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Reynolds v. Xerox Education Services, Inc.

United States District Court, N.D. New York

September 9, 2014

JEFFREY D. REYNOLDS, on behalf of himself and all others similarly situated, Plaintiff,


LAWRENCE E. KAHN, District Judge.


Plaintiff Jeffrey D. Reynolds ("Plaintiff") commenced this putative class action against Defendants Xerox Education Services, Inc., formerly known as ACS Education Services, Inc. ("XES" or "ACS"), and Wells Fargo Bank, N.A. ("Wells Fargo") (collectively, "Defendants"), alleging various causes of action relating to the servicing of his student loans. Dkt. Nos. 1 ("Original Complaint"); 50 ("Amended Complaint"). Now pending before the Court are Wells Fargo's Motion to dismiss Plaintiff's unjust enrichment claim and Defendants' Joint Motion to Dismiss the Amended Complaint. Dkt. Nos. 42 ("Wells Motion"); 55 ("Joint Motion"). For the following reasons, the Motions are denied.


A. Plaintiff's Consolidated Student Loan

Plaintiff is a resident of Virginia. Am. Compl. ¶ 7. On or around October 1992, Plaintiff consolidated his federal student loans with Signet Bank (the "Loan"). Id . Through a series of mergers and acquisitions, Wells Fargo became the owner of Plaintiff's Loan. Id . ¶¶ 7, 9. XES is a limited liability company incorporated in Delaware and headquartered in California. Id . ¶ 8; see also id. at 1. XES is the servicer of Plaintiff's Loan. Id . ¶ 8. XES maintains an office in Utica, NY. Id . Computer systems involved in the servicing of Plaintiff's Loan, as well as employees who corresponded with Plaintiff regarding his Loan, were both based at the Utica facility.[2] Id.

Plaintiff's Loan is a fixed interest rate loan with "level" stated payments. Id . ¶ 10. The Level Repayment Plan "is designed to allow the borrower to make payments of equal amounts throughout the payment period" and "provides the least amount of interest accrual over the life of the loan." Id . The original balance of Plaintiff's Loan was $22, 636.97, with an annual interest rate of 9.00%. Id . ¶ 11. From on or around 1992 to on or around 1999, the Loan was in deferment or forbearance ("Forbearance Period"). Id . The interest that accrued during the Forbearance Period was capitalized into the Loan before the Loan entered repayment. Id . At that time, a third party, as part of a college tuition reimbursement program, made a payment of $2, 865.29, which reduced the Loan principal to $30, 441.43 at the time repayment began. Id.

Plaintiff received a Loan Consolidation Disclosure Statement and Repayment Schedule from AFSA Data Corp.[3] dated September 28, 1999 ("September 1999 Disclosure Statement"). Id . ¶ 12. The September 1999 Disclosure Statement provided that, in order to repay the Loan in full, Plaintiff needed to make 215 monthly payments of $285.07 beginning on November 28, 1999, and one monthly payment of $283.56 on October 28, 2017. Id . It further provided that the total interest to be paid over the course of repayment was $31, 132.18, which, combined with the total principal of $30, 441.43, equaled a total repayment cost of $61, 573.61. Id . ¶ 13. Plaintiff began making monthly payments of $285.07 in November 1999. Id.

B. Misapplied Payments

In February 2012, Plaintiff noticed that his payoff balance was higher than the total of his 69 remaining payments. Id . ¶ 15. On or around February 4, 2012, Plaintiff called XES to inquire, and spoke to an employee at XES's Utica facility. Id . ¶ 15. A customer services supervisor confirmed that XES's computer system showed Plaintiff's final payment date as October 28, 2017, but the system also showed that the Loan would not be repaid in full as of that date. Id . ¶ 16. While the XES employee was trying to resolve this discrepancy, the XES computer system increased Plaintiff's monthly payment from $285.07 to $377.54. Id . The XES employee tried to change Plaintiff's monthly payment back to $285.07, but the computer system would not allow her to do so. Id . She advised Plaintiff that she would review his account and try to change his payment back to $285.07. Id.

On or around February 16, 2012, Plaintiff received another Disclosure Statement ("February 2012 Disclosure Statement"). Id . ¶ 17. It stated that Plaintiff's 69 remaining payments had been increased to approximately $377 each, resulting in an increased total repayment cost of $6, 300. Id . Around this time, Plaintiff received a call from the XES supervisor with whom he had previously spoken, and was informed that his account was still under review. Id.

On March 9, 2012, Plaintiff made another call to XES customer service, during which a different supervisor told him that she was unable to identify what was causing problems with his account, and that she would have the account reviewed. Id . ¶ 18.

Plaintiff called again on March 19, 2012, and spoke to a manager, who, although unable to determine the problem with Plaintiff's account, advised Plaintiff that he needed to continue making monthly payments of $377.54 while the account was under review. Id . ¶ 19.

On April 2, 2012, Plaintiff received another Disclosure Statement ("March 2012 Disclosure Statement"), which increased Plaintiff's 67 remaining payments to over $382 each. Id . ¶ 19. Plaintiff then called XES and spoke with yet another manager. Id . ¶ 20. This manager claimed that although he had identified and corrected the error in Plaintiff's account, he was waiting for final approval by upper management to correct and update the account. Id . ¶ 20. This anticipated approval never came. Id.

Plaintiff filed a complaint with the New York Better Business Bureau ("BBB") in July 2012. Id . After Plaintiff filed the BBB complaint, the manager who had identified the error in Plaintiff's account offered to reduce Plaintiff's monthly payment from $384 to $292, while extending the repayment term by 24 months. Id . ¶ 21. This change would result in the same total repayment cost as paying $384 per month over the original repayment term, i.e., an increased repayment cost of several thousand dollars compared to the repayment terms listed in the September 1999 Disclosure Statement. Id . ¶ 21. Plaintiff rejected this offer, and the manager then advised him that he was waiting to meet with someone at XES's legal department to see how Plaintiff's account could be corrected. Id . Months later, the manager called Plaintiff and told him that he was able to adjust Plaintiff's monthly payment to $291 while extending the repayment term with 18 additional payments. Id . ¶ 22. Plaintiff rejected this offer and informed the manager that he had submitted a complaint to the BBB. Id.

At the BBB's recommendation, Plaintiff requested and received an additional Disclosure Statement ("October 2012 Disclosure Statement"), which stated that Plaintiff now owed 84 monthly payments of approximately $300 each. Id . ¶ 23.

In early November 2012, Plaintiff received a letter ("October 2012 Letter") stating that XES had adjusted Plaintiff's account such that he would pay a maximum of $37, 620.59 in total interest, and that his monthly payments would be $291.91. Id . ¶ 24. The Letter did not state the number of remaining ...

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