (A) Written notice that meets the re-
          quirements of paragraph (b)(5)(vi) of
          this section regarding the proposed ac-
          tions;
          (B) An opportunity to inspect and copy
          agency records pertaining to the loan
          obligation;
          (C) An opportunity for an administra-
          tive review of the legal enforceability or
          past-due status of the loan obligation;
          and
          (D) An opportunity to enter into a re-
          payment agreement on terms satisfacto-
          ry to the agency.
34 C.F.R. § 682.410(b)(5)(ii) (emphasis added).
    This provision does not specify a particular timeframe for
these actions, but it includes two cross-references that do.
First, subparagraph (b)(6)(ii) requires the guaranty agency to
send the written notice mentioned in (b)(5)(ii) within 45 days
of the date it pays the lender’s default claim. Second, sub-
paragraph (b)(5)(iv)(B) requires the agency to give the bor-
rower at least 60 days from the date of the initial notice to
request administrative review of the loan.
    Subparagraph (b)(5)(ii) effectively creates a safe harbor
for borrowers who find themselves in default for the first
time. When a borrower is first notified that a guaranty agen-
cy has paid a default claim on her loan, she has a 60-day
window to request administrative review of the debt or to
enter into a repayment agreement with the agency. If she
does not take either action, the guaranty agency can then
No. 14-1806                                                  21

take collection actions against her, report her default to a
consumer reporting agency, and assess collection costs
against her in the amount specified by § 682.410(b)(2).
    To be sure, subparagraph (b)(5)(iv)(B) mentions the op-
portunity to request administrative review of the loan obli-
gation, not the opportunity to enter into a repayment agree-
ment with the agency. But that is not a problem for Bible.
Her point is that subparagraph (b)(5)(ii) requires the guaran-
ty agency to provide the borrower with all four things before
reporting the debt to a consumer reporting agency or as-
sessing collection costs, and one of those things (administra-
tive review) triggers a waiting period of at least 60 days. The
regulations do not force the borrower to choose between re-
questing administrative review and entering into a repay-
ment program. The borrower has a right to request adminis-
trative review and then to decide whether to enter into a re-
payment agreement. Accordingly, the borrower has at least
60 days to enter into an alternative repayment agreement.
That Bible did not request administrative review of her loan
obligation in this case is beside the point; she had at least 60
days to do so, and before that time ran out, she entered into
the rehabilitation agreement.
    This understanding is confirmed by § 682.410(b)(6)(ii),
which requires the guaranty agency to inform the borrower
“that if he or she does not make repayment arrangements
acceptable to the agency, the agency will promptly initiate
procedures to collect the debt,” such as garnishing her wag-
es, filing a civil suit, or taking her income tax refunds. 34
C.F.R. § 682.410(b)(6)(ii). What would be the point of warn-
ing the borrower that declining to make repayment ar-
rangements would trigger costly debt collection activities if
22                                                No. 14-1806

the guaranty agency could initiate these procedures and as-
sess those costs regardless of whether she agrees to repay?
    That the regulations create this sort of safe harbor is not
surprising. Under USA Funds’ interpretation of the regula-
tions, a guaranty agency could assess collection costs against
a borrower even though it was never forced to “initiate pro-
cedures to collect the debt.” This would allow the guaranty
agency to charge for costly actions that it might never need
to take, such as wage garnishment or filing a civil suit. This
case illustrates the point. USA Funds assessed over $4,500 in
collection costs even though it merely sent one letter, sent
and received one fax, spoke to Bible and her attorney on the
phone several times, and cashed Bible’s monthly checks.
   The safe harbor of subparagraph (b)(5)(ii) also creates an
incentive for first-time defaulters to rehabilitate their loans
by voluntary repayment. If first-time defaulters knew that
they would face collection costs regardless of whether they
agree to repay, they would have less incentive to enter into
the repayment program voluntarily. These regulations are
designed to reward cooperation.
    This concept of providing a borrower with notice and an
opportunity to resolve the default before being subject to
adverse consequences, such as credit reporting or collection
costs, is not new. When the Department first incorporated
this concept into the FFELP regulations in 1992, it was actu-
ally borrowing from a requirement that had been imposed
on guaranty agencies back in 1986 under the federal tax re-
fund offset program. Under that program, guaranty agencies
were required to provide borrowers with notice of the pro-
posed offset and an opportunity to avoid that offset by enter-
ing into a satisfactory repayment agreement. See Letter from
No. 14-1806                                                  23

Lynn B. Mahaffie, Dep’t of Education, Dear Colleague Letter
Gen-15-14, at 2–3 (July 10, 2015). The disputed regulations
here are based on that same model: the defaulted borrower
must be given an opportunity to avoid the adverse conse-
quences by promptly agreeing to repay the debt voluntarily.
    The intent to create this safe harbor is further shown by a
related statutory provision dealing with credit reporting.
Under the HEA, Congress expressly provided that before
reporting the default to a consumer reporting agency, the
guaranty agency must provide the borrower with notice that
the loan will be reported as in default “unless the borrower
enters into repayment.” 20 U.S.C. § 1080a(c)(4) (emphasis
added). “[I]f the borrower has not entered into repayment
within a reasonable period of time,” then the guaranty agen-
cy must report the default. Id. The clear implication of
§ 1080a(c)(4) is that if the borrower timely enters into re-
payment, then the guaranty agency may not report the loan
as in default.
    The Secretary of Education issued the disputed regula-
tion here, 34 C.F.R. § 682.410(b)(5), to implement this statuto-
ry requirement found in § 1080a(c)(4). See Letter from Lynn
B. Mahaffie, Dep’t of Education, Dear Colleague Letter Gen-
15-14, at 2 (July 10, 2015), citing 57 Fed. Reg. 60280, 60355–56
(Dec. 18, 1992). Subparagraph (b)(5)(ii) discusses credit re-
porting and the assessment of collection costs in the exact
same way: “but before it reports the default to a consumer
reporting agency or assesses collection costs against a bor-
rower … .” USA Funds has given us no persuasive reason to
treat one of the stated adverse consequences of default (a
bad credit report) differently from the other (collection
24                                                   No. 14-1806

costs). Yet that is precisely what its interpretation of the stat-
utory framework and related regulations would do.
    This conclusion is based on the text of the applicable
statutory provisions, regulations, and the MPN itself. USA
Funds does not squarely address the textual basis of Bible’s
claim but responds with three arguments. First, it argues
that § 682.410(b)(2) allows it to impose collection costs, and
the regulations do not explicitly prohibit the imposition of
collection costs against a borrower who has defaulted but
promptly entered into a repayment agreement. This argu-
ment is not persuasive. Paragraph (b)(2) merely establishes
the background rule that the guaranty agency must assess
“reasonable collection costs” against the borrower and estab-
lishes the cap on the maximum amount of costs that can be
charged. It does not say anything about the circumstances
under which these costs can be imposed. As explained, other
parts of the regulation such as subparagraph (b)(5)(ii) im-
pose more specific requirements about the circumstances in
which collection costs may be assessed.
    Second, USA Funds contends that Bible’s interpretation
of § 682.410(b)(5)(ii)(D) ignores the fact that the repayment
agreement must be “on terms satisfactory to the agency.” It
appears to argue that under this language the guaranty
agency retains the discretion to assess collection costs when-
ever it wants. But this interpretation is inconsistent with the
introductory paragraph of the regulation, which makes clear
that the agency must provide the borrower an opportunity
to enter into a repayment agreement before collection costs
are assessed. Guaranty agencies do not have unfettered dis-
No. 14-1806                                                             25

cretion to impose whatever collection costs they want,
whenever they want, as the argument suggests.6
     Contrary to USA Funds’ arguments, Bible’s interpretation
still gives meaning to the phrase “on terms satisfactory to the
agency.” Under her theory, USA Funds retained the discre-
tion to set the terms of the repayment agreement. After all, it
transmitted the form document to Bible that became the re-
habilitation agreement. It could have insisted on higher
monthly payments, for example. USA Funds had the power
to set the initial terms of its offer and to reject any proposed
counteroffer. It did not have the power, though, to impose
collection costs in contravention of § 682.410(b)(5)(ii).
    Third, USA Funds points to another provision in the
MPN: “If I default, the guarantor may purchase my loans
and capitalize all then-outstanding interest into a new prin-
cipal balance, and collection fees will become immediately
due and payable.” This provision, however, does not dis-
place the guaranty agency’s obligations under 34 C.F.R.
§ 682.410. The collection fees become “immediately due and
payable” only after the guaranty agency has first provided
the borrower with (1) written notice that meets the require-

    6A “rehabilitation” agreement is one type of authorized “repayment
agreement.” See 34 C.F.R. § 682.405(a)(2) (a loan is “rehabilitated” after
the borrower has voluntarily “made and the guaranty agency has re-
ceived nine of the ten payments required under a monthly repayment
agreement”) (emphasis added); see also 20 U.S.C. § 1078-6(a)(4) (provision
authorizing loan rehabilitation refers to borrower making “scheduled
repayments”); accord, Letter from Lynn B. Mahaffie, Dep’t of Education,
Dear Colleague Letter Gen-15-14, at 5 (July 10, 2015) (“Thus, a rehabilita-
tion agreement is simply a specific form of a satisfactory repayment
agreement.”).
26                                                  No. 14-1806

ments spelled out in subparagraph (b)(5)(vi), (2) an oppor-
tunity to inspect and copy agency records pertaining to the
loan obligation, (3) an opportunity for administrative review
of the enforceability or past-due status of the loan obligation,
and (4) an opportunity to enter into a repayment agreement.
See 34 C.F.R. § 682.410(b)(5)(ii)(A)–(D). Interpreting the pro-
vision as USA Funds suggests would contradict
§ 682.410(b)(5)(ii). Recall, moreover, that USA Funds had
told Bible that she owed zero collection costs when she first
defaulted. It was not until after she signed the rehabilitation
agreement that she finally learned about the costs.
          ii. Deference to the Secretary of Education’s Interpre-
              tation
    Even if the preceding analysis does not provide the best
interpretation of the statutory framework and accompanying
regulations, the author and Judge Flaum agree the same re-
sult would still be correct based on the deference we owe to
the Secretary of Education, who is tasked with administering
the FFELP and issuing the implementing regulations.
    Because the HEA does not define “reasonable collection
costs,” Congress “explicitly left a gap for the agency to fill,”
Chevron, U.S.A., Inc. v. Natural Resource Defense Council, Inc.,
467 U.S. 837, 843 (1984), and delegated to the Secretary of
Education authority to “prescribe such regulations as may
be necessary to carry out the [Act’s] purposes.” 20 U.S.C.
§ 1082(a)(1). The Secretary exercised that expressly delegated
authority by issuing 34 C.F.R. § 682.410, “which establishes
the basic rules for the assessment of collection costs against
borrowers who have defaulted on their student loans.” See
Black v. Educational Credit Mgmt. Corp., 459 F.3d 796, 800 (7th
Cir. 2006). The Secretary’s reasonable interpretation of the
No. 14-1806                                                  27

