Full opinion text
TABLE OF CONTENTS I. Introduction and Analysis. 1239-1240 II. The Secretary’s Motion to Dismiss Shall be Granted in Part and Denied in Part A. Given the Secretary’s Own Policy Statements, Plaintiffs May Defend Against Collection by the Secretary on the Basis of an Alleged Origination Relationship Between the Lenders and CSW 1241 B. Plaintiffs Have Adequately Alleged an Estoppel Against the Secretary Due to the Alleged Agency Relationship Between the Secretary and CSW. 1241-1244 C. The Higher Education Act Does Not Wholly Preempt State Law Governing the Enforceability of Student Loan Promissory Notes 1244-1246 1. Plaintiffs Have Stated a Cause of Action Under D.C.Code § 28-3809(a)(3) and the Secretary’s Motion to Dismiss This Claim Shall Be Denied. 1246-1248 2. Although the FTC Holder Rule Does Not Provide Plaintiffs Relief as a Matter of Federal Law, Plaintiffs Have Stated a Claim for Failure to Include the Notice of Defenses Clause Pursuant to D.C.Code § 28-3904 and the Motions to Dismiss Shall Be Denied. 1248-1253 3. Plaintiffs Have Failed to State a Claim Upon Which Relief Can be Granted With Respect to D.C.Code § 28-3808 and the Defendants’ Motions to Dismiss Shall Be Granted. 1253-1255 4. Plaintiffs Have Failed to State a Claim Upon Which Relief Can be Granted Under D.C.Code § 28-3807 and the Defendants’ Motions to Dismiss these Claims Shall Be Granted. 1255 5. Plaintiffs Have Failed to State a Cause of Action Pursuant to the D.C. Licensing Regulations for Proprietary Schools and the Defendants’ Motions to Dismiss these Claims Shall Be Granted. 1255-1256 D. Because Plaintiffs Do Not Have a Private Cause of Action Under the Higher Education Act as a Matter of Law, These Claims Against the Secretary Shall Be Dismissed. 1256-1259 E. Plaintiffs Cannot Assert Claims Against the Secretary on the Basis of an Ultimate Lender Theory. 1259 III. The Guaranty Agencies’ Motions to Dismiss Shall be Granted in Part and Denied in Part A. Plaintiffs Do Not Have a Private Right of Action Against the Guaranty Agencies Under the HEA. 1260 B. Because Plaintiffs Cannot Assert Claims Against the Guaranty Agencies on the Basis of an Origination Relationship, the Court Shall Dismiss these Counts of the Complaint with Respect to the Guaranty Agencies. 1260-1263 IV. The Lenders’ Motions to Dismiss Shall Be Granted in Part and Denied in Part. 1263-1264 V.Pursuant to Fed.R.Civ.P. 12(b)(6), the Court Shall Dismiss the Complaint Against Sallie Mae, Without Prejudice. 1264-1265 VI.Conclusion. 1265-1266 OPINION CHARLES R. RICHEY, District Judge. I. INTRODUCTION AND ANALYSIS This is a putative class action in which Plaintiffs, former students at the now-defunct Culinary School of Washington (hereinafter, “CSW” or “the school”), seek declaratory and injunctive relief against the Secretary of Education (“Secretary”), Cres-tar Bank, First National Bank of Toledo, certain State and private Guaranty Agencies and the Student Loan Marketing Association (“Sallie Mae”). Plaintiffs contend that the school not only promised educational training in the culinary arts but employment opportunities thereafter for its students. According to the Plaintiffs, the school fraudulently misrepresented its facilities and the strength of its educational program, and thereby fraudulently induced the students to take out GSLs. Complaint at 25, ¶ 59. Plaintiffs are now in default on these student loans. In this action, Plaintiffs seek declaratory and injunctive relief such that their student loans would be null and void and subject to various federal and state law claims and defenses. At bottom, the Plaintiffs contend that the Court should prevent the Secretary, the Guaranty Agencies, the lenders and Sallie Mae from collecting on these loans because the GSLs were extended to the students herein despite the fact that “the Secretary, the guaranty agencies and the banks all knew or had reason to know that CSW was ineligible for the GSL program.” Complaint at 43, 11158. The Court has been inundated with papers by all parties. In view of the importance and complexity of these issues, this is not surprising. The Plaintiffs’ 102-page Complaint asserts numerous causes of action and is hardly the model of clarity. The Secretary of Education, the Guaranty Agencies, the lenders and Sallie Mae have predictably filed voluminous Motions to Dismiss the various and sundry claims. Rule 12 of the Federal Rules of Civil Procedure “streamlines litigation by dispensing with needless discovery and factfinding.” Neitzke