Estes v. ECMC Group, Inc.
1:19-cv-00822
D.N.H.Sep 16, 2020Background
- Alia Estes obtained a federal consolidation student loan in 2001; Navient later serviced the loan and the borrowers received a six‑month forbearance in 2012 but continued making reduced payments through 2015. ECMC began contacting the Estes in 2016–2017, sent default notices, reported the debt to credit bureaus, added fees, and seized the plaintiffs’ 2018 federal tax refund in 2019.
- Plaintiffs (pro se) sued ECMC in New Hampshire state court in June 2019 asserting: UDUCPA (state debt‑collection statute), FDCPA, HEA/regulation violations, and a state criminal‑fraud claim; ECMC removed to federal court and pleaded four counterclaims (breach of contract, quantum meruit, unjust enrichment, and CPA).
- Central factual dispute: whether ECMC acted as a HEA "guaranty agency" (a DOE fiduciary, which would make some activity governed by HEA and potentially exempt from FDCPA) or as a debt collector attempting to collect a private debt. The parties dispute authenticity/meaning of a 2001 loan application/promissory note and the 2010 portfolio transfer.
- Both sides moved to dismiss under Rule 12(b)(6). Key legal questions included whether HEA or HEA regulations create a private right of action, whether ECMC is a "debt collector" under FDCPA, preemption of state law by HEA, timeliness under FDCPA, and whether various state claims state viable causes of action.
- Rulings in brief: the court dismissed HEA‑based private claims and the state criminal‑fraud claim; it declined to dismiss FDCPA claims (on debt‑collector status and statute‑of‑limitations grounds) and declined to dismiss the UDUCPA claim; ECMC’s contract and quasi‑contract counterclaims survived, but ECMC’s CPA counterclaim was dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HEA/regulations create a private right of action | Estes assert ECMC violated HEA regs when seizing tax refund and otherwise handling the loan | ECMC argues HEA has no private cause of action and governs guaranty agencies | Court: No private right under HEA; HEA‑based count dismissed |
| Whether FDCPA applies (is ECMC a "debt collector") | Estes allege ECMC engaged in collection activity and is liable under FDCPA | ECMC contends it is a guaranty agency/fiduciary under HEA and thus not a FDCPA debt collector | Court: Factbound; at pleading stage FDCPA claim survives; debt‑collector status reserved for discovery/summary judgment |
| FDCPA statute of limitations | Estes: many violations (including 2018 refund seizure) occurred within one year or were fraud‑concealed | ECMC: FDCPA claims are time‑barred by 1‑year limitations | Court: Cannot resolve on pleadings; some acts within one year; equitable fraud‑discovery rule may apply; issue preserved for later stages |
| Whether HEA preempts New Hampshire UDUCPA (express or conflict) | Estes assert state law claim for deceptive collection practices | ECMC: HEA/regulations (and guaranty‑agency regime) expressly/impliedly preempt state law | Court: Preemption depends on whether ECMC was acting as guaranty agency; factual issue for discovery; UDUCPA claim survives now |
| Sufficiency of UDUCPA claim | Estes allege misrepresentations, fabricated documents, seizure, added fees and refusal to investigate | ECMC: Some alleged acts (e.g., assessing penalties) are not "collection activity"; claim is deficient | Court: Allegations plausibly show collection activity, debt‑collector status under state law, and deceptive practices; claim survives |
| Private right of action under NH criminal fraud statutes (RSA 638:1‑29) | Estes invoke criminal statute for fabricated documents/fraud | ECMC: Criminal statute does not create civil remedy | Court: No private cause of action; criminal‑fraud count dismissed |
| Sufficiency of ECMC counterclaims (breach, quantum meruit, unjust enrichment, CPA) | Plaintiffs: counterclaims are retaliatory and fail on the merits | ECMC: loan documents and DOE assignment give standing to sue for repayment and restitution | Court: Breach and quasi‑contract claims plausibly pleaded and survive; CPA counterclaim against plaintiffs fails for lack of rascality/commerce nexus and is dismissed |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for pleadings)
- Foley v. Wells Fargo Bank, N.A., 772 F.3d 63 (1st Cir. 2014) (Rule 12(b)(6) standard discussion)
- Ironshore Specialty Ins. Co. v. United States, 871 F.3d 131 (1st Cir. 2017) (documents outside complaint may be considered in narrow circumstances)
- Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718 (2017) (entity that purchases defaulted debt to collect for itself is not a FDCPA "debt collector")
- Rotkiske v. Klemm, 140 S. Ct. 355 (2019) (FDCPA limitations rule and discussion of equitable fraud‑discovery rule)
- McCulloch v. PNC Bank Inc., 298 F.3d 1217 (11th Cir. 2002) (HEA has no private right of action; collecting cases)
- Rowe v. Educ. Credit Mgmt. Corp., 559 F.3d 1028 (9th Cir. 2009) (background on guaranty agencies and HEA role)
- Arizona v. United States, 567 U.S. 387 (2012) (express preemption principles)
- English v. Gen. Elec. Co., 496 U.S. 72 (1990) (conflict preemption standard)