Act is entitled to substantial deference. See Chevron, 467 U.S.
at 843–44. And the agency’s interpretation of its own regula-
tions is “controlling” unless it is (1) plainly erroneous or in-
consistent with the regulation, (2) does not reflect the agen-
cy’s fair and considered judgment on the matter in question,
or (3) represents a post hoc rationalization advanced by the
agency seeking to defend past agency action against attack.
Christopher v. SmithKline Beecham Corp., 567 U.S. —, 132 S. Ct.
2156, 2166 (2012), citing Auer v. Robbins, 519 U.S. 452, 461–62
(1997) (some citations omitted).
    The Secretary’s interpretation of “reasonable collection
costs” in 20 U.S.C. § 1091a(b)(1) is reasonable. The Secretary
interprets “reasonable” to mean that similar costs must be
assessed against borrowers who are at similar stages of de-
linquency. Under the Secretary’s view, a borrower who
promptly enters into a voluntary repayment agreement and
complies with that agreement, thereby obviating the need
for the guarantor to initiate costly debt collection proce-
dures, is not similarly situated to someone who does not,
thereby forcing the guarantor to undertake costly debt col-
lection procedures.
    Even if we thought the interpretation urged by USA
Funds were better in the abstract, “a court may not substi-
tute its own construction of a statutory provision for a rea-
sonable interpretation made by the administrator of an
agency.” Chevron, 467 U.S. at 844 (footnote omitted); see also
Michigan v. EPA, 576 U.S. —, 135 S. Ct. 2699, 2707 (2015)
(“Chevron directs courts to accept an agency’s reasonable
resolution of an ambiguity in a statute that the agency ad-
ministers.”); Chemical Mfrs. Ass’n v. Natural Resources Defense
Council, Inc., 470 U.S. 116, 125 (1985) (“This view of the agen-
28                                                 No. 14-1806

cy charged with administering the statute is entitled to con-
siderable deference; and to sustain it, we need not find that it
is the only permissible construction that EPA might have
adopted but only that EPA’s understanding of this very
‘complex statute’ is a sufficiently rational one to preclude a
court from substituting its judgment for that of EPA.”).
    USA Funds has not shown that the Secretary’s interpreta-
tion is unworthy of deference. The Secretary’s decision to in-
terpret 34 C.F.R. § 682.410(b)(5)(ii) as creating a safe harbor
for borrowers in Bible’s position is not plainly erroneous or
inconsistent with the regulation. It reflects the agency’s fair
and considered judgment on the question. And it does not
represent a post hoc rationalization by the agency seeking to
defend past agency action against attack. There is no indica-
tion from the record that the Secretary has ever taken a con-
trary position since the regulation was first adopted in 1992.
And as explained above, when the Department of Education
first issued this regulation, it was merely borrowing from a
requirement that had previously been imposed on guaranty
agencies under the federal tax refund offset program. See
Letter from Lynn B. Mahaffie, Dep’t of Education, Dear Col-
league Letter Gen-15-14, at 2–3 (July 10, 2015) (explaining
history of the “notice and opportunity to resolve” concept).
    In addition, the Secretary took this same position in a le-
gal brief filed in an earlier case in this circuit, Educational
Credit Mgmt. Corp. v. Barnes, 318 B.R. 482 (S.D. Ind. 2004),
aff’d sub nom. Black v. Educational Credit Mgmt. Corp., 459 F.3d
796 (7th Cir. 2006), interpreting § 682.410(b)(5) in the same
manner it does here. Both its reasoning and its conclusion
No. 14-1806                                                            29

have remained exactly the same.7 Cf. Christopher, 132 S. Ct. at
2165–68 (no Auer deference where agency’s interpretation
would have imposed “massive liability” for conduct that oc-
curred before the announcement of the interpretation, agen-
cy’s announcement was preceded by long period of acquies-
cence to industry practice, and agency materially changed its
reasoning during course of litigation).
    To summarize, Bible has alleged sufficiently that USA
Funds breached its contract with her by assessing over
$4,500 in collections costs after she timely entered into and
complied with a monthly repayment agreement, in violation
of the applicable regulations that were incorporated into the
parties’ contract.
        2. Damages
    We next address whether Bible has adequately pled
damages. USA Funds argues she has not because she de-
faulted on her loan and continues to owe money on that ob-
ligation. This argument is meritless. Of course Bible contin-
ues to owe money under her loan obligation. That does not
mean she has not been damaged by USA Funds’ imposing
over $4,500 in unauthorized collection costs. These costs rep-
resent new charges that have been added to her accrued in-
terest and principal, thereby increasing the total amount she

    7 See App. 54–55 (“Department rules require the guarantor who ac-
quires a loan by reason of the default of the borrower … to charge collec-
tion costs only after providing the debtor an opportunity to contest the
debt and to enter into a repayment arrangement for the debt. … The reg-
ulations therefore direct guarantors to charge collection costs only to
those debtors who cause the guarantor to incur collection costs by failing
to agree promptly to repay voluntarily. … Only those defaulters who
ignore this opportunity face collection cost charges.”) (emphases added).
30                                                  No. 14-1806

owes on her account. Because these charges were not permit-
ted by her contract, she has plausibly alleged damages, even
if the remedy might take the form of a credit to her account
rather than cash in her pocket. Bible has plausibly alleged a
viable breach of contract claim under state law.
     B. Preemption & the “Disguised Claim” Theory
    We next examine whether federal law preempts or oth-
erwise displaces Bible’s state law claim. “Preemption can
take on three different forms: express preemption, field
preemption, and conflict preemption.” Aux Sable Liquid
Products v. Murphy, 526 F.3d 1028, 1033 (7th Cir. 2008). USA
Funds relies on conflict preemption. It also argues that the
breach of contract claim is nothing more than a “disguised
claim” for a violation of the Higher Education Act and is
thus “preempted” by the HEA. Neither theory has merit.
Federal law does not preempt or otherwise displace Bible’s
breach of contract claim.
        1. Conflict Preemption
    Conflict preemption can occur in two situations: (1) when
“it is impossible for a private party to comply with both state
and federal requirements,” or (2) when “state law stands as
an obstacle to the accomplishment and execution of the full
purposes and objectives of Congress.” Freightliner Corp. v.
Myrick, 514 U.S. 280, 287 (1995) (citations and internal quota-
tion marks omitted). USA Funds does not contend that it
would be impossible, without violating federal law, for it to
comply with the state law duty Bible’s suit seeks to impose.
Instead, it invokes the second species of conflict preemption
known as “obstacle” preemption. USA Funds argues that
entertaining Bible’s breach of contract claim would frustrate
No. 14-1806                                                    31

Congress’s goal of “uniformity” because it would require
many state and federal courts to interpret HEA regulations
in potentially inconsistent ways. We reject this contention.
    This argument proves far too much. Under this theory,
conflict preemption would occur any time a court would be
required to interpret a regulation to decide a case arising
under the common law or other sources of law independent
of the regulation itself. But courts interpret federal regula-
tions all the time without triggering preemption concerns.
The mere possibility that a court would need to interpret a
regulation does not itself establish preemption. See CSX
Transportation, Inc. v. Eastwood, 507 U.S. 658, 664 (1993) (“To
prevail on the claim that the regulations have pre-emptive
effect, petitioner must establish more than that they ‘touch
upon’ or ‘relate to’ that subject matter … .”), citing Morales v.
Trans World Airlines, Inc., 504 U.S. 374, 383–84 (1992); English
v. General Electric Co., 496 U.S. 72, 87 (1990) (“Ordinarily, the
mere existence of a federal regulatory or enforcement
scheme, even one as detailed as § 210 [of the Energy Reor-
ganization Act of 1974], does not by itself imply pre-emption
of state remedies.”); Hillsborough County v. Automated Medical
Laboratories, Inc., 471 U.S. 707, 717 (1985) (“To infer pre-
emption whenever an agency deals with a problem compre-
hensively is virtually tantamount to saying that whenever a
federal agency decides to step into a field, its regulations will
be exclusive.”); Keams v. Tempe Technical Institute, Inc., 39 F.3d
222, 226–27 (9th Cir. 1994) (holding that detailed regulatory
scheme under the HEA did not imply preemption of state
tort remedies against accreditors). That is the very point of
34 C.F.R. § 682.410(b)(8), which provides that paragraphs
(b)(2), (5), and (6)—the provisions at issue here—preempt
only “State law … that would conflict with or hinder satisfac-
32                                                  No. 14-1806

tion of the requirements of these provisions.” (Emphasis
added.)
    The real question is whether entertaining Bible’s breach
of contract claim actually conflicts with the HEA and its as-
sociated regulations. It does not. We begin with Wigod v.
Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012), where we
dealt with a nearly identical issue in the context of the feder-
al Home Affordable Mortgage Program (HAMP). In Wigod,
the plaintiff brought state law claims against her mortgage
service provider, including a breach of contract claim alleg-
ing that the defendant breached a written agreement that in-
corporated the HAMP requirements. Like USA Funds in this
case, the defendant in Wigod argued that the state law claims
were preempted by the federal guidelines under principles
of conflict preemption. We rejected the argument. 673 F.3d at
577–81.
    Although Wigod dealt with a different regulatory frame-
work, its reasoning applies directly here. Bible’s claim is that
USA Funds breached the MPN by acting contrary to the fed-
eral regulations incorporated into the contract. Just as in
Wigod, “the state-law duty allegedly breached is imported
from and delimited by federal standards.” Wigod, 673 F.3d at
579. In this situation, federal law simply provides the stand-
ard of compliance, and the parties’ duties are actually en-
forced under state law. See id. at 579–80. There is no conflict.
    The Fourth Circuit reached the same conclusion regard-
ing the HEA in College Loan Corp. v. SLM Corp., 396 F.3d 588
(4th Cir. 2005). In that case, the plaintiff sued Sallie Mae and
its affiliates under state law, alleging that they had a contract
that incorporated the requirements of the HEA and its regu-
lations. The district court held that the state law claims were
No. 14-1806                                                  33

preempted. The Fourth Circuit reversed. The court held that
the plaintiff’s state law claims were not preempted even
though they relied on establishing a violation of the HEA
and its regulations:
       This point is particularly obvious in relation to
       [plaintiff’s] contract claim. As parties to the
       Agreement, [the parties] voluntarily included
       federal standards (the HEA) in their bargained-
       for private contractual arrangement. Both ex-
       pressly agreed to comply with the HEA. In that
       context, [defendants’] argument that enforce-
       ment of the Agreement’s terms is preempted by
       the HEA boils down to a contention that it was
       free to enter into a contract that invoked a fed-
       eral standard as the indicator of compliance,
       then to proceed to breach its duties thereunder
       and to shield its breach by pleading preemp-
       tion. In this case at least, federal supremacy
       does not mandate such a result.
Id. at 598 (citations omitted). The Fourth Circuit’s reasoning
applies with equal force here.
    Unable to distinguish Wigod or College Loan Corp. in
meaningful ways, USA Funds seeks help from Chae v. SLM
Corp., 593 F.3d 936 (9th Cir. 2010). But Chae actually reinforc-
es our conclusion. There, borrowers sued Sallie Mae under
state law for its handling of their student loans. Applying
principles of conflict preemption, the Ninth Circuit held that
the claims were preempted by the HEA because
“[p]ermitting varying state law challenges across the coun-
try, with state law standards that may differ and impede uni-
formity” would pose an obstacle to Congress’s purpose in
34                                                 No. 14-1806

creating the FFELP. Chae, 593 F.3d at 945. The Ninth Circuit,
however, carefully distinguished College Loan Corp. on
grounds directly applicable here, saying that the plaintiff in
College Loan Corp. had “sought to enforce FFELP rules, not to
vary them.” Id. at 946, citing 396 F.3d at 591–94. In Chae,
though, the plaintiffs were “not seek[ing] to buttress the
FFELP framework, but rather to alter it in their home state.”
Id. They were asking the court to impose a higher standard of
compliance than was required by federal law. Such claims
are preempted, held Chae, but that reasoning does not apply
here.
    Like the plaintiff in College Loan Corp. and unlike those in
Chae, Bible is not attempting to require more of the defend-
ant than was already required by the HEA and its regula-
tions. She seeks only to enforce the federal standards that the
parties agreed to in their contract. This case is therefore not
different from Wigod, where we held that state law claims
attempting to enforce the requirements of the HAMP guide-
lines were not preempted by federal law. In Wigod, College
Loan Corp., and now this case, the plaintiffs’ state law claims
were complementary to, not in conflict with, the federal re-
quirements. Bible’s claim is not preempted by federal law.
       2. The “Disguised Claim” Theory
    In addition to its formal preemption argument, USA
Funds argues that Bible’s state law claim is “preempted” be-
cause it is nothing more than a “disguised claim” for a viola-
tion of the HEA, and the HEA does not provide a private
right of action. We considered and rejected this same theory
in Wigod. There the defendant-lender referred to it as an
“end-run” theory rather than a “disguised claim” theory.
The difference is merely semantic. The defense theory in
No. 14-1806                                                  35

both cases is that the lack of a private right of action under a
regulatory statute necessarily preempts or otherwise dis-
places a state law cause of action that makes the violation of
that regulatory statute an element of the claim. This theory is
mistaken at its core: “The absence of a private right of action
from a federal statute provides no reason to dismiss a claim
under a state law just because it refers to or incorporates
some element of the federal law. To find otherwise would
require adopting the novel presumption that where Con-
gress provides no remedy under federal law, state law may
not afford one in its stead.” Wigod, 673 F.3d at 581 (citation
omitted).
    USA Funds attempts to distinguish Wigod on two
grounds. First, it says there was no administrative enforce-
ment scheme under the HAMP. That is simply not true as a
matter of fact. See Spaulding v. Wells Fargo Bank, N.A., 714
F.3d 769, 773–74 (4th Cir. 2013) (describing administrative
enforcement scheme under HAMP); Wigod, 673 F.3d at 556–
57 (same).
    Second, USA Funds contends that Wigod is distinguisha-
ble because there the Secretary of the Treasury had issued a
directive saying that the HAMP must be implemented in
compliance with state common law and statutes. See Wigod,
673 F.3d at 580. This does not distinguish Wigod either. We
noted that the directive was additional evidence that federal
law did not preempt state law. See id. (noting that Depart-
ment of Treasury’s “tacit view of its program’s lack of
preemptive force” was entitled to “some weight”). We did
not suggest that our rejection of the end-run theory depend-
ed on this supplemental directive. (In fact, we discussed the
supplemental directive in a different section in the opinion.)
36                                                  No. 14-1806

