Open Letter to Mr. Arne Duncan, U.S. Secretary of Education

Student loan borrowers have lost the consumer protection rights. As the case described here indicates, the U.S. Department of Education is moving in the direction where it is trying to remove consumer protection rights from student loan applicants as well. If this becomes an accepted business practice, then when a student loan applicant fills in an application, the applicant owes the full amount applied for, plus interest and penalties. No proof is needed of actual borrowing of money. All the U.S. Department of Education needs, are guaranty agency internal records, and these internal records do not have to be related to actual borrowing and to relevant loan contracts. The U.S. Department of Education can use the powers granted to it against the loan applicant and treat the loan applicant as a borrower.

So, we live in a society where one government agency can make up lending and borrowing related paperwork and computer records at will, and another can then base its demands on that paperwork and computer records, and can proceed by using the special powers granted to it.

Is this what we want? Is this what you want?

As a follow-up I will add that I received a response to the letter posted below and sent out my response to that letter as well.

Contents

If You Have Applied for Student Loans, Be Very Careful

If you have ever filled in any student loan applications, be very, very careful. Save copies of all the paperwork – the longer, the better. Even if the student loan applicant does not receive the loans, or receives lesser amounts than he or she applied for, any number of years later the U.S. Department of Education may come after the applicant, demanding payments for the full amounts that the person had applied for in the loan applications.

The U.S. Department of Education may not validate the debt, and may not have any proof that the former student loan applicant actually borrowed the money. Instead, the U.S. Department of Education may require that the former student loan applicant must prove that he or she did not borrow the money.

If the former student loan applicant does not pay the demanded amounts, the U.S. Department of Education can send its army of business partners-collectors after the former applicant, and threaten to garnish wages, to put a lien on the property, to cease the tax returns, and to make the former applicant’s life miserable by contacting the applicant at work and at home, and his or her friends and relatives, until the applicant pays what is demanded from him or her.

Even though I live in the middle of Anti-Extortion Case 1 and have had to battle the U.S. Department of Education for over a year now, it is still hard for me to believe that this can actually happen in the U.S.

Background

In the first part of 1990-s I applied for college financial aid and student loans. The loan applications contain an area called Promissory Note, which I also had to sign as part of the loan application filling process.

I did receive grants as financial aid. I was in the U.S. on a temporary visa when I first attended school, and then on Green Card, without any work experience in the U.S., credit history, co-signer or collateral, and I did not qualify for most of the loans.

According to the U.S. Department of Education, in 1997, over a year after I graduated, a private lender submitted claims to the guaranty agency. Apparently, these claims were based on my loan applications. According to the U.S. Department of Education, the guaranty agency paid the private lender substantial amounts of money and in the process apparently also created its internal computer records regarding these transactions.

According to the U.S. Department of Education, in 2008 these computer records were transferred from the guaranty agency to the U.S. Department of Education.

So, the U.S. Department of Education has internal records and my loan applications.

Now the U.S. Department of Education is using the loan applications to demand money from me. These demands are accompanied by treats, which is how the U.S. Department of Education conducts such business. Even though most of the loan applications show that the lender did not approve the loans, the U.S. Department of Education claims that the loan applications are legally binding obligations to pay them the amounts that I applied for, and all that they need to support their demands are the guaranty agency internal records.

In 1996, after graduating from college, I lived for the most part in Europe for several years. I do acknowledge, that there may be an amount that I owe as student loans. However, that amount must be way smaller than is the amount that is demanded from me.

Abuse of Power and Extortion, or Business as Usual?

To me personally, the amount of money that I owe makes a difference, just like any debt would make. However, in the larger scale, the specific amount in question here does not matter as much. What matters more, is that we live in a society where one government agency can make up lending and borrowing related paperwork and computer records at will, and another can then base its demands on that paperwork and computer records, and can proceed by using the special powers granted to it.

The latter government agency, the U.S. Department of Education, insists that it does not have to validate its monetary demands. All it needs is the paperwork and computer records of a guaranty agency it works with.

