ORDER GRANTING MOTION TO DISMISS THIRD AMENDED COMPLAINT
This matter came before the Court on March 29, 2010, on the motion to dismiss filed by Defendants KeyBank, National Association and Great Lakes Educational Loan Services, Inc. For the reasons set forth below, the motion is GRANTED.
BACKGROUND
Plaintiffs and putative class representatives Matthew C. Kilgore and William Bruce Fuller (“Plaintiffs”) are California residents who enrolled in a helicopter flight academy operated in Oakland, California by Silver State Helicopters, LLC (“Silver State”). The Third Amended Complaint alleges that Plaintiffs — and the class of student loan borrowers they seek to represent — paid Silver State nearly $60,000 in tuition to be trained as commercial helicopter pilots, but failed to complete the educational program before Silver State filed for bankruptcy on February 4, 2008. Plaintiffs financed their tuition by obtaining student loans from KeyBank, National Association and its education lending division, Key Education Resources (collеctively “KeyBank”). Plaintiffs allege that KeyBank defied its own risk management policies to partner with Silver State, ignoring red flags — including the school’s recent founding, deficient credentials, and poor student placement rates — that should have signaled Silver State’s risk of failure. Plaintiffs now seek to enjoin KeyBank and Great Lakes Educational Loan Services, Inc. (“Great Lakes”) — which services their loans — from collecting the loans or reporting the loan balances to credit reporting agencies.
Plaintiffs instituted this putative class action in Alameda County Superior Court on May 12, 2008, against KeyBank and Great Lakes. Student Loan Xpress, Inc. (“SLX”) and American Education Services (“AES”)' — which allegedly made and serviced loans to Silver State students — were added as defendants in a First Amended Complaint filed four days later. After Plaintiffs filed a Second Amended Complaint (“SAC”), KeyBank removed the action to federal court, and a settlement with SLX led to its and AES’s dismissal on October 27, 2009.
After an unsuccessful mediation, Key-Bank and Great Lakes (collectively “Defendants”) responded to the SAC on April 24, 2009 by moving to dismiss and to compel arbitration. The Court denied the motion to compel arbitration on July 8, 2009,
LEGAL STANDARD
Dismissal is appropriate under Federal Rule of Civil Procedure 12(b)(6) when a plaintiffs allegations fail “to state a claim upon which relief can be granted.” In ruling on a motion to dismiss, the Court must “accept all material allegations of fact as true and construe the complaint in a light most favorable to the non-moving party.”
Vasquez v. L.A. County,
A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief,” Fed.R.Civ.P. 8(a)(2), in order to “‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ ”
Bell Atlantic Corp. v. Twombly,
Rule 12(b)(3) governs a motion to dismiss for improper venue. When “resolving motions to dismiss based on a forum selection clause, the pleadings are not accepted as true, as would be required under a Rule 12(b)(6) analysis.”
Argueta v. Banco Mexicano, S.A.,
DISCUSSION
Plaintiffs bring six causes of actions under California’s Unfair Competition Law (“UCL”), Cal. Bus.
&
Prof.Code § 17200. The claims are all premised on the Federal Trade Commission’s “Holder Rule,” 16 C.F.R. § 433.2, which “requires purchase money loan agreements (loans supplying money for the purchase оf goods or services) arranged by sellers to contain a notice to all loan holders that preserves the borrower’s ability to raise claims and defenses against the lender arising from the seller’s misconduct.”
Armstrong v. Accrediting Council for Continuing Educ. & Training, Inc.,
The Court begins by examining the Holder Rule and determining whether any of Plaintiffs’ six causes of action state plausible claims for relief under the Rule 12(b)(6) standard. For any claims that overcome that hurdle, the Court will then assess whether they must nevertheless be dismissed due to federal preemption. Since the Court finds that all of Plaintiffs’ causes of action falter at one of those two steps, it is unnecessary to address Key-Bank’s other arguments. 1
*946 1. Plaintiffs’ Claims Under the Holder Rule and California’s Unfair Competition Law
The so-called “Holder Rule” was adopted by the Federal Trade Commission (“FTC”) in 1975 to stem the “unfair practice” of separating “the buyer’s duty to pay for goods or services from the seller’s reciprocal duty to perform as promised” in the financing of consumer sales. 40 Fed. Reg. 53,522 (Nov. 18, 1975). The-Rule makes it an “unfair or deceptive act or practice” under section 5 of the FTC Act “for a seller, directly or indirectly, to”:
(a) Take or receive a consumer credit contract which fails to contain the [Holder Notice], or,
(b) Accept, as full or partial payment for such sale or lease, the proceeds of any purchase money loan (as purchase money loan is defined fyerein), unless any consumer credit contract made in connection with such purchase money loan contains the [Holder Notice].