If anything, there is even less reason to find preemption in
this case because USA Funds voluntarily agreed to comply
with the only federal requirements that Bible is attempting
to enforce. In Wigod, by contrast, the plaintiff had brought
claims against the defendant under state tort law in addition
to her breach of contract claim.
    We reiterate the lesson from Wigod. The absence of a pri-
vate right of action under federal law provides no reason to
dismiss a state law claim just because the claim refers to or
incorporates some element of the federal law. Congress’s de-
cision not to supply a remedy under federal law does not
necessarily mean that it also intended to displace state law
remedies. The lack of a private right of action under the HEA
itself does not preclude Bible’s breach of contract claim.
     C. RICO Claim
    We now turn to Bible’s civil RICO claim alleging a viola-
tion of 18 U.S.C. § 1962(c). Section 1962(c) makes it “unlaw-
ful for any person employed by or associated with any en-
terprise engaged in, or the activities of which affect, inter-
state or foreign commerce, to conduct or participate, directly
or indirectly, in the conduct of such enterprise’s affairs
through a pattern of racketeering activity.” 18 U.S.C.
§ 1962(c). A civil remedy is available under 18 U.S.C. § 1964.
To establish a violation of § 1962(c), Bible must eventually
prove four elements: (1) conduct (2) of an enterprise (3)
through a pattern (4) of racketeering activity. E.g., Jennings v.
Auto Meter Products, Inc., 495 F.3d 466, 472 (7th Cir. 2007).
USA Funds contends that Bible has failed to allege plausibly
the existence of an enterprise, racketeering activity, or a pat-
tern. Whether or not detailed allegations of each element
(other than the alleged fraud) are required at the pleading
No. 14-1806                                                   37

stage, cf. Johnson v. City of Shelby, 574 U.S. —, 135 S. Ct. 346,
347 (2014) (per curiam) (reversing dismissal for failure to in-
voke proper statute in complaint); Runnion v. Girl Scouts of
Greater Chicago, 786 F.3d 510, 517–18, 528 (7th Cir. 2015) (re-
versing dismissal of complaint), we find that Bible’s allega-
tions are sufficient. It remains to be seen whether she can
marshal evidence to support her claim, but that’s a matter for
further proceedings in the district court.
       1. Enterprise
    RICO defines the term “enterprise” broadly to include
“any individual, partnership, corporation, association, or
other legal entity, and any union or group of individuals as-
sociated in fact although not a legal entity.” 18 U.S.C.
§ 1961(4). An association-in-fact does not require any struc-
tural features beyond “a purpose, relationships among those
associated with the enterprise, and longevity sufficient to
permit these associates to pursue the enterprise’s purposes.”
Boyle v. United States, 556 U.S. 938, 946 (2009). But the defini-
tion does require that the defendant be a “person” that is
distinct from the RICO enterprise. United Food & Commercial
Workers Unions & Employers Midwest Health Benefits Fund v.
Walgreen Co., 719 F.3d 849, 853–54 (7th Cir. 2013) (citations
omitted). Under § 1962(c), the plaintiff must also establish
that the defendant “person” participated in the operation or
management of the distinct enterprise. Reves v. Ernst &
Young, 507 U.S. 170, 179 (1993).
   Bible identifies USA Funds as the defendant “person” for
purposes of RICO, and she defines the “enterprise” as an as-
sociation-in-fact consisting of USA Funds, GRC, and Sallie
Mae. She alleges that the members of the enterprise associat-
ed for the common purpose of maximizing revenue before,
38                                                No. 14-1806

during, and after the loan rehabilitation process by unlaw-
fully imposing collection costs on borrowers who had de-
faulted. USA Funds uses GRC as its debt collector, and Sallie
Mae is the parent company of GRC. Although Sallie Mae
and USA Funds are “technically independent,” Sallie Mae
has purchased a number of USA Funds’ departments and
exerts “extensive financial and operational control” over
USA Funds. Am. Compl. ¶ 95.
    Our cases have distinguished between two situations: a
run-of-the-mill commercial relationship where each entity
acts in its individual capacity to pursue its individual self-
interest, versus a truly joint enterprise where each individual
entity acts in concert with the others to pursue a common
interest. See United Food & Commercial Workers, 719 F.3d at
855 (“This type of interaction, however, shows only that the
defendants had a commercial relationship, not that they had
joined together to create a distinct entity for purposes of im-
properly filling … prescriptions.”); Crichton v. Golden Rule
Ins. Co., 576 F.3d 392, 400 (7th Cir. 2009) (distinguishing
“garden-variety marketing arrangement” comprised of dis-
tinct entities from RICO enterprise). This distinction is im-
portant. Without it, “every conspiracy to commit fraud that
requires more than one person to commit is a RICO organi-
zation and consequently every fraud that requires more than
one person to commit is a RICO violation.” Stachon v. United
Consumers Club, Inc., 229 F.3d 673, 676 (7th Cir. 2000), quot-
ing Bachman v. Bear, Stearns & Co., 178 F.3d 930, 932 (7th Cir.
1999) (footnote and internal quotation marks omitted).
   Mindful of this distinction, we conclude that Bible has
pled more than a run-of-the-mill commercial relationship.
Bible alleges a number of facts permitting the reasonable in-
No. 14-1806                                                    39

ference that, with respect to managing accounts before, dur-
ing, and after the loan rehabilitation process, USA Funds,
GRC, and Sallie Mae work as a single enterprise.
    First, she alleges an unusual degree of economic interde-
pendence among the entities. According to the amended
complaint, USA Funds agreed to place all defaulted loans
with Sallie Mae for portfolio management. Sallie Mae was
then authorized to refer a large number of the defaulted
loans to its “affiliates” or subsidiary debt collectors such as
GRC. In addition, USA Funds committed to sell at least half
of its rehabilitated loans to Sallie Mae. Under this arrange-
ment, USA Funds not only paid Sallie Mae directly to man-
age its portfolio but also compensated Sallie Mae indirectly
by using its affiliates and subsidiaries for debt collection and
by agreeing to sell a large chunk of rehabilitated loans to Sal-
lie Mae.
    Second, Bible alleges that the entities do not operate as
completely separate entities in managing the loan rehabilita-
tion process. For example, she alleges that: the printout on
top of the rehabilitation agreement indicates that it was sent
from a Sallie Mae fax machine; in answers to interrogatories
in another lawsuit, GRC identified five Sallie Mae officials
who had approved and provided input into the wording of
GRC’s collection correspondence, including the correspond-
ence at issue in this case; Sallie Mae assumes responsibility
for compliance with some of USA Funds’ statutory duties,
including the delivery of privacy policies to borrowers; Sallie
Mae has agreed to a marketing plan under which Sallie Mae
will promote USA Funds as a guaranty agency; Sallie Mae
has agreed not to use another guaranty agency unless, de-
spite Sallie Mae’s best efforts, a school or lender insists; asso-
40                                                No. 14-1806

ciate counsel at Sallie Mae recently appeared at a settlement
conference in a Fair Debt Collection Practices Act lawsuit
against GRC purporting to have settlement authority on be-
half of GRC; and in another FDCPA lawsuit, GRC negotiated
a settlement release that covered Sallie Mae and other enti-
ties “related to” Sallie Mae, including USA Funds, despite
the fact that neither Sallie Mae nor USA Funds were named
as defendants in the case.
    These allegations distinguish this case from cases like
United Food & Commercial Workers, 719 F.3d at 854–55 (noting
that complaint failed to allege “that officials from either
company involved themselves in the affairs of the other”),
and Crichton, 576 F.3d at 400 (noting that plaintiff’s claim
“begins and ends” with the fraud allegedly committed by
individual entity, not enterprise). Taken together, Bible’s al-
legations indicate a common purpose, relationships among
the three entities associated with the enterprise, and longevi-
ty sufficient to permit these associates to pursue the enter-
prise’s purposes. See, e.g., Sykes v. Mel Harris & Associates,
LLC, 757 F. Supp. 2d 413, 426–27 (S.D.N.Y. 2010) (complaint
plausibly alleged RICO enterprise comprised of debt-buying
company, debt collection agency, process service company,
and others).
    USA Funds contends that even if there is an enterprise,
USA Funds’ own alleged actions could not amount to partic-
ipation in the operation or management of the enterprise’s
affairs because USA Funds did not operate or manage the
collection efforts related to Bible’s defaulted loans. We disa-
gree. Bible alleges that USA Funds “directed GRC to unlaw-
fully and fraudulently impose collection costs [on] borrow-
ers,” Am. Compl. ¶ 88, and that “GRC carried out these in-
No. 14-1806                                                   41

structions.” Id., ¶ 89. She also alleges that GRC secured a re-
lease for USA Funds and Sallie Mae in the FDCPA case men-
tioned above because “both [USA Funds] and Sallie Mae
were intimately involved in GRC’s debt collection activities.”
Id. ¶ 105.
    USA Funds points out that merely performing a service
for another entity is not sufficient to establish this element.
That is correct as far as it goes. See Goren v. New Vision Int’l,
Inc., 156 F.3d 721, 728 (7th Cir. 1998) (“Indeed, simply per-
forming services for an enterprise, even with knowledge of
the enterprise’s illicit nature, is not enough to subject an in-
dividual to RICO liability under § 1962(c); instead, the indi-
vidual must have participated in the operation and man-
agement of the enterprise itself.”). But that principle does
not help USA Funds. If we were to apply it here, it might
mean that GRC did not participate in the operation or man-
agement of the enterprise’s affairs since GRC was hired by
USA Funds to perform the debt collection activities. But the
same cannot be said for USA Funds, which hired GRC, di-
rected it to impose the collection costs at issue, and was “in-
timately involved” in GRC’s debt collection activities more
generally. Bible’s amended complaint pleads factual content
permitting the reasonable inference that USA Funds, in con-
junction with Sallie Mae, actually directed the enterprise’s
debt collection activities even though GRC was the entity
that dealt with the borrower most directly. She has plausibly
alleged that USA Funds conducted or participated in the en-
terprise’s affairs.
       2. Racketeering Activity and Fraudulent Intent
   USA Funds next argues that Bible has not plausibly al-
leged racketeering activity. “Racketeering activity” is defined
42                                                  No. 14-1806

in 18 U.S.C. § 1961(1)(B) to include mail fraud in violation of
18 U.S.C. § 1341 and wire fraud in violation of 18 U.S.C. §
1343. “The elements of mail fraud … are: ‘(1) the defendant’s
participation in a scheme to defraud; (2) defendant’s com-
mission of the act with intent to defraud; and (3) use of the
mails in furtherance of the fraudulent scheme.’” Williams v.
Aztar Indiana Gaming Corp., 351 F.3d 294, 298–99 (7th Cir.
2003), quoting United States v. Walker, 9 F.3d 1245, 1249 (7th
Cir. 1993). The elements of wire fraud are the same except
that it requires use of interstate wires rather than mail in fur-
therance of the scheme. E.g., United States v. Green, 648 F.3d
569, 577–78 (7th Cir. 2011).
    Bible alleges both mail and wire fraud. Her allegations
are subject to Federal Rule of Civil Procedure 9(b), which re-
quires her to plead fraud with particularity. E.g., Slaney v.
Int’l Amateur Athletic Federation, 244 F.3d 580, 597 (7th Cir.
2001). As a result, Bible “must, at a minimum, describe the
two predicate acts of fraud with some specificity and state
the time, place, and content of the alleged false representa-
tions, the method by which the misrepresentations were
communicated, and the identities of the parties to those mis-
representations.” Id.
    Bible’s fraud allegations are based on the form default let-
ter and rehabilitation agreement. According to the amended
complaint, USA Funds, through its agent GRC, mailed the
default letter telling Bible that her loan was in default. The
letter said that her “current collection cost balance” and
“current other charges” were zero. Like the default letter, the
rehabilitation agreement, which was faxed, said that her
“current collection cost balance” and “current other charges”
were zero. She alleges that USA Funds uses form documents
No. 14-1806                                                 43