The only paperwork that has been furnished to me as documents that I as loan applicant signed, are copies of incomplete parts of partially filled loan applications, which also indicate that the loans were not approved by the lender.

The U.S. Department of Education insists that this does not matter, and that I have to prove that I did not borrow the money that they demand from me.

The people at the U.S. Department of Education do not seem to see anything wrong with this picture.

Student loan borrowers have lost the consumer protection rights. As my case indicates, the U.S. Department of Education is moving in the direction where it is trying to remove consumer protection rights from student loan applicants as well. If student loan applicant filled in an application, the applicant owes the full amount applied for, plus interest and penalties. No proof is needed of actual borrowing of money. The U.S. Department of Education can use the powers granted to it against the loan applicant and treat the loan applicant as a borrower.

I consider this to be abuse of power and extortion. If you disagree, it would be interesting to know what the basis of your disagreement is.

Increasing number of people are tangled in the web of student loan problems. So, it is likely that sooner or later other people may get caught in situations that are similar to mine.

I believe that people, ordinary people, when they act together, can stop extortion.

The more people will take action against the abuse of power and extortion, the more likely it is that such acts will not become business as usual.

On my part, I am contributing to both furthering my case and to stopping extortion by publishing relevant materials on the Internet. The letter sent to Mr. Arne Duncan, U.S. Secretary of Education, that is published below, is part of this process.

Collection Agency Demanding Not to Be Contacted

Have you ever heard about instances where a collection agency first demands large amounts of money from a person, and then demands that the person cannot contact them any more, and can only contact their lawyer instead?

I had not, but this is what happened.

As is described in Anti-Extortion Case 1, in December of 2011 I received a collection letter from the U.S. Department of Education business partner, FMS Investment Corp. (dba FMS Services, aka Financial Management Systems, http://www.fmsdc.com), a private collection agency. FMS Services business name is deceptively similar to the Financial Management Service (or FMS, http://www.fms.treas.gov), a bureau of the United States Department of the Treasury. However, these are two different entities.

I responded on 12/16/2011, disputed the amount demanded from me and requested debt validation.

This dispute continued. However, in September of 2012 I received a letter from James K. Schultz of Sessions, Fishman, Nathan & Israel, L.L.C. law office, advising me that I should no longer contact FMS Investment Corp. directly, but should direct any future communication regarding FMS Investment Corp. to James K. Schultz.

Since then, I have had couple of communication instances with Fishman, Nathan & Israel, L.L.C. law firm. The tone of it has been civil.

My opinion of collection agencies is not high. However, I have to admit that FMS Investment Corp. management showed a relatively high level of intelligence. They saw that the probability of making any profit in this case is low, and the probability of incurring costs is high.

Low probability of making profit + High probability of losses = No interest in working on the case.

Thereafter the U.S. Department of Education assigned another collection agency to this case, Collection Technology, Inc. (CTI).

In a letter dated 12/03/12 I requested debt validation from CTI as well. Similarly to the previous handling of this case, I also instructed CTI not to contact me by phone, and that any communication with me must be handled via U.S. post Certified Mail with Return Receipt for positive verification of receipt. I need written correspondence for my record keeping.

Let’s see, what CTI will do and conclude, and how long the communication process with this collection agency will continue.

Open Letter Sent to the U.S. Department of Education

A copy of the letter published below was delivered to the following institutions and people:

  • Arne Duncan, U.S. Secretary of Education, USPS Delivery Confirmation 03120860000199344868
  • Anthony Miller, U.S. Deputy Secretary of Education, USPS Delivery Confirmation 03120860000199344875
  • Naomi Randolph, Special Assistant, Operations Services, Federal Student Aid, USPS Delivery Confirmation 03120860000199344899
  • James K. Schultz, Sessions, Fishman, Nathan & Israel, L.L.C., Attorneys at Law, USPS Delivery Confirmation 03120860000199344882
  • Chris E. Van Dellen, President, Collection Technology, Inc., USPS Delivery Confirmation 03122860000081309146
  • Collection Technology, Inc., USPS Delivery Confirmation 03122860000081309153

Mr. Arne Duncan, U.S. Secretary of Education

U.S. Department of Education

400 Maryland Avenue S.W.

Washington, DC 20202

Dear Mr. Duncan,

Thank you for your letter dated 11/12/12 that your assistant sent to me on your behalf regarding your demands for payments for student loans that I never received. Please note that this is an open letter which I will publish on the Internet, on StopExtortion.org so that it is accessible to the general public and to other institutions.