16 C.F.R. § 433.2. 2 The “Holder Notice” must be written “in at least ten point, bold face, type” and read as follows:
ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED [PURSUANT HERETO OR] WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER. 3
Id.
The onus is therefore placed on the seller to ensure the Holder Notice’s inclusion in consumer credit contracts, either by refusing a contract that omits the Notice, or by refusing proceeds of a loan made pursuant to such a contract.
4
When the Holder Notice appears in a consumer credit contract, a debtor can assert the same defenses against his lender as he could against the seller. “For example, if a used car dealer who fraudulently sells a lemon also arranges the buyer’s financing through a bank, the buyer may rely on the dealer’s fraud as a defense against repaying the bank loan.”
Armstrong,
Plaintiffs allege that they and every member of the proposed class executed a “service contract” with Silver State, in which the school “agreed to provide specific education and training for each student to become a commercial helicopter pilot within a specified period of time.” TAC ¶ 9. Class members financed all or part of Silver State’s nearly $60,000 per-student tuition by executing promissory notes with KeyBank. Silver State filed for bankruptcy and shuttered before any of them had completed their promised training, but after KeyBank had disbursed their loans in their entirety. Plaintiffs contend that the service contracts and the promissory notes are both “consumer credit contracts” under the Holder Rule, and that Silver State was a “seller” required to comply with the Rule. However, neither the service contracts nor the promissory notes included the Holder Notice, an omission that underlies this action.
As the Holder Rule provides no private right of action, Plaintiffs bring their claims under the UCL, which characterizes “any unlawful, unfair or fraudulent business act or practice” as “unfair competition.” Cal. Bus. & Prof.Code § 17200. The statute’s coverage is “sweeping, embracing ‘anything that can properly be called a business practice and that at the same time is forbidden by law.’ ”
Rubin v. Green,
Since section 17200 is “written in the disjunctive,” it “establishes three varieties of unfair competition — acts or practices which are unlawful, or unfair, or fraudulent.”
Podolsky v. First Healthcare Corp.,
A. “Unlawful” Prong: Direct Violation of the Holder Rule
“By proscribing ‘any unlawful’ business practice, section 17200 ‘borrows’ violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable.”
Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tele. Co.,
The Holder Rule has never been subject to close scrutiny by the Ninth Circuit, and other circuits have likewise had little opportunity to explore its scope. As a result, both parties draw support frоm opinions by federal district and state courts outside the Ninth Circuit, none of which are binding on this Court. Plaintiffs rely on
Gonzalez v. Old Kent Mortgage Co.,
where a court in the Eastern District of Pennsylvania — after concluding that “contract terms may be implied where public policy so requires”' — read the Holder Notice into a contract that omitted it. No. 99-5959,
Plaintiffs’ other authorities fare no better. The Common Pleas Court of Allegheny County, Pennsylvania, recognized that the creditor bank had committed “no violation” of the Holder Rule because “the rule, as presently drafted, places a duty only on the seller to insure that the preservation of defenses provisions is included within the loan agreement.”
Iron & Glass Bank v. Franz,
9 Pa. D.
&
C.3d 419, 427 (Pa.C.P.1978). Although the court still refused to insulate the creditor “from the seller’s wrongdoing,” it did so despite its conclusion that no direct violation of the Holder Rule had occurred.
Id. Heastie v. Community Bank of Greater Peoria
suffers the same infirmity: the court acknowledged that “part 433 does not apply by its terms to lenders,” but found that a lender’s addition of a non-responsibility provision contrary to the Holder Notice — which was included in the contract — could be an unfair or deceptive practice under Illinois’ Consumer Fraud Act.
The Holder Rulе imposes obligations only on the seller. Its language is “explicit in stating the consequences of a failure to include the notice and notably incur a penalty is solely visited upon the seller.”