substantially similar to the default letter and rehabilitation
agreement in its dealings with thousands of other borrowers
who have defaulted on their loans.
    Bible’s theory of fraud is that the statements in the de-
fault letter and rehabilitation agreement that her “current
collection cost balance” and “current other charges” were
zero were false, misleading, or contained material omissions.
They implied that collection costs would not be assessed
against her if she promptly agreed to enter into a repayment
program. According to the amended complaint, these state-
ments were designed to deceive her into entering into the
rehabilitation program by concealing the fact that thousands
of dollars in collection costs would be imposed by the guar-
anty agency before she had completed the rehabilitation
process.
    USA Funds argues that Bible has not plausibly alleged
fraud because the collection costs were permitted by federal
regulations and because she has failed to allege that USA
Funds intended to deceive her. Neither argument can justify
dismissal under Rule 12(b)(6). Whether Bible can eventually
come forward with evidence of fraudulent intent is a ques-
tion for the district court on remand.
    As discussed above, the collection costs were not permit-
ted by federal regulations, at least as interpreted by the Sec-
retary of Education. In addition, even if the costs had been
permitted by the regulations, Bible alleges that USA Funds
misled her in its correspondence leading to her agreeing to
the repayment program. We recognize that the correspond-
ence to Bible signaled that collection costs could be assessed
in the future. Yet that same correspondence said that she
owed no collection costs, which could reasonably be under-
44                                                   No. 14-1806

stood as implying that there would be nothing to add in the
future. A Rule 12(b)(6) motion to dismiss is not a suitable
procedure for determining that these documents could not
possibly have been misleading to Bible or other borrowers
like her.
    The question of USA Funds’ intent also cannot be decid-
ed on the pleadings. At this stage of the litigation, Bible has
plausibly alleged that USA Funds intended to deceive her.
See Fed. R. Civ. P. 9(b) (fraudulent intent “may be alleged
generally”). She alleges that it sent her a form saying that her
collection costs were zero and that it made this representa-
tion intending to induce her to enter into a repayment pro-
gram by hiding that she would be forced to pay over $4,500
in collection costs if she did. These representations could be
deemed literally false. Even if they could avoid literal falsity,
omission or concealment of material information can be suf-
ficient to constitute mail or wire fraud. See United States v.
Morris, 80 F.3d 1151, 1161 (7th Cir. 1996) (“We reiterated,
moreover, that the statutes apply not only to false or fraudu-
lent representations, but also to the omission or concealment
of material information, even where no statute or regulation
imposes a duty of disclosure.”); Emery v. American General
Finance, Inc., 71 F.3d 1343, 1348 (7th Cir. 1995); United States v.
Biesiadecki, 933 F.2d 539, 543 (7th Cir. 1991); United States v.
Keplinger, 776 F.2d 678, 697 (7th Cir. 1985).
   The rehabilitation agreement warned Bible that collection
costs could be capitalized at the time of rehabilitation by the
new lender. See App. 139 (“Collection costs may be capital-
ized at the time of the Loan Rehabilitation by your new
lender, along with outstanding accrued interest, to form one
new principal amount.”); id. (“By signing below, I under-
No. 14-1806                                                              45

stand and agree that the lender may capitalize collection
costs of 18.5% of the outstanding principal and accrued in-
terest upon rehabilitation of my loan(s).”). One straightfor-
ward reading of this language is that it authorized the new
lender—not the guaranty agency—to capitalize existing col-
lection costs, not to impose new ones, and then only after re-
habilitation is complete (i.e., after the guaranty agency has
sold the loan to a private lender).
    At this preliminary pleading stage, we do not know USA
Funds’ state of mind when it sent the default letter or reha-
bilitation agreement. Bible has plausibly alleged that the
statements in the default letter and the rehabilitation agree-
ment were designed to induce her to enter into the repay-
ment agreement while concealing that she would be as-
sessed over $4,500 in collection costs if she did so. Her alle-
gations of racketeering activity should survive the Rule
12(b)(6) motion to dismiss.8
        3. Pattern
    We turn next to USA Funds’ argument that Bible has
failed to allege a pattern of racketeering activity. “A pattern
of racketeering activity consists, at the very least, of two

    8   On the RICO claims, USA Funds repeats the same argument it
made on Bible’s breach of contract claim, contending that she has failed
to allege an injury. For the same reasons, we reject this contention. Bi-
ble’s alleged injury is that she made monthly payments for costs she did
not owe, which constitutes a financial loss. Nothing more is required to
plead an injury under § 1962(c). See Haroco, Inc. v. American Nat’l Bank &
Trust Co. of Chicago, 747 F.2d 384, 398 (7th Cir. 1984) (holding that plain-
tiffs’ allegations of excessive interest charges resulting from defendants’
alleged fraudulent scheme to overstate the prime rate satisfied the injury
requirement), aff’d, 473 U.S. 606 (1985).
46                                                  No. 14-1806

predicate acts of racketeering committed within a ten-year
period.” Jennings v. Auto Meter Products, Inc., 495 F.3d 466,
472 (7th Cir. 2007), citing 18 U.S.C. § 1961(5). To prove a pat-
tern, Bible will need to satisfy the “continuity plus relation-
ship” test, which requires that the predicate acts be related to
one another (the relationship prong) and that they pose a
threat of continued criminal activity (the continuity prong).
Id. at 473, quoting Midwest Grinding Co. v. Spitz, 976 F.2d
1016, 1022 (7th Cir. 1992). The relationship prong is satisfied
“if the criminal acts ‘have the same or similar purposes, re-
sults, participants, victims, or methods of commission, or
otherwise are interrelated by distinguishing characteristics
and are not isolated events.’” DeGuelle v. Camilli, 664 F.3d
192, 199 (7th Cir. 2011), quoting H.J. Inc. v. Northwestern Bell
Telephone Co., 492 U.S. 229, 240 (1989). The continuity prong
is satisfied by showing either that the criminal behavior, alt-
hough it has ended, was so durable and repetitive that it
“carries with it an implicit threat of continued criminal activ-
ity in the future,” Midwest Grinding Co., 976 F.2d at 1023, or
that the past conduct “by its nature projects into the future
with a threat of repetition,” H.J. Inc., 492 U.S. at 241.
    Whether or not Bible needed to plead details of her pat-
tern theory, cf. Runnion v. Girl Scouts, 786 F.3d at 528, Bible’s
allegations satisfy the relationship-plus-continuity test. She
alleges that USA Funds, through its enterprise, unlawfully
imposed collection costs on thousands of borrowers in de-
fault in the same manner it did to her. She alleges that USA
Funds has sent the form document that became the rehabili-
tation agreement in this case more than 100,000 times over a
period of several years. Bible also alleges that the conduct at
issue is USA Funds’ standard operating procedure and that
it is continuous and ongoing. These allegations satisfy the
No. 14-1806                                                   47

relationship-plus-continuity test. See, e.g., Corley v. Rosewood
Care Center, Inc., 142 F.3d 1041, 1050 (7th Cir. 1998) (relation-
ship-plus-continuity test satisfied where plaintiff alleged de-
fendant systematically overcharged residents at several
nursing homes).
       4. Preemption
    We have one last loose end to tie up: the district court de-
termined that Bible’s RICO claim was “preempted” by the
Higher Education Act. See Bible v. United Student Aid Funds,
Inc., 2014 WL 1048807, at *10. It is well settled that federal
law does not preempt a federal law claim alleging a viola-
tion of another federal statute. Preemption is limited to con-
flicts between federal and state law. The alleged preclusion
of a cause of action under one federal statute by the provi-
sions of another federal statute is another issue entirely. See
POM Wonderful LLC v. Coca-Cola Co., 573 U.S. —, 134 S. Ct.
2228, 2236 (2014).
    Realizing that the HEA does not preempt the RICO
claim, USA Funds argues instead that the absence of a pri-
vate right of action under the HEA precludes Bible’s RICO
claim because Bible’s RICO theory alleges only a violation of
the HEA. USA Funds relies principally on McCulloch v. PNC
Bank Inc., 298 F.3d 1217, 1226–27 (11th Cir. 2002) (per curi-
am), and United Food & Commercial Workers Unions & Employ-
ers Midwest Health Benefits Fund v. Walgreen Co., No. 12 C 204,
2012 WL 3061859, at *4 (N.D. Ill. July 26, 2012), aff’d on other
grounds, 719 F.3d 849 (7th Cir. 2013), for the proposition that
non-compliance with a regulatory statute that does not itself
provide a private right of action necessarily forecloses any
RICO claim based on that non-compliance.
48                                                            No. 14-1806

    We are skeptical of this legal principle (our court has
never adopted it), but we need not decide that question now
because it is not presented by Bible’s allegations. USA Funds’
argument simply mischaracterizes Bible’s theory. Her RICO
claim is not based on regulatory non-compliance. It is based
on alleged misrepresentations and deception in the default
letter and the rehabilitation agreement. Even if the regula-
tions permitted USA Funds to assess the collection costs, Bi-
ble alleges that USA Funds committed fraud by concealing
that these collection costs would be imposed when it sent the
default letter and the rehabilitation agreement. Thus, Bible’s
RICO claim does not necessarily require her to prove that
USA Funds violated the HEA or its regulations, even if such
proof might strengthen her claims.9 Even if we agreed with
McCulloch and the district court in United Food & Commercial
Workers on this issue, neither decision considered this alter-
native theory Bible is pursuing. See McCulloch, 298 F.3d at
1226–27 (lenders’ failure to comply with HEA disclosure ob-
ligations was not actionable under RICO); United Food &
Commercial Workers, 2012 WL 3061859, at *4 (noting that
plaintiff’s RICO claim depended on violation of regulatory
statutes referenced in complaint). The absence of a private

     9Suppose discovery or a former employee showed that USA Funds
included certain language in the default letter or rehabilitation agree-
ment to hide the extent of its non-compliance with the regulations. That
might indicate that USA Funds intended to defraud borrowers, who
might have reasonably relied on the regulatory framework to protect
them. The point for our purposes, though, is that a violation of the HEA
and its regulations is not essential to Bible’s fraud claims. Even if the col-
lection costs were permitted by the regulations, Bible’s theory is that
statements in the form documents sent to her were misleading.
No. 14-1806                                                49

right of action under the HEA itself does not preclude Bible’s
RICO claim.
                         Conclusion
   Neither of Bible’s claims is preempted or otherwise dis-
placed by federal law, and she has plausibly alleged all of
the elements of both claims. The judgment of the district
court is REVERSED and the case is REMANDED for further
proceedings.
50                                                  No. 14-1806