You sent me again internal documents, and, once again, you did not send me any necessary debt validation documentation. Unlike your internal documents, the necessary debt validation documentation would demonstrate and validate my receipt of the loans in the past.

I am still holding hope that we can resolve this dispute without legal action.

Further, I hope that we have one thing in common: we both want to agree on the actual amount of debt.

Because you are demanding money from me, and not the other way around, we need to establish a valid basis for your demands, before we can come to an agreement. We need to get beyond usage of circular arguments, where you just demand money, because you say that your internal documents show that you have the right to do so.

In order to increase the validity of your claims, I am asking you to demonstrate, step-by-step, that the transactions that you claim took place in the past, actually did take place. The amount of money that you are demanding from me certainly justifies this request.

Because I know that I did not borrow the money that you are demanding from me, I am also quite certain that somewhere in the sequence of transactions that you claim took place in the past are discrepancies, when we compare these transactions to the sequence of transactions that should have taken place in the case of actual borrowing, and when we compare existing documents to the documents that such actual borrowing transactions would have produced. My job is to find these discrepancies.

I will divide this letter into sections and parts numerically. Please respond to each numbered part that contains one or more questions. Similarly, please respond to each part that contains one or more statements that you dispute.

You Do Not Hold Promissory Notes – You Hold Loan Applications

1.1. As I stated before, in the first half of 1990s, after arriving from a completely different socio-economic environment, the Soviet Union, I did fill in student loan applications as I was instructed to do by the college that I attended. However, most of my loan applications were denied because I was in the U.S. on a temporary visa when I first attended school, and then on Green Card, without any work experience in the U.S., credit history, co-signer or collateral. As you already know, I received grants that helped to pay for my education.

The loan applications that I signed in the past do contain an area called Promissory Note. Further, I am not disputing that legally qualifying promissory notes are legally binding. Further, I am not disputing that if I would have borrowed the money that you demand from me, you most likely would be holding relevant legally binding documents.

However, I am disputing you having the legal right to turn unqualified documents into qualified documents simply by claiming that the documents that you hold or manufacture are qualifying documents.

1.2. You erroneously state that the U.S. Department of Education holds promissory notes signed by me. The loan applications that I signed do not qualify as promissory notes for the following reasons:

  • They are lacking the exact principal amount that has to be paid.
  • They do not contain due dates, and information on when and at what frequencies any money has to be paid.
  • They do not contain specific interest rates.

1.3. Question: Do you dispute, that these loan applications that I signed are lacking the information listed above in the part 1.2.?

1.4. Question: Would it have been possible for me to apply for student loans without signing the Promissory Note area of the loan application?

1.5. Question: If the loan applications that I signed lack the information that is necessary for qualifying them as promissory notes, then what makes these specific partially filled loan applications legally binging promissory notes in your opinion?

1.6. I have received from you only one sided copies of loan applications. The loan applications are referring to the other side of the application, but the other side of these applications is blank. If you have two sided loan applications that I have signed, please send me two-sided copies of these two-side applications. Until I have received such two-sided copies, I have only one-sided copies.

You Are Trying to Substitute Needed Documents with Manufactured Records

2.1. Question: Do you dispute, that the Notice of Loan Guarantee and Disclosure Statement documents that you sent me are based on the records of a loan guaranty agency associated with the U.S. Department of Education?

2.2. Question: Do you dispute, that the Notice of Loan Guarantee and Disclosure Statement documents that you sent me are not based on the actual loan contracts that I have signed in the past?

