In the
United States Court of Appeals
For the Seventh Circuit
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No. 14‐1806
BRYANA BIBLE, Individually and on Behalf of the
Proposed Class,
Plaintiff‐Appellant,
v.
UNITED STUDENT AID FUNDS, INC.,
Defendant‐Appellee.
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Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 13‐CV‐00575‐TWP‐TAB — Tanya Walton Pratt, Judge.
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DECIDED OCTOBER 5, 2015
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Before FLAUM, MANION, and HAMILTON, Circuit Judges.
On consideration of appellant’s petition for rehearing and
rehearing en banc, filed on September 1, 2015, no judge in
active service has requested a vote on the petition for rehear‐
ing en banc, and all judges on the original panel have voted
to deny the petition. Accordingly, the petition for rehearing
is DENIED.
2 No. 14‐1806
EASTERBROOK, Circuit Judge, concurring in the denial of
rehearing en banc. If default on a student loan causes the
lender to collect on a federal guaranty, the borrower must
pay “reasonable collection costs” to curtail the expense to the
Treasury. 20 U.S.C. §1091a(b)(1). A federal regulation none‐
theless provides that a borrower who signs (and complies
with) a “repayment agreement,” thus reimbursing the guar‐
antor, need not add collection costs to the debt. 34 C.F.R.
§682.410(b)(5)(ii)(D).
Bryana Bible stopped paying her student loan but later
agreed to a rehabilitation program, governed by 34 C.F.R.
§682.405, under which she paid $50 a month (not enough to
cover even half of the monthly interest) in anticipation that
she would eventually resume making full payments, after
which the note would be sold to a new private lender. When
signing the rehabilitation contract, Bible promised to pay
collection costs that could not exceed 18.5% of her loan.†
But when the holder of her note sought to recover those
costs, Bible replied with this suit characterizing the effort as
a form of mail or wire fraud and seeking millions of dollars
in damages under RICO, even though the guaranty funds
† Two paragraphs of the rehabilitation agreement address collection
costs. One reads: “Once rehabilitation is complete, collection costs that
have been added will be reduced to 18.5% of the unpaid principal and
accrued interest outstanding at the time of Loan Rehabilitation. Collec‐
tion costs may be capitalized at the time of the Loan Rehabilitation by
your new lender, along with outstanding accrued interest, to form one
new principal amount.” The other, appearing immediately above the
signature block, reads: “By signing below, I understand and agree that
the lender may capitalize collection costs of 18.5% of the outstanding
principal and accrued interest upon rehabilitation of my loan(s).”
No. 14‐1806 3
have not been repaid and the premise of §682.410(b)(5)(ii)(D)
has not been fulfilled. She contends that a rehabilitation
agreement under §682.405 must be treated the same as a re‐
payment agreement under §682.410 and that, by treating
these two programs differently, United Student Aid Funds
has committed thousands of federal felonies—at least one
per borrower. Bible also contends that United Student Aid
Funds must pay damages for breach of contract, even
though her original loan agreement and her rehabilitation
agreement permit the lender to assess collection costs. Re‐
versing the district court, the panel held that Bible’s suit may
proceed on both the RICO and contract claims.
Each member of the panel wrote separately. The lead
opinion, by Judge Hamilton, concludes that the addition of
collection costs to a loan in rehabilitation is forbidden be‐
cause every “rehabilitation agreement” is a “repayment
agreement.” Judge Manion, in dissent, concludes that a “re‐
habilitation agreement” is not a “repayment agreement.”
The two kinds of agreements are governed by separate regu‐
lations, and “rehabilitation” does not produce “repayment”
when it doesn’t even cover ongoing interest. Judge Flaum
saw merit in both of these views and wrote that:
Judge Manion, in his dissent, makes a strong
case for the proposition that the two concepts
are separate and distinct, and thus, that the re‐
payment agreement provisions of [34 C.F.R.]
§682.410(b)(5)(ii) do not apply to the loan reha‐
bilitation program described in 34 C.F.R.
§682.405. Indeed, the Department of Educa‐
tion’s website lists “Loan Repayment” and
“Loan Rehabilitation” as independent options
4 No. 14‐1806
for “getting your loan out of default.” [Citation
omitted.] Moreover, there is no cross‐reference
or other textual indication in the regulations
suggesting that the rehabilitation agreements
described in §682.405 constitute repayment
agreements “on terms satisfactory to the agen‐
cy” under §682.410(b)(5)(ii), such that a reha‐
bilitation agreement might fall within the
scope of §682.410(b)(5)(ii)’s exception to the
general rule that collection costs will be as‐
sessed against borrowers in default. Rather, the
sole reference to collection costs in §682.405
appears to assume the assessment of collection
costs in the rehabilitation context. See
§682.405(b)(1)(vi)(B) (explaining that the guar‐
anty agency must inform a borrower entering
into a rehabilitation agreement “[o]f the
amount of any collection costs to be added to
the unpaid principal of the loan when the loan
is sold to an eligible lender, which may not ex‐
ceed 18.5 percent of the unpaid principal and
accrued interest on the loan at the time of the
sale”).
Slip op. 50–51. But Judge Flaum thought that the court is re‐
quired by Auer v. Robbins, 519 U.S. 452 (1997), to accept the
agency’s view that collection costs may not be assessed
against borrowers who sign rehabilitation agreements—even
though this view was announced in a brief filed as amicus
curiae in this suit and contradicts some earlier statements by
the Department of Education (although it is arguably con‐
sistent with the position taken in one filing in one district
court in 2004 but never laid out in the Federal Register or
No. 14‐1806 5
another place the regulated industry might access; compare
Judge Hamilton’s conclusion, slip op. 28–29, with Judge
Manion’s, slip op. 66–70).
The petition for rehearing en banc asks the court to con‐
sider whether Auer supports the Secretary’s current position,
when applied to conduct that predates the Secretary’s amicus
brief. That is a substantial and potentially important ques‐
tion, but an antecedent issue is whether Auer is sound. In
concurring opinions to Perez v. Mortgage Bankers Association,
135 S. Ct. 1199 (2015), three Justices (including Auer’s author)
expressed deep reservations about deferring to the position
an agency adopts through means other than rulemaking. See
also Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156
(2012); John F. Manning, Constitutional Structure and Judicial
Deference to Agency Interpretations of Agency Rules, 96 Colum.
L. Rev. 612 (1996).
I do not think that it would be a prudent use of this
court’s resources to have all nine judges consider how Auer
applies to rehabilitation agreements, when Auer may not be
long for this world. The positions taken by the three mem‐
bers of the panel show that this is one of those situations in
which the precise nature of deference (if any) to an agency’s
views may well control the outcome.
The petition for rehearing does not contend that this liti‐
gation meets the standards for en banc review independent
of the Auer question. None of the other circuits has consid‐
ered whether repayment and rehabilitation agreements
should be treated the same for the purpose of collection costs
under §1091a(b)(1). Indeed, legal issues about the student‐
loan program rarely arise in any circuit outside of bankrupt‐
cy litigation. But an agency’s (or litigant’s) invocation of Auer
6 No. 14‐1806
deference is a frequent occurrence, and one whose effects
this litigation illuminates—for deference has set the stage for
a conclusion that conduct, in compliance with agency advice
when undertaken (and consistent with the district judge’s
view of the regulations’ text), is now a federal felony and the
basis of severe penalties in light of the Department’s revised
interpretation announced while the case was on appeal.