    FLAUM, Circuit Judge, concurring in part and concurring
in the judgment.
    I join in full Judge Hamilton’s analysis of USA Funds’
preemption argument and Bible’s RICO claim. With respect
to Bible’s breach of contract claim, I agree with the portion of
the analysis that defers to the Secretary of Education’s inter-
pretation of the statute and corresponding regulations.
However, I am unable to join subsection II.A.1.b.i of Judge
Hamilton’s opinion, which offers an alternative ground for
holding that USA Funds was prohibited from assessing col-
lection costs against Bible—that is, that the text of the regula-
tions unambiguously supports Bible’s interpretation of the
statutory and regulatory scheme. Instead, I find the regula-
tory landscape sufficiently complex to merit deference to the
agency’s reasonable interpretation.
    In order to bring Bible’s rehabilitation agreement within
the purview of 34 C.F.R. § 682.410(b)(5)(ii)’s prohibition on
the imposition of collection costs, we are necessarily re-
quired to infer that Bible’s rehabilitation agreement qualifies
as a “repayment agreement on terms satisfactory to the
[guaranty] agency.” And while Judge Hamilton assumes
from the outset that “rehabilitation agreement” and “repay-
ment agreement” are overlapping concepts, in my view, this
is no small inferential leap.
   Judge Manion, in his dissent, makes a strong case for the
proposition that the two concepts are separate and distinct,
and thus, that the repayment agreement provisions of
§ 682.410(b)(5)(ii) do not apply to the loan rehabilitation
program described in 34 C.F.R. § 682.405. Indeed, the De-
partment of Education’s website lists “Loan Repayment” and
“Loan Rehabilitation” as independent options for “getting
No. 14-1806                                                   51

your loan out of default.” Fed. Student Aid, U.S. Dep’t of
Educ., Getting out of Default, https://studentaid.ed.gov/sa/
repay-loans/default/get-out (last visited Aug. 5, 2015). More-
over, there is no cross-reference or other textual indication in
the regulations suggesting that the rehabilitation agreements
described in § 682.405 constitute repayment agreements “on
terms satisfactory to the agency” under § 682.410(b)(5)(ii),
such that a rehabilitation agreement might fall within the
scope of § 682.410(b)(5)(ii)’s exception to the general rule that
collection costs will be assessed against borrowers in default.
Rather, the sole reference to collection costs in § 682.405 ap-
pears to assume the assessment of collection costs in the re-
habilitation context. See § 682.405(b)(1)(vi)(B) (explaining
that the guaranty agency must inform a borrower entering
into a rehabilitation agreement “[o]f the amount of any col-
lection costs to be added to the unpaid principal of the loan
when the loan is sold to an eligible lender, which may not
exceed 18.5 percent of the unpaid principal and accrued in-
terest on the loan at the time of the sale”).
    Further, it is unsurprising that a rehabilitation agreement
may not qualify as “satisfactory” to a guarantor. The lan-
guage of § 682.410(b)(5)(ii) suggests that a guaranty agency
retains discretion in determining which terms render a re-
payment agreement “satisfactory.” Under § 682.405, howev-
er, guaranty agencies have almost no discretion in setting the
terms of rehabilitation agreements: the regulation requires
that a borrower’s monthly repayment amount be
“[r]easonable and affordable,” § 682.405(b)(1)(i), and sets
forth specific guidelines to which a guarantor must adhere
in calculating that amount. See § 682.405(b)(1)(iii) (“The
guaranty agency initially considers the borrower’s reasona-
ble and affordable payment amount to be an amount equal
52                                                No. 14-1806

to 15 percent of the amount by which the borrower’s Adjust-
ed Gross Income (AGI) exceeds 150 percent of the poverty
guideline amount applicable to the borrower’s family size
and State, divided by 12, except that if this amount is less
than $5, the borrower’s monthly rehabilitation payment is
$5.”). The regulation also specifies that “[t]he agency may
not impose any other conditions unrelated to the amount or
timing of the rehabilitation payments in the rehabilitation
agreement.” § 682.405(b)(1)(vi). It is therefore no great leap
to conclude that rehabilitation agreements and repayment
agreements “on terms satisfactory to the agency” are mutu-
ally exclusive concepts.
    On the other hand, Judge Hamilton’s position that the re-
habilitation agreements described in § 682.405 are a subset of
the repayment agreements referenced in § 682.410(b)(5)(ii) is
intuitively appealing. After all, just like other forms of loan
repayment, rehabilitation offers borrowers a path back to
good standing, and does not permit them to avoid eventual
repayment in full. See § 682.405(b)(4) (explaining that “[a]n
eligible lender purchasing a rehabilitated loan must establish
a repayment schedule that meets the same requirements that
are applicable to other FFEL Program loans of the same loan
type as the rehabilitated loan”).
   Moreover, I am skeptical of the dissent’s assertion that
the regulations shield from collection costs only those bor-
rowers who agree to immediate repayment of the full out-
standing balance of their defaulted loans. The repayment
agreement provision, § 682.410(b)(5)(ii), was clearly drafted
with the intent to permit borrowers who have lapsed into
default the opportunity to regain good standing and to
avoid many of the adverse consequences—i.e., report to a
No. 14-1806                                                   53

credit bureau and assessment of collection costs—associated
with default. Yet to make that opportunity available only to
those borrowers capable of immediately paying their out-
standing loan balance in full would render this second
chance illusory. Practically speaking, it would be impossible
for the vast majority of borrowers in default—who presum-
ably have defaulted on their loans as a result of their inabil-
ity to make far lower monthly payments—to eliminate the
entirety of their student debt (which could easily reach into
the tens of thousands of dollars) in a single payment. And I
think it unlikely that, in drafting this regulation, the Secre-
tary sought to exclude nearly every borrower in default from
its purview.
    In sum, while I question certain aspects of each of my re-
spected colleagues’ positions, they both offer plausible read-
ings of this complex and ambiguous regulatory scheme. I
therefore believe the appropriate course of action is to accept
the guidance that we sought from the Secretary of Educa-
tion. Under the Supreme Court’s decision in Auer v. Robbins,
519 U.S. 452, 461 (1997), it is generally appropriate to defer to
an agency’s interpretation of its own regulations, even when
that interpretation is informally announced. See Christopher v.
SmithKline Beecham Corp., 132 S. Ct. 2156, 2159 (2012) (“Auer
ordinarily calls for deference to an agency’s interpretation of
its own ambiguous regulation, even when that interpretation
is advanced in a legal brief … .”). Here, the Secretary has un-
equivocally advanced the position that the applicable regula-
tions do not permit a guaranty agency to assess collection
costs against a first-time defaulted borrower who timely en-
ters into a rehabilitation agreement and fully complies with
that agreement. Given the regulations’ lack of clarity with
respect to this issue, I cannot conclude that the Secretary’s
54                                                 No. 14-1806

position is either plainly erroneous or inconsistent with the
regulations. See L.D.G. v. Holder, 744 F.3d 1022, 1029 (7th Cir.
2014). Accordingly, I join that portion of Judge Hamilton’s
analysis that relies on administrative deference. I note, how-
ever, that while the Secretary’s amicus filing has proven
helpful in resolving this dispute, an unambiguous regulato-
ry scheme is preferable to soliciting the agency’s interpretive
guidance. Thus, while I accept the Secretary’s proffered inter-
pretation here, perhaps the Department might consider reex-
amining and revising the language of the regulations.
No. 14-1806                                                   55

    MANION, Circuit Judge, concurring in part and dissenting
in part.
    I agree with the court’s conclusion that Bible’s claims are
not preempted, but I disagree that she pleaded a valid
breach of contract or RICO claim. As a matter of law, United
Student Aid Funds, Inc., did not breach the Master Promis-
sory Note (MPN) and did not commit the fraud upon which
Bible’s RICO claim is predicated. Bible’s entire theory is
erected atop an erroneous equivocation, that the loan reha-
bilitation agreement of 34 C.F.R. § 682.405 is the same as the
repayment agreement of § 682.410. I say Bible’s theory be-
cause it truly is her own contrivance. There is no evidence to
suggest that the Department of Education ever interpreted
the regulations in the manner advanced by Bible prior to our
request for an amicus brief in this case. In fact, the record re-
flects that the Department agreed with USA Funds’ interpre-
tation and had no cause to question USA Funds’ regulatory
compliance, that is, until the Department filed its amicus
brief. Applying the Department’s post hoc rule to USA Funds
is both wrong and unjust. The fraud is on the guarantors
and, because the Department ultimately guarantees the
loans, on the taxpayer. For this and for the detailed reasons
that follow, I respectfully dissent.
   A. Background
    Before setting out my analysis and rebuttal to Bible’s ar-
guments and the court’s opinion, it is important to under-
stand what this case is about and how the court and I came
to disagree. I provide the following background as a means
of presenting the big picture.
56                                                          No. 14-1806

    To obtain a student loan, Bible entered into a loan agree-
ment with Citibank. At some point she quit making pay-
ments. After about nine months of nonpayment (270 days),
Citibank declared her loan in default. USA Funds, the guar-
antor, stepped forward and “bought” the loan. USA Funds’
agent, General Revenue Corp. (GRC), offered Bible several
options.1 The first option was to pay the loan in full. Unable
to pay the full amount, she declined that option. The second
option, which was offered at the same time, would have giv-
en her a new payment plan that perhaps would have low-
ered her monthly payments and stretched out the repayment
period, or she could have negotiated a lower amount. Had
she exercised the first option, she would not have incurred
costs nor would have the credit reporting agencies been noti-
fied of her default. Had she exercised the second option, she
would have incurred costs, but would have avoided notifica-
tion to the credit reporting agencies of her default. As with
the first option, Bible did not have the wherewithal to exer-
cise the second option. The third option, which was offered
at the same time as the first two that she refused, was to en-
ter into a rehabilitation agreement whereby USA Funds
would sell her loans to a new lender who would establish a
new repayment schedule, her default would be eliminated,
and her costs capped at 18.5% of her outstanding balance.
    Bible and her lawyers chose the third option and entered
into negotiations for a loan rehabilitation agreement. After

     1 I am referring to the options GRC provided to rectify Bible’s de-
fault. GRC also offered Bible opportunities to review the records pertain-
ing to her loans and to request an administrative review of the legal en-
forceability or past-due status of her loans. She did not take advantage of
these opportunities, and they are not the subject of this litigation.
No. 14-1806                                                 57

several days of negotiations, Bible agreed to enter into the
loan rehabilitation process by signing an agreement to do so.
At the time of signing, Bible had accrued no collection costs.
That is why the chart in the court’s opinion shows zero costs.
But from that time forward, costs would accrue.
    To show her good-faith intention to rehabilitate her loans,
Bible agreed to make monthly payments in the amount of
$50.00 for a period of nine or ten months. At the end of that
period, she would have shown her good faith and willing-
ness to abide by a new repayment schedule. It should be
noted that the $50.00 payments were by no means sufficient
to cover the amount due each month. Rather, the payments
could only cover about one-half of the interest that accrued
over the rehabilitation period. After the nine- or ten-month
period of good-faith payments, Bible was eligible for a new
loan repayment schedule for an amount that included out-
standing principal and accumulated interest and costs. The
latter amounts would be capitalized into the new loan total
when USA Funds sold the loan to a new lender. As best we
know at this juncture, Bible’s loans were sold to a new lender
and, according to the court, she is current on payments un-
der the new schedule.
   The dispute in this case is confined to the issue of costs.
As indicated above, when she entered into the rehabilitation
agreement no costs had yet accrued. However, from that
time forward, costs accrued. Presumably these costs resulted
from USA Funds “buying” Bible’s loans from Citibank, cor-
responding and negotiating with Bible over several days,
preparing her loans for resale, finding a buyer, and finalizing
the sale of her loans. Presumably, this process occurred dur-
58                                                  No. 14-1806

ing the nine or ten months that Bible was making the good-
faith payments of $50.00.
    Bible now insists that USA Funds should not have
charged her costs for this process. But that flies in the face of
the statute, which expressly permits costs so long as they are
limited to 18.5% of the new loan total. She relies instead on a
novel theory that would grant her a complete exemption
from costs despite the plain language of the statute. Based
on her interpretation, Bible claims that USA Funds breached
her loan contract and committed fraud sufficient to violate
the RICO Act. But as I will demonstrate in detail below, there
was no breach of contract and absolutely no fraud commit-
ted when she accepted loan rehabilitation. There is certainly
no RICO violation. The court implies this by its very mild
recognition of the RICO claim simply because it was recited
in the complaint.
    The only saving grace that the court falls back on, if there
is such a thing in this case, is that the Department has sub-
mitted, at the court’s invitation, an amicus brief. But that
brief establishes a brand new interpretation that was not
present when the events of this case unfolded. Aside from
the fact that the law is not ambiguous and the Department’s
interpretation is unreasonable, the fact that there was no no-
tice and opportunity to oppose the Department’s substantial
“revision” gives us a very good reason not to defer to the
Department’s interpretation.
     B. Bible’s theory relies on two fundamental errors.
   With the big picture now before us, I start my analysis
with the Department’s new interpretation, that is, Bible’s
theory. Section 682.410(b)(2) requires the guarantor to
No. 14-1806                                                   59