In re Vincent Crisomia, Sr.,
No. 00-35085DWS,
B. “Unlawful” Prong: Aiding and Abetting Silver State’s Violation of the Holder Rule
Plaintiffs’ third and fourth claims are also brought under the UCL’s “unlawful” prong, but the Holder Rule violation alleged is that of Silver State, with KeyBank’s liability premised on aiding and abetting that violation. Defendants contend — incorrectly—that California law precludes actions for “aiding and abetting” under section 17200. California courts have held only that a section 17200 claim “cannot be predicated on
vicarious
liability,” which is based on an agency relationship.
Emery v. Visa Int’l Serv. Ass’n,
Plaintiffs allege that Silver State violated both parts of the Holdеr Rule by receiving the service contracts and accepting the proceeds of KeyBank’s loans when neither the service contracts nor the promissory notes included the Holder Notice.
See
16 C.F.R. § 433.2(a)-(b). Violations of federal regulations may constitute “unlawful” activity under the UCL.
Smith v. Wells Fargo Bank, N.A.,
*950
The Court therefore turns its attention to whether KeyBank’s conduct, as alleged, meets the standard for aiding and abetting. In
Schulz,
the California Court of Appeal ruled that a plaintiff had properly pleaded an aiding and abetting claim under section 17200.
Plaintiffs’ allegations meet Schulz’s threshold for pleading an aiding and abetting claim under the UCL. The TAC alleges that KeyBank was “keenly aware that ... if it permitted the Holder Rule Notice to be included in the consumer credit transaction documentation, Key-Bank would be unable to sell the loans into the secondary market and would necessarily be obligated to return those unused funds to the students if the school closed prior to the students obtaining all of the promised education.” TAC ¶27. Plaintiffs charactеrize KeyBank as a sophisticated player, well aware of the Holder Rule and consciously seeking to avoid it. They claim that KeyBank developed strategies to enhance “its ability to aggressively pursue collection of loans made to students scammed by vocational schools,” such as “omitting the Holder Rule Notice from its promissory notes” and “ensuring that the contracts between the vocational school partner and its students omitted” the notice. Id. ¶ 25. KeyBank had specific knowledge of Silver State’s violations because, according to the TAC, it reviewed and approved exemplar copies of its service contract, and disbursed loans to Silver State despite the omission of the Holder Notice. The knowledge requirement is therefore satisfied.
As for substantial assistance, the TAC alleges that KeyBank was Silver State’s “preferred lender,” and that “KeyBank’s marketing and sales personnel helped create, review, approve and ratify [Silver State’s] marketing and sales presentation, at least as it related to KeyBank’s Key Alternative Loan program.” TAC ¶ 32. Silver State could not have violated section 433.2(b) — accepting loan funds despite omission of the Holder Notice — had Key-Bank not disbursed the loans. The TAC likewise alleges that KeyBank encouraged the violation of section 433.2(a), by reviewing and approving exemplar copies of the service contract, and ensuring the Holder Rule’s omission. TAC ¶¶ 25, 49. The pleading establishes substantial assistance or encouragement.
By alleging that KeyBank knew of and encouraged Silver State’s violations of the Holder Rule, Plaintiffs have stated plausible claims for aiding and abetting Silver State’s “unlawful” activity under the UCL.
C. “Unfair” Prong
Plaintiffs allege, in their fifth claim, that KeyBank violated the “unfair” prong of the UCL by omitting the Holder Notice from its own promissory notes, by facilitat *951 ing Silver State’s violation of the Holder Rule, and by partnering with Silver State despite numerous red flags about the school’s viability. Defendants argue that KeyBank’s conduct cannot satisfy the unfair prong because it did not violate the provisions of any statute, regulation, or case law.
The parties advance different standards for determining what is unfair, a discrepancy arising from conflicting California authority on this question. Recognizing the difficulty of determining “whether the challenged conduct is unfair within the meaning of the unfair competition law,” the California Supreme Court devised a “more precise test” to avoid reliance on “purely subjective notions of fairness.”
Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tele. Co.,
Cel-Tech
has produced confusion among the California appellate courts over whether the clarified definition of “unfair” is properly apрlied to
consumer
cases.