2.3. Question: If you claim, that the Notice of Loan Guarantee and Disclosure Statement documents that you sent me are based on the actual loan contracts that I have signed in the past, what proof do you have for making that claim?

2.4. If you claim, that the Notice of Loan Guarantee and Disclosure Statement documents that you sent me are based on the actual loan contracts that I have signed in the past, please send me copies of these loan contracts.

2.5. Some of the Notice of Loan Guarantee and Disclosure Statement that you sent me state that they have been reissued on 10/23/12.

2.6. Question: Do you dispute that parts of the Notice of Loan Guarantee and Disclosure Statement that you sent me as proof of validity of your demands were created just recently, on or around 10/23/12, by the guaranty agency associated with the U.S. Department of Education?

2.7. Questions: Were the Notice of Loan Guarantee and Disclosure Statement that were created on or around 10/23/12 based on the statements of previous Notice of Loan Guarantee and Disclosure Statements, and were these Statements created on or around 10/23/12 without having the actual signed loan contracts? If so, what prevented in the past someone at the guaranty agency from generating computer records and statements in a similar manner, at will, without having the actual loan contracts?

2.8. This illustrates the underlying problem that we have had from the beginning. Apparently, there is a disconnection between generating records based on signed loan contracts, and how the guaranty agency and the U.S. Department of Education operate. It seems that the guaranty agency associated with the U.S. Department of Education and the U.S. Department of Education are manufacturing records at will, and you then serve these manufactured records as if they were fully qualifying legal documents.

2.9. Question: If loan records are not based on actual signed and agreed on loan contracts, but can be manufactured at will, what makes these records legally valid documents in your opinion?

2.10. I graduated from Rhode Island College in May of 1996. In your previous correspondence to me, dated 07/27/12, your assistant stated that in 1997 the student loan guaranty agency stamped my loan applications and paid a private bank money based on the claims filed by that bank.

2.11. A claim filed does not necessarily mean that the claim has to be paid. Different kinds of entities file claims and may make errors, or may file fraudulent claims, or may make fraudulent payments.

2.12. Questions: How do you know, that the guaranty agency did not make these payments in error? If the guaranty agency operates without having copies of the actual loan contracts, what proof do you have, that the guaranty agency was supposed to make these payments?

2.13. Question: How do you know, when precisely the guaranty agency generated its original computer records and Notice of Loan Guarantee and Disclosure Statements?

2.14. Question: How do you know, whether the guaranty agency generated its computer records and Notice of Loan Guarantee and Disclosure Statements before making the payments to the private bank, or after making the payments to the private bank in 1997?

2.15. Questions: Are there any documents that show the claim that the private bank submitted to the guaranty agency? If so, please send me copies of these documents. If not, what proof do you have and how do you know that these transactions even took place, other than the guaranty agency records which could have been generated at will?

2.16. Question: If the private bank would not have submitted a claim and the guaranty agency would not have had to pay anything at all to a private bank, would the guaranty agency records regarding my alleged borrowing still exist? If your response to this question is affirmative, then how do you know that this is the case? We do not have any loan contracts or any other documents that we can use for validating your claims that I borrowed money. So, how do we know that without alleged payment to the private bank the guaranty agency would still have generated any records on my alleged borrowing of money?

Governing Laws, Existing Documents and Your Actions

3.1. In your letter to me dated 11/12/12 you stated the following:

  • A student borrower who has applied for a student loan and signed a promissory note for the requested loan should be aware that he or she has requested a loan. If the borrower then attends the school during the period for which the loan is intended and the proceeds of the loan are applied to the charges owed to the school or delivered to the student, the borrower is responsible for repaying the loan obligation.

Here you are using the word “borrower” so that you are suggesting the same conclusion that you are trying to prove – that the person borrowed money. A person who applies for student loans is an applicant, and is not a borrower until he or she actually borrows money.

The above illustrates the flawed, circular logic that is embedded in the arguments you make. You are assuming the very same thing that you are trying to prove, and then you proceed by building your arguments on these assumptions. More on this below.