“charge a borrower an amount equal to reasonable costs in-
curred by the agency in collecting a loan.” Bible’s interpreta-
tion, now endorsed by the Department, is that a guarantor
must charge a borrower “reasonable costs” except when the
borrower agrees to loan rehabilitation within 60 days of be-
ing offered the opportunity and honors the agreement. Bible
relies on the regulation’s requirement that the guarantor not
charge collection costs until it offers the borrower certain
opportunities, chief among them the “opportunity to enter
into a repayment agreement on terms satisfactory to the
agency.” § 682.410(b)(5)(ii)(D).
    There are two fundamental errors with Bible’s theory.
First, the regulation’s waiting period for charging costs ap-
plies to a different kind of repayment agreement than a re-
habilitation agreement. Second, the regulation does not con-
tain an exception to charging costs for any kind of repay-
ment agreement, let alone a rehabilitation agreement. Only
by relying on these errors is it possible for Bible to argue that
USA Funds’ assessment of collection costs was a breach of
contract and that USA Funds’ letter reporting Bible’s current
collections costs as zero was fraudulent.
    The correct interpretation is this: the rehabilitation
agreement is not the same as the “repayment agreement on
terms satisfactory to the agency” mentioned in the adminis-
trative regulation. The two are separate, and the regulations
governing each are also separate, even though the guaran-
tors’ current practice is to offer a defaulted borrower a reha-
bilitation agreement at the same time they offer her a re-
payment agreement. To avoid collection costs and a report of
default, the borrower must choose the repayment agreement
and either pay her balance in full or come to “terms satisfac-
60                                                 No. 14-1806

tory to the agency” that do not include collection costs. The
alternative rehabilitation agreement is not a “repayment
agreement on terms satisfactory to the agency,” and accept-
ing it does not allow the borrower to escape collection costs
and default reporting. Rather, by agreeing to loan rehabilita-
tion instead of loan repayment the borrower incurs costs and
her default is reported, but her costs will be capped at 18.5%
and her default will be cleared from her credit report if she
successfully completes loan rehabilitation.
     C. Loan repayment, not loan rehabilitation, offers de-
        faulted borrowers the opportunity to avoid collec-
        tion costs and default reporting.
    Although Bible accepted neither loan repayment in full
nor repayment through another agreement, it is necessary to
review how loan repayment works in order to understand
Bible’s errors. Once a borrower is in default, by failing to
make a monthly payment for nine months (270 days), 20
U.S.C. § 1085(l); 34 C.F.R. § 682.200(b)(1), the lender hands
the loan over to the guarantor who pays the default claim.
Under 34 C.F.R. § 682.410, the guarantor then has 45 days to
provide the borrower with a written notice and opportuni-
ties to inspect the loan records, request an administrative re-
view, and “enter into a repayment agreement on terms satis-
factory to the agency.” § 682.410(b)(5)(ii) & (6)(ii). The guar-
antor may not assess any collection costs against the bor-
rower or report the borrower’s default to the credit reporting
agencies until it provides the borrower with the notice and
opportunities. § 682.410(b)(5)(ii). The notice must, among
other things, “[d]emand that the borrower immediately
begin repayment of the loan,” explain “that all costs incurred
to collect the loan will be charged to the borrower,” and ex-
No. 14-1806                                                    61

plain the opportunity “to reach an agreement on repayment
terms satisfactory to the agency to prevent the agency from
reporting the loan as defaulted to consumer reporting agen-
cies.” § 682.410(b)(5)(vi)(D), (E) & (G). Sixty days after the
guarantor has sent the notice, if the borrower has not
“reach[ed] an agreement on repayment terms satisfactory to
the agency to prevent the agency from reporting the loan as
defaulted,” then the guarantor “shall” report the borrower’s
default to all national credit reporting agencies.
§ 682.410(b)(5)(i); cf. 20 U.S.C. § 1080a(c)(4) (requiring only a
30-day wait before reporting default).
    If the borrower agrees to a repayment agreement suffi-
ciently acceptable to the guarantor for the guarantor to not
report the default, then the guarantor will not report the bor-
rower’s default to all the national credit reporting agencies.
34 C.F.R. § 682.410(b)(5)(vi)(G); 20 U.S.C. § 1080a(c)( 4). Al-
though the borrower may avoid the report of her default in
this way, she is still in default and therefore must pay collec-
tion costs: “a borrower who has defaulted on a loan made
under this subchapter … shall be required to pay … reason-
able collection costs[.]” 20 U.S.C. § 1091a(b)(1). So, although
the guarantor is prevented from charging collection costs be-
fore it provides the notice and opportunities, 34 C.F.R.
§ 682.410(b)(5)(ii), it is required to charge collection costs af-
terwards. Again, “the guaranty agency shall charge a bor-
rower an amount equal to reasonable costs incurred by the
agency in collecting.” § 682.410(b)(2). That said, the guaran-
tor has the discretion to not charge collection costs under a
repayment agreement because the repayment agreement is
“on terms satisfactory to the agency.” § 682.410(b)(5)(ii)(D).
Thus, the borrower may avoid collection costs either by en-
suring that the guarantor does not incur collection costs, that
62                                                 No. 14-1806

is, by paying the loan balance in full upon the guarantor’s
demand for payment, or by coming to “terms satisfactory to
the agency” that do not include collection costs. Id.
    Obviously, a “repayment agreement on terms satisfactory
to the agency” requires, at most, payment in full of the out-
standing balance and, at least, terms that actually stand a
chance of paying off the loan. § 682.410(b)(5)(ii)(D). If the
borrower pays her outstanding balance in full, then she
avoids the report of default and collection costs. If she is un-
able to pay in full, but comes to terms that do not include
collection costs, then she also avoids the report of default
and collection costs. If she cannot reach such favorable terms
but can still reach a repayment agreement, then she avoids
the report of default but not collection costs. Finally, if the
borrower declines to accept a repayment agreement (per-
haps she cannot afford one), then, according to the regula-
tions, the guarantor reports the borrower’s default to the na-
tional credit reporting agencies and charges collection costs.
§ 682.410(b)(5)(i); § 682.410(b)(2).
     D. Loan rehabilitation is a separate opportunity, after a
        borrower has rejected loan repayment, to remove
        the loan from default status and erase the report of
        default.
    Yet, for a borrower like Bible who cannot afford repay-
ment there is a way out: loan rehabilitation. Loan rehabilita-
tion is a separate program, § 682.405, for those borrowers
who are unable to meet the stricter repayment obligations of
§ 682.410. It requires only payments that the borrower can
afford; it removes the loan from collection, clears the default
from the borrower’s credit history, and limits collection costs
to 18.5% (now 16%) of the loan’s outstanding balance and
No. 14-1806                                                   63

accrued interest. 20 U.S.C § 1078-6; 34 C.F.R. § 682.405. It is a
lengthy process and takes as long as it took to get into de-
fault (nine months) but it allows the borrower time to get
back on her feet. Id. However, loan rehabilitation will incur
the report of default and collection costs. This is because it is
only available to a borrower whose default has been (or will
be) reported and whose loan is in collection, in other words,
a borrower who has rejected a repayment agreement satis-
factory to the guarantor.
     While the post-2006 regulations may describe loan reha-
bilitation as a type of monthly repayment agreement (ex-
plained below), it is not “a repayment agreement on terms
satisfactory to the agency” because it is not a repayment
agreement that can repay the loan. § 682.410(b)(5)(ii)(D).
Loan rehabilitation requires that the borrower voluntarily
make nine out of ten monthly payments (which can be as
little as $5.00) to demonstrate the borrower’s good-faith in-
tention to repay the loan. § 682.405(b)(1)(iii). The nine token
payments alone are insufficient to rehabilitate the loan, be-
cause the loan must be sold to a new lender for it to be con-
sidered rehabilitated. § 682.405(a)(2)(ii). Only after the loan
is sold to a new lender who establishes a new repayment
schedule is the loan rehabilitated and back in a standard re-
payment status. § 682.405(b)(4). Thus, because a loan in the
process of rehabilitation is still in default and under collec-
tion until it is sold to a new lender, “[a] guaranty agency
may charge the borrower and retain collection costs in an
amount not to exceed 18.5 percent of the outstanding princi-
pal and interest at the time of sale of a loan rehabilitated[.]”
20 U.S.C. § 1078-6(a)(1)(C) (effective July 1, 2006).
64                                                No. 14-1806

     E. Loan rehabilitation is not loan repayment.
    Central to Bible’s theory is her claim that the rehabilita-
tion agreement of 34 C.F.R. § 682.405 is the repayment
agreement in 34 C.F.R. § 682.410(b)(5)(ii)(D). It is not. Al-
though § 682.405(a)(2) states that “[a] loan is considered to
be rehabilitated only after [t]he borrower has made and the
guaranty agency has received nine of the ten qualifying
payments required under a monthly repayment agreement,”
this is merely a description, not a definition. It does not al-
low the term “repayment agreement” in § 682.410 to be re-
placed with “rehabilitation agreement.” A rehabilitation
agreement may be a type of repayment agreement, but it is
not the “repayment agreement on terms satisfactory to the
agency” required by § 682.410(b)(5)(ii)(D).
    There are several reasons why the two agreements are
not the same. First, it is apparent from their differing levels
of discretion. Section 682.410 requires that the guarantor of-
fer a repayment agreement “on terms satisfactory to the
[guaranty] agency.” § 682.410(b)(5)(ii)(D). Quite obviously,
whether the terms of a particular agreement are satisfactory
to the guarantor is largely a matter of the guarantor’s discre-
tion. The Department agrees with this. Gov’t. Amicus Br. 8,
15. On the other hand, the terms of a rehabilitation agree-
ment are mandated by § 682.405(b)(1). The amount and tim-
ing of each payment are defined by the regulation, and
“[t]he agency may not impose any other conditions unrelat-
ed to the amount or timing of the rehabilitation payments in
the rehabilitation agreement.” § 682.405(b)(1)(i)–(vi). Accord-
ing to Bible, every rehabilitation agreement must be a re-
payment agreement satisfactory to the guarantor because the
guarantor accepts each agreement. But even that is mandat-
No. 14-1806                                                  65

ed by the regulation: “A guaranty agency … must enter into
a loan rehabilitation agreement with the Secretary. The guar-
anty agency must establish a loan rehabilitation program for
all borrowers with an enforceable promissory note for the
purpose     of     rehabilitating defaulted     loans    … .”
§ 682.405(a)(1).
    Second, the history of the regulations also demonstrates
that they are not the same. Section 682.405(a)(2) did not de-
scribe the rehabilitation agreement as a “repayment agree-
ment” until September 8, 2006, but § 682.410 always used the
term.
    Third, a guarantor is prevented from both charging collec-
tion costs and reporting the default until it provides the bor-
rower with the opportunity to enter into a repayment
agreement satisfactory to the guarantor. § 682.410(b)(5)(ii). If
a rehabilitation agreement necessarily is a repayment
agreement satisfactory to guarantor, so that the guarantor is
prevented from charging collection costs, then the guarantor
would also be prevented from reporting the default. Yet, one
of the primary purposes of loan rehabilitation is to clear the
report of default from the borrower’s credit history, includ-
ing the default reported by the guarantor, which the guaran-
tor must do once loan rehabilitation is complete.
§ 682.405(b)(3)(i); 20 U.S.C. § 1078-6(a)(1)(C). If timely ac-
ceptance of a rehabilitation agreement prevented collection
costs, then it should also prevent default reporting. But if it
prevented default reporting, then one of the primary pur-
poses of loan rehabilitation would be pointless. Obviously,
Bible does not argue that the timely acceptance of loan reha-
bilitation prevents the report of default because it would be
absurd.
66                                                    No. 14-1806