Compare Gregory v. Albertson’s, Inc.,
To resolve the conflict, the Second Appellate Division turned to section 5 of the FTC Act — which the California Supreme Court had identified in
Cel-Tech
as a source of guidance for interpreting the UCL — and adopted its three-factor test for determining unfairness. For conduct to be unfair under the UCL, “(1) [t]he consumer injury must be substantial;. (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided.”
Camacho v. Auto. Club of S. Cal.,
Plaintiffs are able to satisfy this standard. Their injury is substantial: Plaintiffs owe tens of thousands of dollars to KeyBank but, due to the omission of the Holder Notice, cannot assert Silver State’s failure to provide the bargained-for education as a defense to the collection of their debt. On oral argument, Defendants suggested that requiring lenders to include the Holder Notice would cause lenders to exit the student loan market for vocational schools and limit the availability of credit to Plaintiffs and similarly situated individuals. Under Defendants’ theory, Key-Bank’s conduct offers a countervailing benefit by making credit more available. However, the Court cannot conclude on motion to dismiss that such a benefit outweighs Plaintiffs’ injury. Finally, Plaintiffs could not have reasonably done anything to avoid this injury, which was brought on by Silver State’s closure' — -a turn of events they could not have anticipated. Plaintiffs therefore state a plausible claim under the unfair prong of the UCL.
D. “Fraud” Prong
Plaintiffs’ sixth and final cause of action alleges a violation of the “fraud” prong of section 17200 based on Key-Bank’s failure to disclose material facts about Silver State’s risk of failure. Plaintiffs allege that KeyBank intentionally concealed information from loan customers because it relied on the Silver State loans to offset losses from other failed partner schools and to create publicly offered securities backеd by education loans. Defendants argue that Plaintiffs fail to state a claim because KeyBank had no duty to disclose, and the “facts” that went undisclosed were not material.
“The fraudulent business practice prong of the UCL has been understood to be distinct from common law fraud.”
In re Tobacco II Cases,
(1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts.
Heliotis v. Schuman,
Plaintiffs do not contend that they and KeyBank had any type of fiduciary relationship. Even under the remaining three circumstances that may constitute fraud, “some relationship” must exist “between the parties [to] give[ ] rise to a duty to disclose such known facts.”
LiMandri v. Judkins,
This claim falters on two fronts. First, none of the facts that Plaintiffs allege as the basis for fraud could plausibly have been in the “exclusive knowledge” of Key-Bank. Such “red flags” as Silver State’s lack of affiliation with a college or university, its failure to obtain certification from the Federal Aviation Administration, or its relatively recent founding are not facts known only to KeyBank. Plaintiffs had a relationship with Silver State itself, which could have disclosed such details or responded to inquiries by Plaintiffs. Nor is it plausible that Silver State and KeyBank were the only sources of this information. Such basic facts as the existence of government certifications or the date a corporation began operating are matters of public record. Although the Court recognizes that KeyBank is the more sophisticated party, Plaintiffs cannot establish fraud by alleging facts that could not plausibly have been in KeyBank’s exclusive knowledge.
Second, other “facts” on which Plaintiffs premise their fraud allegations аre not facts at all, but rather opinions about Silver State’s viability. For example, Plaintiffs allege that KeyBank was aware that an aviation school expert had predicted Silver State’s failure. “[Predictions as to future events are ordinarily non-actionable expressions of opinion under basic principles of the tort of fraudulent misrepresentation.”
Bayview Hunters Point Cmty. Advocates v. Metro. Transp. Comm’n,
II. Preemption by the National Bank Act
Three of Plaintiffs’ six causes of action — • two сlaims for aiding and abetting under the UCL’s “unlawful” prong, and one claim under the “unfair” prong — state plausible claims under the Rule 12(b)(6) standard. However, Defendants further argue that those claims must be dismissed as preempted by federal law, which exclusively governs the terms of credit extended by a national bank such as KeyBank. Plaintiffs respond that preemption does not reach as far as KeyBank suggests, as laws of general application — like those invoked here — are not preempted by federal law.
KeyBank is a national bank created and operated under the National Bank Act (“NBA”), 12 U.S.C. § 1
et seq.
Congress enacted the NBA in 1864, “establishing the system of national banking still in place today.”
