A federal judge in Missouri has dismissed a Fair Debt Collection Practices Act lawsuit accusing a collection agency of threatening to withhold the plaintiff’s college transcripts over unpaid tuition, finding the plaintiff failed to show the school was prohibited from taking that action under recently updated Department of Education regulations.
The background: The plaintiff attended college during the Fall 2023 semester and later enrolled in a Winter 2024 semester before dropping out several weeks into the term. The balance in question stemmed from that Winter 2024 enrollment.
- The defendant, a collection agency, allegedly contacted the plaintiff in September 2024 and stated that if the debt was not paid, the college could withhold the plaintiff’s transcripts.
- The plaintiff argued those statements violated the FDCPA because new Department of Education rules that took effect in July 2024 prohibit schools from withholding transcripts tied to coursework paid for with federal financial aid. The plaintiff claimed the collection effort falsely represented the debt and threatened action that could not legally be taken.
The ruling: Judge Douglas Harpool of the District Court for the Western District of Missouri rejected that argument and granted the defendant’s motion to dismiss.
- The judge focused heavily on the wording of Department of Education regulations, which states schools must provide transcripts for payment periods in which institutional charges were paid or included in an agreement to pay.
- According to the ruling, the plaintiff’s own allegations established that the unpaid balance related to the Winter 2024 semester and did not show the debt had been paid or placed into an agreement to pay.
- The judge wrote: “The Court cannot say this statement by Defendant, as alleged in Plaintiff’s Complaint, was false, deceptive, or misleading as Benedictine College had a right to withhold Plaintiff’s transcript pursuant to payment or an agreement to pay.”
- The opinion also highlights a nuance that may interest compliance professionals. The court noted the regulation protects students only under certain circumstances and found the plaintiff had not shown she satisfied those conditions.
- Another interesting procedural wrinkle involved the defendant introducing public Department of Education records showing the college allegedly did not enter into a revised Program Participation Agreement incorporating the new transcript rule until after the collection communications occurred. While the judge allowed that argument and related public records to remain in the case, the court ultimately did not need to rely on it to dismiss the lawsuit.