    Fourth, it is unreasonable to hold that a rehabilitation
agreement is “satisfactory to the agency” for actual repay-
ment of the loan. Id. The loan rehabilitation’s “monthly re-
payment agreement” is only part of the agreement. The nine
token payments are used to prove the borrower’s good-faith
intention to repay the loan once it is purchased by a new
lender, not to repay the loan to the guarantor. It is the new
lender that sets the actual repayment schedule that will re-
pay the rehabilitated loan. 34 C.F.R. § 682.405(a)(2)(ii), (b)(4).
In Bible’s case the loan rehabilitation payments did not even
cover the interest accruing on her loans.
     F. The Barnes/Black litigation does not support Bible’s
        theory that loan rehabilitation is loan repayment.
    The Department’s brief in Ed. Credit Mgmt. Corp. v. Barnes,
318 B.R. 482 (S.D. Ind. 2004), aff’d sub nom. Black v. Educ. Cred-
it Mgmt. Corp., 459 F.3d 796 (7th Cir. 2006), does not support
Bible’s theory. Bible misrepresents the Department’s brief in
Barnes just as she does the regulation’s description of a reha-
bilitation agreement. In Barnes, the Department intervened
in a bankruptcy proceeding to defend 34 C.F.R.
§ 682.410(b)(2), the section of the regulation that allows a
guaranty agency to charge collection costs based on a flat-
rate formula. The Department was defending the regulation
from the bankruptcy trustee’s challenge that the use of the
flat-rate formula for charging collection costs was arbitrary
and capricious. Bible relies on a particular passage from the
Department’s brief:
        Department rules require the guarantor who
        acquires a loan by reason of the default of the
        borrower ( … ) to charge collection costs only
        after providing the debtor an opportunity to contest
No. 14-1806                                                 67

      the debt and to enter into a repayment arrangement
      for the debt. 34 C.F.R. § 682.410(b)(5). The guar-
      antor, moreover is not bound by the original
      loan repayment schedule, but can agree to any
      repayment arrangement that debtor can afford,
      regardless of the amount of time needed to pay
      the debt off under that arrangement. See 20
      U.S.C. § 1078-6(a) (defaulter may have loan re-
      habilitated and default status cured after 12 in-
      stallment payments to the guarantor); § 1078-
      6(b) (defaulter may regain eligibility for new
      student aid after six reasonable and affordable
      payments based on the borrower’s total finan-
      cial circumstances).
          The regulations therefore direct guarantors
      to charge collection costs only to those debtors
      who cause the guarantor to incur collection
      costs by failing to agree promptly to repay vol-
      untarily.
Appellant’s App. 55 (emphasis added; last emphasis in orig-
inal).
    As part of its much larger effort to prove that the regula-
tion’s use of a flat-rate formula was reasonable, the Depart-
ment briefly explained that the same regulation allowed bor-
rowers to avoid collection costs if they promptly agreed to
repay voluntarily. In its explanation, the Department was
clearly referring to the repayment agreement of § 682.410,
not the rehabilitation agreement of § 682.405, as is evident
from the brief’s straightforward citation to § 682.410(b)(5).
The Department went on to explain that the guarantor is not
bound in a repayment agreement by the original repayment
68                                                         No. 14-1806

schedule. According to Bible, because the Department sup-
ported this subsequent proposition with a citation to the
loan rehabilitation statute, 20 U.S.C. § 1078-6, the Depart-
ment was somehow explaining that a guarantor is prevented
from charging collection costs if a borrower timely accepts a
rehabilitation agreement. It was not.2
    When we affirmed Barnes, we held that the Higher Edu-
cation Act (HEA) expressly allows a guarantor to impose
collection costs on rehabilitated loans:
         Nothing in the HEA prohibits a guaranty agen-
         cy from assessing collection costs as a flat-rate
         percentage upon rehabilitation. To the contrary,
         the statute explicitly provides that “[a] guaran-
         ty agency may charge the borrower and retain
         collection costs in an amount not to exceed 18.5
         percent of the outstanding principal and inter-
         est at the time of sale of a loan rehabilitated.”
         20 U.S.C. § 1078–6(a)(1)(C). Thus, even if
         Barnes’s loans could have been rehabilitated
         through his Chapter 13 proceeding, the 18.06%
         that ECMC charged Barnes for collection costs

     2 The Department cited § 1078-6 with a “see” introductory signal,
which is used when “there is an inferential step between the authority
cited and the proposition it supports.” THE BLUE BOOK: A UNIFORM
SYSTEM OF CITATION 58 (Columbia Law Review Ass’n et al. eds., 20th ed.
2015). The citation’s inferential step is that repayment agreements are
like rehabilitation agreements in that they are not bound by the original
repayment schedule. Whereas, Bible would have the inferential step be
that rehabilitation agreements are like repayment agreements in that the
borrower can avoid collection costs. For that to be the case, the citation
would have had to support the sentence before the one it did.
No. 14-1806                                                69

      falls within the bounds of what is allowed un-
      der the HEA’s loan rehabilitation provisions.
Black, 459 F.3d at 803. In so holding we did not disagree with
the Department’s interpretation of its rules. On the contrary,
we agreed with the Department, which then told us in its
brief:
          Furthermore, the Trustee’s argument rests
      upon a mistaken assumption that rehabilitation
      would have enabled Barnes to pay lower col-
      lection costs. The Trustee suggests that, if
      Barnes has rehabilitated his loan, ECMC could
      not have assessed collection costs at a flat rate.
      According to the Trustee, ECMC could have
      recovered only the actual costs that it incurred
      in collecting Barnes’ student loan during the
      period leading up to rehabilitation.
          But the regulation governing rehabilitation
      plainly allows a guaranty agency to assess col-
      lection costs at a flat rate as long as the rate
      does “not exceed” 18.5 percent. See 34 C.F.R. §
      682.405(b)(1)(iv).
Br. for Appellee Secretary of United States Department of
Education, Black, 459 F.3d 796, 2005 WL 3738503, at 33 (cita-
tion omitted). Neither we nor the Department recognized a
special exception that would have prevented a guarantor
from charging a borrower collection costs on rehabilitated
loans. We plainly said that “[n]othing in the HEA prohibits a
guaranty agency from assessing collection costs as a flat-rate
percentage upon rehabilitation.” Black, 459 F.3d at 803 (em-
phasis added). Nothing in the Barnes/Black litigation sup-
70                                                                No. 14-1806

ports the theory that Bible, and now the Department, ad-
vances.3

3 In its brief before the district court in Barnes, the Department made
clear that guarantors must charge collection costs or those costs will be
borne by the taxpayer:
             To restate the problem which the regulation ad-
        dresses: the student loan guarantor must recover enough
        to meet its collection costs, or those costs will be charged
        to the taxpayer—exactly what §484A [20 U.S.C. 1091a(b)]
        was intended to prevent.
Appellant’s App. 66. The Department also disagreed that collection costs
assessed by the flat-rate formula could be unreasonable if the costs are in
excess of actual costs. Its argument concerned the costs incurred by a
guarantor who uses a collection contractor, such as USA Funds used
GRC:
             A debtor may object that a contractor incurred only
        modest costs in generating a particular payment, and
        that the contingent fee earned by the contractor for
        payment exceeds the “actual costs” of collecting that
        amount. Such an objection misses the point: the creditor
        incurs a negotiated contingent fee owed to the contractor
        for that payment, regardless of the effort needed by the
        contractor to secure that particular payment. The credi-
        tor must pay the contractor, and that cost is a real ex-
        pense for the guarantor, and one incurred solely because
        the debtor previously has failed to pay the debt. Because
        the guarantor incurs that fee, the guarantor can, and
        must, pass that real cost on to the debtor. Debtors whose
        loans have been referred by guarantors to contingent fee con-
        tractors for collection action have no basis for objecting to lia-
        bility for a contingent fee charged as a “flat rate” percentage of
        the payment recovered.
Appellant’s App. 60 (emphasis added).
No. 14-1806                                                   71

   G. The regulation’s collection-cost provisions contain
      no exemption for rehabilitated loans.
    Bible’s theory is contrary to the plain language of the
statutes and regulations because nowhere do the statutes
and regulations contemplate that “reasonable costs” equals
“no costs” for borrowers who timely enter into a rehabilita-
tion agreement. See 20 U.S.C. §§ 1078-6, 1091a; 34 C.F.R.
§§ 682.405, 682.410. That is why we held in Black that
“[n]othing in the HEA prohibits a guaranty agency from as-
sessing collection costs as a flat-rate percentage upon reha-
bilitation.” Black, 459 F.3d at 803 (emphasis added). The reg-
ulation’s only exception for collection costs refers to limiting
collection costs to 18.5% on rehabilitated and consolidated
loans. § 682.410(b)(ii)(2) (“Except as provided in §§
682.401(b)(18)(i) and 682.405(b)(1)(iv)(B)”). Plainly, collection
costs cannot be limited on rehabilitated loans unless they are
first allowed.
    Bible’s theory tries to explain this incongruity by saying
that the regulations’ references to collection costs refer to
those borrowers who fail to timely agree to loan rehabilita-
tion, or fail to honor the agreement. This cannot be the case.
First, the regulations’ references to collection costs do not re-
fer to a borrower who fails to honor the rehabilitation
agreement because the limitation applies “at the time of the
loan sale,” 20 U.S.C. § 1078 6(a)(1)(D(i)(II)(aa), and the loan
cannot be sold unless the borrower honors the rehabilitation
agreement, § 1078-6(a)(1)(A). Second, and more importantly,
the references do not refer to a borrower who fails to agree
to loan rehabilitation within the 60-day deadline because
there is no deadline for loan rehabilitation.
72                                                 No. 14-1806

    The regulatory scheme does not require that a guarantor
offer loan rehabilitation, only that the guarantor have a pro-
gram where “[a] borrower may request rehabilitation of the
borrower’s defaulted loan held by the guaranty agency.”
§ 682.405(b)(1) (emphasis added). It was not until 2010 that
the regulation was amended to require guarantors to
“[i]nform the borrower of the options that are available to the
borrower to remove the loan from default, including an ex-
planation of the fees and conditions associated with each op-
tion.” § 682.410(b)(5)(vi)(M) (effective July 1, 2010; emphasis
added). When the Department finalized the regulations in
2006, they said, “We believe the regulations accurately reflect
the HEA and Congressional intent. Borrowers must request, or
in some fashion initiate, loan rehabilitation so that the period
during which the 9 qualifying payments must be made is
clear for both the guaranty agency and the borrower.” 71
Fed. Reg. 64389 (Nov. 1, 2006) (emphasis added).
    Thus, the regulations do not require a guarantor to offer
rehabilitation, but merely to make rehabilitation available. If
there is no requirement to offer rehabilitation, and therefore
no deadline, then there is nothing to gauge whether a bor-
rower has “timely” or “promptly” entered into a rehabilita-
tion agreement. This is the whole reason for Bible’s equivoca-
tion between a rehabilitation agreement and a repayment
agreement satisfactory to the guarantor. Bible needs the re-
payment agreement’s deadline to create the special category
of borrowers who “promptly” enter into rehabilitation
agreements. But as I have explained at length above, the re-
habilitation agreement of § 682.405 is not a repayment
agreement satisfactory to the guarantor of § 682.410. Without
Bible’s fictitious special category, the regulations allow costs
on rehabilitated loans without exception.
No. 14-1806                                                73

    Simply put, nowhere do the statutes or regulations say
that collection costs may be assessed except when, or unless,
the borrower timely agrees to loan rehabilitation and honors
that agreement. Bible’s interpretation would turn loan reha-
bilitation into a kind of at-will deferment. A borrower could
make no payment on her loans for nine months and then
make only token payments for another nine months, all
without collection costs, only to have her loan purchased by
a new lender and the default erased from her record. This
was not what Congress intended. As explained by the De-
partment in 2006:
      We believe the regulations accurately reflect
      the HEA and Congressional intent. … Addi-
      tionally, a reasonable and affordable payment
      amount needs to be established, and the conse-
      quences of loan rehabilitation, such as the addi-
      tion of collection costs to the rehabilitated loan
      amount, the post-rehabilitation payment period
      and the likely increased payment amount,
      need to be explained to the borrower.
71 Fed. Reg. 64389 (emphasis added).
   H. Bible takes advantage of the guarantors’ practice of
      offering loan rehabilitation at the same time as loan
      repayment.
    Bible obfuscates the regulations in another way. She takes
advantage of the fact that USA Funds offered her loan reha-
bilitation at the same time as it offered her loan repayment.
The regulations do not require that the guarantor immedi-
ately offer a defaulted borrower loan rehabilitation. Never-
theless, the current practice—at least as practiced by USA
74                                                  No. 14-1806