Watters v. Wachovia Bank, N.A.,
At issue here is whether Plaintiffs’ state law claims would “significantly impair” KeyBank’s exercise of its “enumerated or incidental” powers under the NBA. If that is so, state law must give way to federal, because the Supremacy Clause enshrines the “Constitution, and the Laws of the United States,” as “the supreme Law of the Land.” U.S. Const, art. VI, cl. 2. “In determining whether a state statute is pre-empted by federal law and therefore invalid under the Supremacy Clause of the Constitution, our sole task is to ascertain the intent of Congress.”
Cal. Fed. Sav. & Loan Ass’n v. Guerra,
State law can be preempted by federal law in three contexts: where “(1) Congress enacts a statute that explicitly preempts state law; (2) state law actually conflicts with federal law; or (3) federal law occupies a legislative field to such an extent that it is reasonable to conclude that Congress left no room for state regulation in that field.”
Engine Mfrs. Ass’n v. S. Coast Air Quality Maint. Dist.,
The Office of the Comptroller of the Currency (“OCC”), as “the agency charged by Congress with supervision of the NBA,” “oversees the operations of national banks and their interactions with customers.”
Watters,
The broad contours of NBA preemption are not in dispute. States have “the power to regulate national banks” where “doing so does not prevent or significantly interfere with the national bank’s exercise of its powers.”
Barnett Bank,
Defendants do not contend that California’s UCL is preempted by the NBA. As this Court has previously noted, “California courts have long held that consumer protection laws of general application are not preempted by federal banking laws.”
Jefferson v. Chase Home Finance,
No. C06-6510 TEH,
The Court has already concluded that the Holder Rule does not directly apply to KeyBank; the regulation provides only that a seller commits an unfair business practice by omitting the Holder Notice from a consumer credit contract, or by accepting loan proceeds made pursuant to such a contract. KeyBank was not required to include the Holder Notice in its promissory notes. However, Plaintiffs’ surviving claims — which are all premised on KeyBank’s complicity in Silver State’s alleged Holder Rule violation — would compel KeyBank to add the Holder Notice to its consumer crеdit contracts. For example, Plaintiffs allege that KeyBank aided and abetted Silver State’s violation by dispersing loan funds to Silver State — which was therefore “[a]ecept[ing] ... the proceeds of a[ ] purchase money loan” made pursuant to a “consumer credit contract” that did not contain the Holder Notice. 16 C.F.R. § 433.2(b). KeyBank could only avoid aiding and abetting liability under that theory by including the Holder Notice in its promissory notes, or by not making the loan in the first place.
The
relief
Plaintiffs request would also, in effect, read the Holder Notice into Key-
*956
Bank’s promissory notes. Plaintiffs seek to enjoin KeyBank from enforcing its promissory notes with Plaintiffs, or from reporting Plaintiffs to credit reporting agencies. Had KeyBank included the Holder Notice in its promissory notes, Plaintiffs could have defended against KeyBank’s collection efforts by claiming Silver State had breached their contract— as inclusion of the Holder Notice “preserves the borrower’s ability to raise claims and defenses against the lender arising from the seller’s misconduct.”
Armstrong v. Accrediting Council for Continuing Educ. & Training, Inc.,
State law cannot obstruct or impair “a national bank’s ability to fully exercise its Federally authorized non-real estate lending powers.” 12 C.F.R. § 7.4008(d)(1). States are explicitly barred from imposing limits on the “terms of credit” extended by a natiоnal bank. Id. § 7.4008(d)(2)(iv). KeyBank’s promissory notes embody the terms of credit extended to Plaintiffs to finance their education at Silver State. Plaintiffs’ theory would deploy state law to alter those terms of credit and bar Key-Bank from collecting on Plaintiffs’ debts. It is difficult to conceive how Plaintiffs’ action can survive in light of its clear interference with powers conferred on KeyBank by federal law.
Plaintiffs contend that this Court’s decision in
Jefferson v. Chase Home Finance,
No. C06-6510 TEH,
The Court found that the plaintiffs claims were not preempted, holding that “laws of general application, which merely require all businesses (including banks) to refrain from misrepresentations and abide by contracts and representations to customers do not impair a bank’s ability to exercise its lending powers.”
Id.
at *10,
However, the result in
Jefferson
hinged on the nature of the claim asserted: misrepresentation. “The duty to refrain from misrepresentation falls on all businesses.”