3.2. Questions: Are you suggesting, that if I as a student filled in loan applications, but did not receive the loans, I still owe the money that I applied for? If so, are you suggesting that this provision or clause applies to student loans in general, or did this provision or clause apply only to some or all of the loans that I personally applied for?

3.3. Question: Are you suggesting that in accordance with the laws governing student loans and borrowing, a guaranty agency records serve as a legal substitute for a loan contract? If so, please specify which law and which specific part of that law states this.

3.4. Question: Are you suggesting that in accordance with the laws governing student loans and borrowing, a guaranty agency records serve as a legal substitute for a proof of loan distribution to the borrower? If so, please specify which law and which specific part of that law states this.

3.5. Question: If there is no law that clearly states that a guaranty agency records serve as a legal substitute for a loan contract and for a proof of loan distribution to the borrower, then what are you demands based on, other than partially filled in student loan applications and your records, which may not be accurate?

3.6. Questions: At the time when I applied for student loans, were there any additional documents that I would have had to sign, if I received the loans? If so, what specific documents would I have had to sign that would indicate that I received the loans that I applied for? Which specific documents would I have had to sign that would indicate that the money that I borrowed was used to pay for tuition? Which specific documents would I have had to sign that would indicate that the money was disbursed to me to cover any other expenses but the tuition?

3.7. In the first half of 1990s, Rhode Island College that I attended was a state owned relatively inexpensive school. For the most parts the cost of my education was covered with Pell Grant and with Rhode Island College Honors Grant. You do have information on this.

3.8. Question: Do you dispute that I received full Pell Grant and with Rhode Island College Honors Grant which covered most of the cost of the tuition?

3.9. If you dispute that I received full Pell Grant and with Rhode Island College Honors Grant that covered most of the cost of the tuition, then please show, which loans, or portions of the loans, were applied to the charges owed to the school for tuition.

3.10. Your records may be related to living expenses. However, I neither qualified for, nor received loans for that purpose.

Accordingly, you have not furnished any debt validation documents whatsoever that would demonstrate that any such money was ever paid to me – because such documents do not exist.

3.11. If you claim that I received money other than grants for covering the living expenses, then please show, which loans, or portions of the loans that I actually received were allocated for covering the living expenses.

3.12. If you claim that I received money other than grants for covering the living expenses, then please furnish documents that show how much money and when was dispersed to me as loans (and not as grants).

3.13. If you claim that I received money other than grants for covering the living expenses, then please furnish relevant signed loan contracts that contain the loan amounts, interest rates agreed on, due dates, and information on when and at what frequencies any money has to be paid to the lender.

Flawed Logic That Leads to Extortion

4.1. In your letter to me dated 11/12/12 you stated the following:

  • Although the “Application and Promissory Note” documents were not fully completed by the lender, our records indicate that the loans were approved and issued by the lender. Because the Department holds the promissory notes and other records supporting the existence of this debt, you have the burden to prove that the dept is not owed.

4.2. I am not disputing that your demands are based on your records. I am disputing the accuracy of your records. So far you have not provided any proof at all that your records are accurate and that your demands are valid – other than more of your own records.

4.3. Similarly, usage of circular logic illustrates your entire approach to this dispute. According to your correspondence, the loan applications were time stamped in 1997, over a year after I graduated. Apparently, either while I attended school, or after I had graduated, based on the loan applications, one or more loan guaranty agency employees associated with your institution created the records that you have. What the purpose of these actions was, that I do not know. Perhaps errors were made, or money was shifted around this way, and these actions may have been fraudulent.

Now, years later, you are making demands because your records indicate that you have the right to do so, and you provide manufactured records as a proof that you have the right to make such demands. At some point you must realize that what you do is not valid.

4.4. You continue to make monetary demands, accompanied by threats, without providing proof that money was borrowed. The only “proof” that you provide is what you call “your records.” At the same time you state that I have the burden to prove that I do not owe the amount of money to you that you are demanding from me, even though you are not providing any conclusive proof that your records are valid and accurate.