Funds in this case—appears to be for the guarantor to offer
loan rehabilitation at the same time it offers loan repayment.
The Department endorses this method of giving the borrow-
er a choice. Its website states:
       You have several options for getting your loan
       out of default. These include
          • loan repayment
          • loan rehabilitation, and
          • loan consolidation.
Addendum to Appellee’s Response to Gov’t Amicus Br. The
Department clearly describes loan repayment and loan reha-
bilitation as separate options and gives the impression that
they are options provided concurrently. (Loan consolidation
is also a separate option, but is not at issue in this case.) The
Department’s description of loan repayment does not men-
tion collection costs, whereas its description of loan rehabili-
tation does. Id. (“Outstanding collection costs may be added
to the principal balance.”). The Department’s description of
loan rehabilitation includes collections costs because the
regulations allow them. 71 Fed. Reg. 64389 (“the conse-
quences of loan rehabilitation, such as the addition of collec-
tion costs to the rehabilitated loan amount … need to be ex-
plained to the borrower”).
    When a guarantor offers loan rehabilitation at the same
time as loan repayment there is an incentive for the borrower
to choose loan rehabilitation because it is less expensive in
the short term. But by choosing loan rehabilitation, the bor-
rower necessarily rejects loan repayment. Because the bor-
rower rejects loan repayment, the guarantor must report the
default and assess collection costs. And, remember that the
No. 14-1806                                                   75

guarantor is prohibited from charging collection costs before
offering loan repayment. So, when the guarantor offers loan
rehabilitation at the same time as loan repayment it is not
allowed to assess collection costs until the borrower chooses
loan rehabilitation, thereby rejecting loan repayment. If the
borrower has not previously defaulted, then collection costs
will be zero when loan rehabilitation is offered.
    This practice is entirely permissible under the regulations
as long as the guarantor meets the separate requirements for
each option. Borrowers are not harmed by the practice, so
long as they receive the necessary warnings regarding collec-
tion costs and other consequences. As can be seen from an
examination of GRC’s correspondence with Bible, this was
the practice followed here.
   I. Bible fails to state a claim for either breach of con-
      tract or RICO because USA Funds and GRC com-
      plied with the regulations.
    The default letter sent by GRC to Bible stated: “Without a
dispute, failure to pay the account in full, agree to a satisfac-
tory repayment arrangement, or utilize another recovery op-
tion as outlined on the attached insert, may result in addi-
tional collection efforts.” Appellant’s App. 131. At the top of
the attached insert was a call-out box which stated in bold
type: “If you are unable to pay in full the outstanding bal-
ance on your defaulted loan(s), call a representative to find
out which of the following additional options you qualify
for.” Id. at 133. The insert then listed three additional op-
tions: 1) “Alternative Payment Arrangements,” 2) “Loan Re-
habilitation,” and 3) “Loan Consolidation.” Id.
76                                                        No. 14-1806

    The first option, “to pay in full the outstanding balance
on [the] defaulted the loan(s)” and the additional option,
“Alternative Payment Arrangements,” were both the “re-
payment agreement on terms satisfactory to the agency” of
§ 682.410. By paying the outstanding balance in full, Bible
would have avoided collection costs and the report of de-
fault.4 By choosing “Alternative Payment Arrangements,”
Bible would have avoided the default but not collection
costs. USA Funds’ description of the “Alternative Payment
Arrangements” stated that “[a] portion of each payment re-
ceived from you will be allocated to pay collection costs.” Id.
But Bible chose neither of those options. Instead of choosing
loan repayment, Bible chose loan rehabilitation, which USA
Funds described as “the opportunity to resolve a loan de-
fault and improve your credit record by removing the guar-
antors’ report of your loan default.” Id. GRC also informed
Bible that “[a]s part of your eligibility for loan rehabilitation, you
will be assessed collection costs at a reduced rate of 18.5% of
the outstanding balance at the time your loan is purchased
by an eligible lender, and the purchasing lender may add
these costs to your outstanding loan principal.” Id. (empha-
sis added). By choosing loan rehabilitation Bible rejected
loan repayment, thereby incurring the collection costs per-
mitted under the statutes and regulations.

     4Bible’s MPN included an acceleration clause that made the entire
unpaid balance of Bible’s loan immediately due and payable in the event
of default. Appellant’s App. 122. It also states that “the guarantor may
purchase [her] loans and capitalize all then-outstanding interest into a
new principal balance, and collection fees will become immediately due
and payable.” Id.
No. 14-1806                                                  77

    Both the default letter and the loan rehabilitation applica-
tion letter listed Bible’s current collection-cost balance on
each of her four loans as zero because it was. Appellant’s
App. 132, 137. USA Funds was prohibited from charging col-
lection costs until Bible acted on its offer of loan repayment,
or the offer expired. 34 C.F.R. § 682.410(b)(5)(ii). Had Bible
paid her account in full she would have avoided collection
costs, but she did not, she chose loan rehabilitation. When
she chose loan rehabilitation she rejected loan repayment
and collection costs began accruing. By choosing loan reha-
bilitation Bible agreed “that the lender may capitalize collec-
tion costs of 18.5% of the outstanding principal and accrued
interest upon rehabilitation of my loan(s).” Appellant’s App.
139.
    USA Funds abided by the statutes and regulations. USA
Funds neither breached the contract nor committed fraud.
For this reason, Bible’s breach of contract claim and RICO
claim should be dismissed.
   J. We cannot give deference to the Department’s inter-
      pretation because the statutes and regulations un-
      ambiguously allow collection costs and because the
      Department’s interpretation is unreasonable, incon-
      sistent with prior interpretations, and without warn-
      ing.
    The Department—in response to our request for an ami-
cus brief—claims that it has always interpreted its regula-
tions to provide an exception to collection costs when a bor-
rower promptly enters into a rehabilitation agreement and
complies with that agreement. It also claims that its interpre-
tation deserves deference under Chevron, U.S.A., Inc. v. Natu-
78                                                   No. 14-1806

ral Res. Def. Council, Inc., 467 U.S. 837 (1984), and Auer v. Rob-
bins, 519 U.S. 452 (1997).
    The Department’s interpretation is not entitled to defer-
ence. First, Congress may have left it up to the Department
to define “reasonable collection costs,” but the Department
has already clearly defined the term, 34 C.F.R.
§§ 682.410(b)(2)(i), 682.405(b)(1)(vi)(B), and we need look no
further. The regulations define “reasonable collections costs”
with a flat-rate formula that must be capped at 18.5% of the
principal and accrued interest for rehabilitated loans. Id. See
also Department’s letter to guaranty agency directors, infra at
79. The definition the Department now advocates does not
comport with those regulations. Instead, the Department’s
interpretation amounts to a new rule that determines when
costs will be charged for rehabilitated loans, not what those
costs will be. That was not a gap “explicitly left [] for the
agency to fill.” Chevron, 467 U.S. at 843. Congress stated
quite explicitly that a guarantor may charge the borrower
collection costs on a rehabilitated loan. 20 U.S.C. § 1078-
6(a)(1)(D)(i)(II). We are not allowed “to permit the agency,
under the guise of interpreting a regulation, to create de facto
a new regulation.” Christensen v. Harris Cnty., 529 U.S. 576,
588 (2000). Because the regulation is not ambiguous regard-
ing collection costs for rehabilitated loans, and because the
Department’s interpretation is plainly erroneous and incon-
sistent with the regulation, it is not entitled to deference. Id.;
Auer, 519 U.S. at 461.
    Moreover, the Department’s amicus brief demonstrates
that its interpretation is entirely new and inconsistent with
its prior interpretations. See Thomas Jefferson Univ. v. Shalala,
512 U.S. 504, 515 (1994) (“an agency’s interpretation of a
No. 14-1806                                                   79

statute or regulation that conflicts with a prior interpretation
is entitled to considerably less deference than a consistently
held agency view” (quotation marks omitted)). The Depart-
ment’s reasoning appears to be taken wholesale from Bible’s
briefs with supporting material that actually undermines its
case. There is nothing in the record that demonstrates that
the concept existed prior to Bible’s attorneys filing this class
action. (As I explained above, the Department’s brief in
Barnes did not advocate the position it now holds.)
    In an effort to provide some record that the Department
developed this interpretation before Bible’s lawsuit, the De-
partment provided two letters: a 1994 general letter to the
directors of guaranty agencies and a 1997 letter to the vice
president of Texas Guaranteed Student Loan Corporation.
Although the excerpts are long, I include them to show how
unreasonable and inconsistent the Department’s interpreta-
tion is. From the 1994 general letter addressed to the guaran-
ty agency directors:
       [W]e have concluded that the amount of the
       collection costs currently assessed borrowers as
       reasonable under 34 CFR 682.410(b)(2) is not
       reasonable when the borrower has shown the
       initiative to address the default through one of
       these two programs [loan rehabilitation and
       loan consolidation]. Therefore, the Department
       has decided to modify its earlier policy guid-
       ance to restrict the amount of collection costs that
       will be considered “reasonable” under these circum-
       stances to be an amount that does not exceed 18.5
       percent of the outstanding amount of principal and
       accrued interest on the loan at the time the agency
80                                                    No. 14-1806

       arranges the lender purchase to rehabilitate the loan
       or certifies the pay-off amount to the consoli-
       dating lender. This percentage is consistent
       with the percentage a guaranty agency is al-
       lowed to retain under the loan rehabilitation
       program at the time of lender purchase.
Gov’t Amicus Br. 3a (emphasis added). This letter contains
no mention of an exception for borrowers who promptly
agree to rehabilitation, and it explicitly states that collection
costs on rehabilitated loans that do not exceed 18.5% of the
outstanding balance and accrued interest are “reasonable.”
    Now, from the 1997 letter, which the Department sent to
the loan corporation’s vice president in response to his ques-
tion concerning collection costs for loan repayment agree-
ments under § 682.410(b)(5)(ii)(D):
       The Department agrees with your interpreta-
       tion of 34 CFR 682.410(b)(5)(ii)(D) and its inter-
       action with §682.410(b)(2)(i). This provision of
       the regulations provides the borrower an op-
       portunity to enter into a satisfactory repayment
       agreement before the agency either reports the
       default to a credit bureau or assesses collec-
       tions costs against the borrower as required in
       §682.410(b)(2). You also are correct that “terms
       satisfactory to the agency …” does not require that
       the loan be paid in full and provides the agency with
       discretion in establishing a satisfactory repayment
       agreement with the borrower. If the agency ob-
       tains a signed repayment agreement from the
       borrower within the 60-day period, and the
       borrower begins to make payments, the agency
No. 14-1806                                                    81

       is not required to assess the borrower collection
       costs. Collection costs related to the default
       would be assessed only if the borrower failed
       to continue to make payments by the repay-
       ment agreement.
Gov’t Amicus Br. 1a (emphasis added). This letter does not
concern loan rehabilitation at all. Instead, it confirms that
while § 682.410(b)(2) requires the guarantor to charge collec-
tion costs, the provision requiring a “repayment agreement
on terms satisfactory to the agency” grants the guarantor the
discretion to not charge costs. That is a far cry from providing
an exception for borrowers who promptly enter into a reha-
bilitation agreement and comply with that agreement. In
fact, the proper inference from the Department’s letter is
that, since § 682.405 does not grant the guarantor the same
discretion as § 682.410(b)(5)(ii)(D) does, the guarantor must
charge collection costs on rehabilitated loans.
    To accept the Department’s extraordinary position re-
quires us to hold that a single letter to an assistant vice presi-
dent of one guaranty agency explaining that the agency has
the discretion not to charge collection costs under a repayment
agreement constitutes sufficient notice for the rule that all
agencies are prohibited from charging costs on rehabilitated
loans. That is hardly the kind of “fair warning” required of
the Department, especially since Bible seeks to “invoke the
[Department’s] interpretation of ambiguous regulations to
impose potentially massive liability on [USA Funds] for
conduct that occurred well before that interpretation was
announced.” Christopher v. SmithKline Beecham Corp., 132 S.
Ct. 2156, 2167 (2012) (quotation marks omitted).
82                                                       No. 14-1806

   The Department’s recent July 10, 2015, letter purporting
to “restate and clarify the rules” (provided to the court by
the Department as a “citation of additional authority”) is
nothing short of an admission that the Department’s rule is
entirely new. Ultimately, the Department is not interpreting
the regulations. Instead,
        What [the Department] claims for itself here is
        not the power to make political judgments in
        implementing Congress’ policies, nor even the
        power to make tradeoffs between competing
        policy goals set by Congress. It is the power to
        decide—without any particular fidelity to the
        text—which policy goals [the Department]
        wishes to pursue.
Michigan v. E.P.A., 135 S. Ct. 2699, 2713 (2015) (Thomas, J.,
concurring) (citation omitted). This raises serious constitu-
tional questions.
    The Department’s interpretation is not entitled to defer-
ence. Furthermore, even if the Department truly interpreted
the statutes and regulations prior to the events of this case as
it claims, we cannot apply the interpretation to USA Funds.
To subject USA Funds—indeed, an entire industry—to RICO
liability based on a rule that was never enforced—and only
recently announced—is manifestly unjust.
     For all of these reasons, I respectfully dissent.