Id.
at *13,
Plaintiff does not claim that California consumer protection laws require Chase to service or process loans, include specific content in its disclosures, or handle repayment of loans in any particular mаnner — requirements that would be preempted. See 12 C.F.R. § 34.4(a). Instead Plaintiff claims that the laws require Chase to refrain from misrepresenting the manner in which it does service loans.
Id.
at *12,
In
Martinez v. Wells Fargo Bank, N.A.,
a sister court dismissed the plaintiffs’ section 17200 claims alleging improprieties in the fees charged by a national bank for the plaintiffs’ home mortgage refinancing. No. C06-03327 RMW,
That is precisely the type of claim before this Court. Plaintiffs are. not asking *958 that KeyBank be held liable for defying its own contracts or committing a tort, nor are they alleging the violation of a state law that directly infringes on its powers as a national bank. Rather, Plaintiffs’ theory would deploy the UCL to require Key-Bank to comply with a federal regulation that does not itself require KeyBank’s compliance. Abiding by the Holder Rule would directly affect the terms of credit extended by KeyBank, infringing on a power that national bаnks are meant to exercise free from state authority. The Court therefore concludes that Plaintiffs’ remaining claims are preempted by the National Bank Act. The remaining causes of action are DISMISSED without leave to amend, as Plaintiffs cannot plead around federal preemption.
CONCLUSION
Defendants’ motion to dismiss is GRANTED. Plaintiffs’ first, second, and sixth causes of action are dismissed for failure to state a claim, and their third, fourth, and fifth claims are dismissed based on federal preemption. The TAC is DISMISSED without leave to amend.
The Clerk shall enter judgment and close the file.
IT IS SO ORDERED.
Notes
. Defendants also argue that Great Lakes must be dismissed because Plaintiffs fail to allege any facts concerning it. The Court need not address this argument as all claims are to be dismissed on other grounds.
. A “seller” is a "person who, in the ordinary course of business, sells or leases goods or services to consumers,” 16 C.F.R. § 433.l(j), and a "consumer credit contract” is any "instrument which evidences or embodies a debt arising from a 'Purchase Money Loan’ transaction or a ‘financed sale' as defined in paragraphs (d) and (e) of this section,” id. § 433.1 (i). A "purchase money loan” is a "cash advance which is received by a consumer in return for a 'Finance Charge' within the meaning of the Truth in Lending Act and Regulation Z, which is applied, in whole or substantial part, to a purchase of goods or services from a seller who (1) refers consumers to the creditor or (2) is affiliated with the creditor by common control, contract, or business arrangement.” Id. § 433.1(d). "Financing a sale” means "[e]xiending credit to a consumer in connection with a 'Credit Sale' within the meaning of the Truth in Lending Act and Regulation Z.” Id. § 433.1(e).
. The bracketed language — "pursuant hereto or” — appears only in the Holder Notice required by 16 C.F.R. § 433.2(a), but not in § 433.2(b). Aside from that difference, the language required by subsections (a) and (b) is identical.
. On the same day the Holder Rule was officially promulgated, the FTC also proposed an amendment that would have applied the rule to lenders, as well.
See Heastie v. Cmty. Bank of Greater Peoria,
. Defendants argued for the first time at hearing that Silver State’s service contracts are not consumer credit contracts. At the motion to dismiss stage, the Court finds Plaintiffs’ allegation that the service contracts constitute consumer credit contracts to be sufficient without examining the contract to determine whether it “evidences or embodies a debt.” 16 C.F.R. § 433.l(j). Defendants also asserted — for the first time — that KeyBank’s promissory notes are not consumer credit Contracts, because education loans above $25,000 were exempt from the Truth in Lending Act (“TILA”) and Regulation Z at the time Plaintiffs’ loans were made. See 15 U.S.C. § 1603(3). The Court agrees with Plaintiffs that the Holder Rule merely borrows the definitions of "finance charge” and “credit sale” from TILA and Regulation Z; it does not import the restrictions to which Defendants refer. See note 2, supra (quoting provisions of OCC regulations).
. “Federal regulations have no less pre-emptive effect than federal statutes.”
Fid. Fed. Sav. & Loan Ass'n v. de la Cuesta,
. Plaintiffs also contend that the Supreme Court’s decision in
Cuomo v. Clearing House Ass'n,
- U.S. -,