The Higher Education Act doesn’t exempt Temple University from following the terms of the Fair Credit Reporting Act in the way it reports student loan debt information, the U.S. Court of Appeals for the Third Circuit has ruled.
The appeals court vacated the district court’s finding in favor of Temple and rejected the university’s argument that the Higher Education Act functionally excuses educational institutions from reporting the date of the first delinquency and the collection history of students who had Perkins Loans to credit reporting agencies.
Without the date of delinquency, the credit reporting agencies can’t calculate the seven-year window provided by the Fair Credit Reporting Act after which delinquent loans “age off” of a consumer’s credit report, according to the opinion. The Higher Education Act, though, says that credit reporting agencies can disregard that “aging off” provision with regard to some federally-backed education loans, like Perkins Loans, according to the opinion.
The Higher Education Act, though, specifically gives that discretion to credit reporting agencies and not to the institutions that furnish consumer credit data, the Third Circuit held. Temple had argued that by omitting the delinquency date from the information it provided to credit reporting agencies about Edward Seamans’ Perkins Loan, it was helping the credit reporting agencies to comply with the Higher Education Act.
“The strange compliance-by-omission described by Temple is not present in the statutory text at issue and we decline to read such a procedure into it,” Third Circuit Judge Thomas I. Vanaskie wrote on behalf of the unanimous three-judge panel in Seamans v. Temple University.
The case arose after Seamans, who got a federal Perkins Loan for $1,180 when he was a student at Temple in 1989 and failed to make payments on it, which put the loan in delinquency in 1992, enrolled at Drexel University in 2010. He applied for a Pell Grant, which Drexel denied until he paid his outstanding loan. Seamans repaid the loan in full in April 2011.
The following month, Seamans, for the first time, noticed a “trade line” on his credit report with information about the loan, according to the opinion.
Seamans disputed parts of the information and, in October 2011, he filed suit against Temple claiming that the university had violated the Fair Credit Reporting Act. Temple won summary judgment in the Eastern District of Pennsylvania a year later by arguing “in essence that HEA exempted it from compliance with FCRA because the credit instrument at issue was a Perkins Loan,” Vanaskie said.
But, the Third Circuit held that under the clear statutory language of the Higher Education Act, it is up to the credit reporting agencies and not the institutions that furnish them with loan information whether the information is included in a report.
“The question of whether a particular loan should or should not ‘age off’ a credit report must be answered by the CRAs, and not by furnishers such as Temple,” Vanaskie said.
If the credit reporting agency would have allowed the “trade line” to drop from Seamans’ credit report in 1999, after the seven-year window had passed from when his loan became delinquent, which might be at odds with the Higher Education Act, that would be the agency’s concern, “not an excuse for Temple to report loan information in an incomplete or inaccurate manner,” Vanaskie said.
The Third Circuit held that the effect of the Higher Education Act on the Fair Credit Reporting Act is that the seven-year window can be extended only until the loan is paid in full. So, “once Seamans’ loan had been repaid, the trade line pertaining to the loan should have ‘aged off’ his credit report,” Vanaskie said, “because the loan by that time had been placed for collection more than seven years prior. In reality, however, the trade line did not ‘age off,’ and it did not ‘age off’ because Temple never provided the [credit reporting agencies] with the collection history and date of delinquency. Instead, Temple’s incomplete and misleading reporting made it appear as if Seamans had simply made a late repayment on a non-defaulted loan in 2011, which … could be recorded on his credit report until 2018.”
On the panel with Vanaskie were Judges Michael A. Chagares and Patty Shwartz.
Gregory Gorski of Francis & Mailman represented Seamans and called the opinion an important one “that very strongly favors the rights of consumers.”
It sends a strong message to student-loan lenders that all information about the loans needs to be accurate and up-to-date, he said.
Neither Richard Perr of Fineman Krekstein & Harris, who represented Temple, nor a spokesman for the university could be reached in time for comment.
(Copies of the 33-page opinion in Seamans v. Temple University, PICS No. 14-0277, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •