Manchanda v. Educational Credit Management Corporation

Background

Rahul Manchanda alleged that Educational Credit Management Corporation (ECMC) violated New York General Business Law § 349 and the Fair Debt Collection Practices Act (FDCPA) through deceptive conduct in servicing and collecting his federal student-loan debt. The parties filed cross-motions for summary judgment, asking the court to decide the claims without a trial when the record shows no genuine dispute over a fact that could affect the result.

Manchanda consolidated student loans under the Federal Family Education Loan Program in 2003. After Manchanda filed for bankruptcy in 2014, the guarantor transferred the loan rights to ECMC. After the loan went into default, ECMC paid the default claim, and the rights to the note transferred to ECMC. In 2017, Manchanda entered a loan-rehabilitation agreement with ECMC. The agreement stated that collection costs would be added to the balance within specified limits and that, after rehabilitation, ECMC would ask consumer-reporting agencies to remove the default record. Manchanda successfully completed rehabilitation, and another lender purchased the loan in January 2018.

New York General Business Law § 349

The court granted ECMC summary judgment on the § 349 claim and denied Manchanda’s motion. First, the court held that the portion of the claim challenging the amount of collection costs fell within § 349’s safe-harbor provision. That provision excludes conduct that complies with applicable federal rules and regulations. The court found that federal Department of Education regulations limited the collection charges and that ECMC assessed the charges in accordance with those regulations. Manchanda offered no evidence that ECMC failed to comply with the limits.

The court also held that Manchanda lacked evidence supporting two required elements of a § 349 claim: consumer-oriented conduct and materially misleading conduct. Consumer-oriented conduct must have a broader effect on consumers generally, rather than concern a private dispute unique to the parties. The court found that the alleged failure to mail the default notice to Manchanda’s current address, ECMC’s statements about rehabilitation, and ECMC’s reporting of the default concerned Manchanda’s individual contractual relationship with ECMC. Manchanda offered no evidence that ECMC mailed other consumers’ notices to incorrect addresses.

The court further found no evidence that ECMC’s conduct was likely to mislead a reasonable consumer. Manchanda did not provide evidence supporting his assertion that ECMC intentionally sent the notice to the wrong address. The rehabilitation agreement and the employee’s breakdown of the loan identified the collection costs, and the record showed that Manchanda completed rehabilitation and exited default. The agreement’s statement that ECMC would notify reporting agencies that the loan was no longer in default also indicated that the agencies knew about the default.

Fair Debt Collection Practices Act

The court granted ECMC summary judgment on the FDCPA claim. The FDCPA applies to a person whose principal business purpose is collecting debts or who regularly collects debts owed to another. The court found no admissible evidence that ECMC’s principal purpose was debt collection. Manchanda relied on quotations from a newspaper article, but the court treated those quotations as inadmissible hearsay and found that he did not show that an exception applied or that admissible evidence would be available at trial.

The court also found that ECMC did not regularly collect debts owed to another because the record showed that ECMC collected debts for its own account. The court rejected Manchanda’s argument that ECMC qualified as a debt collector because it purchased defaulted debt and collected it. Relying on the Supreme Court’s decision in Henson v. Santander Consumer USA Inc., the court explained that an entity collecting a debt it owns and purchased after default does not fall within that part of the FDCPA definition.

Disposition

Judge Lorna G. Schofield denied Plaintiff’s motion for summary judgment and granted Defendant’s motion for summary judgment. The court directed the clerk to close the motions at Docket Nos. 74 and 76 and to close the case.