In the process, you use substantial governmental resources at your disposal to back up your threats.

You actions amount to the very definition of extortion.

The U.S. Department of Education Steps into the Shoes of the Lender

5.1. As far as loan eligibility determination and possible fraud are concerned, as I stated before (citing),

  • as assignees, the Guaranty Agencies and other secondary holders step into the shoes of the lender from whom they have taken the promissory notes and are subject to any defenses that the student/obligee may assert against the assignor/lender. See Jackson v. Culinary School of Washington, 788 F. Supp. 1233, 1248 n.9 (D.D.C. 1992), reversed on other grounds, 27 F.2d 573 (D.C. Cir. 1994), vacated, 515 U.S. 1139, on reconsideration, 59 F.3d 354 (D.C. Cir. 1995).
  • For full text see http://scholar.google.com/scholar_case?case=17364705146781432529

5.2. In your letter, you are trying to imply that the school, which told me that I did not qualify for the loans, was also responsible for determining my eligibility for the loans. The school does not claim that it holds the promissory notes. You claim that the U.S. Department of Education holds the promissory notes. I do not agree that the partially filled loan applications alone qualify as legally binding promissory notes. However, because you insist that they do, I hold the U.S. Department of Education responsible for the past student loan lending practices, for the eligibility determinations and for possible past fraud, and the above citation supports this position. Please note that the above citation is applicable to the time period the loans were made.

Further, I am suggesting here that in addition to applying to my case, this concept applies to many other people who share similar circumstances and from whom you have been demanding money in the past, are demanding money now, or will demand money in the future. Because you are forcing me to take legal action against you, I have to find such other people, so that we can file a class action lawsuit against you and, hopefully, share the relevant expenses.

You are needlessly forcing me down this path. Once I will be fully committed to taking legal action against you, I will also proceed with it until this matter is resolved successfully.

5.3. Similarly, you are fully responsible for your current extortion-like demands.

New Record in Extortion Claims – Is It Rooted in Greed and Desire for Power?

Mr. Duncan, I have to say that I personally find it reprehensible that the U.S. Department of Education makes money by holding people in what amounts to a contemporary version of involuntary servitude. I do have to point this out, because it seems that you want to impose similar conditions on me.

Further, it is especially reprehensible that most of your victims are young people who may sign documents and make commitments that they do not fully understand.

Again, I do have to point this out, because I believe that in the instances where your demands are disputed, you should be committed to furnishing the highest standards of proof that your demands are indeed valid. However, based on my case it seems that you have knowingly chosen to do the opposite – you operate by using shadowy records and invalid arguments.

Further, I have to point out in conjunction with the case addressed here, that I am not the only person who finds your leadership style alarming. Do an Internet search on your name and word extortion:

Arne Duncan extortion

You will find a record number of results that exceeds similar searches for any other current or past U.S. cabinet level government official.

Is this an accident, or is it a result of the record that you have created for the institution that you are leading?

Is this the legacy that you want for yourself?

Could it be, that the reason for this is that the student loan business is incredibly big and, when compared to many other current investment opportunities, until recently has been rather profitable? Because many other money making and governmental revenue sources have declined in their value, the importance of squeezing out as much as possible from student loan business may be even greater than before.

It is certain that year after year, your operations have rendered growing numbers of people into financial misery. Thus, your operations clearly do not serve the students very well. However, they do serve the interests of the lenders and debt collectors.

The U.S. Department of Education has its power, prestige and financial interests vested in the student loan business, and you are in charge of it. The more student loan borrowers you manage to generate, the higher is the number of people from whom additional money can be squeezed out. Defaulted student loans? Not a problem! You just add fees, costs, and whatever you want, and make even more money on the defaults! The U.S. Department of Education is proud to say that it collects over 80 cents on a dollar on defaults, which is lending industry record that nobody else can even get close to!

This is what I believe to be true. Please demonstrate that I’m wrong about this, and I will be happy to apologize.

However, either way, I do not owe you the money that you demand but I did not borrow.

Sincerely,

Thomas Eklund

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