v. Williams, 490 U.S. 319, 109 S.Ct. 1827, 1832, 104 L.Ed.2d 338 (1989). In particular, “Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law.” Id. However, in determining whether the Plaintiffs have failed to state a claim as a matter of law, the Court must construe the Complaint liberally, granting the Plaintiffs “the benefit of all inferences that can be derived from the facts alleged.” Schuler v. United States, 617 F.2d 605, 608 (D.C.Cir.1979) (quoting Jenkins v. McKeithen, 395 U.S. 411, 421, 89 S.Ct. 1843, 1848, 23 L.Ed.2d 404 (1969)). Prior to evaluating the Defendants’ respective Motions to Dismiss, it is important to outline the basic structure of the GSL program in which the Plaintiffs participated. A student meeting the prescribed needs test may obtain a GSL. See 20 U.S.C. §§ 1087kk-1087uu (1986). However, GSLs are available only if the student attends an “eligible institution” as defined by 20 U.S.C. §§ 1085(a)-(c). CSW was deemed an eligible institution and entered into a program participation agreement with the Secretary. Pursuant to the GSL program, Plaintiffs executed promissory notes with private lenders, such as the Defendants Crestar and First National Bank of Toledo. Non-profit Guaranty Agencies and the Secretary subsidized the program by guaranteeing payment to the private lenders in the event of a student’s default on the loan. See 20 U.S.C. §§ 1078, 1087. In the event of default, the private lender may assign the loan to the Guaranty Agency and the Guaranty Agency could begin collection efforts against the student. Pursuant to the Secretary of Education’s contractual reinsurance agreements with the Guaranty Agencies, the Secretary could receive an assignment of the loan and could then undertake collection efforts upon reimbursing the Guaranty Agencies for any losses incurred on the defaulted loan. See 20 U.S.C. § 1078; 34 C.F.R. § 682.410(b)(4). In this action, the Plaintiffs seek to halt the collection efforts of the lenders, the Guaranty Agencies and the Secretary under a variety of theories. In evaluating the Defendants’ respective Motions to Dismiss, the Court must determine whether the Plaintiffs have stated a basis upon which to defend against the collection of their student loans. II. THE SECRETARY OF EDUCATION’S MOTION TO DISMISS SHALL GRANTED IN PART AND DENIED IN PART Upon consideration of the claims herein with respect to the Defendant Secretary of Education, the Court finds that the Plaintiffs have stated causes of action against the Secretary with respect to the alleged origination relationship between CSW and the lenders; D.C.Code § 28-3809(a)(3) (1981); D.C.Code § 28-3904 (1981); and on the basis of an estoppel due to the alleged agency relationship between the school and the Secretary. Accordingly, the Secretary’s Motion to Dismiss shall be denied with respect to these claims. However, the Secretary’s Motion to Dismiss shall be granted with respect to all claims under the Higher Education Act, 20 U.S.C. § 1070 et seq.; D.C.Code § 28-3808 (1981); D.C.Code § 28-3807 (1981); D.C.Mun.Regs. tit. 16, §§ 1212.1, 1212.2; the “ultimate lender theory”; and Plaintiffs’ estoppel claims with respect to the actions of the Secretary himself and the Guaranty Agencies. A. Given the Secretary’s Own Policy Statements, Plaintiffs May Defend Against the Secretary’s Collection Efforts When There Exists an Origination Relationship Between the Lender and the School. Plaintiffs seek to assert claims arising out of CSW’s alleged wrongdoing against the Secretary on the basis of an alleged “origination” relationship between the lenders and CSW as defined by federal law. Complaint at 72, ¶ 266(a); id. at ¶ 174 (alleging the existence of an origination relationship between CSW, and the banks). In various letters and policy statements, the Secretary has promised to abstain from collection of those defaulted student loans arising from an origination relationship. See Complaint at' 30, ¶ 81. The Secretary’s position is evidenced in a July 21, 1988 letter from Dewey L. Newman, Deputy Assistant Secretary for Student Financial Assistance at the DOE, to the Commissioner of Education at the Texas Education Agency: If a loan is not legally enforceable, it is not insurable by the Department, and the Department would not encourage or require a lender or guaranty agency to attempt to collect such a loan. As a legal matter, however, a student who borrows under the GSL program from a third party lender remains responsible for repaying the loan even if the school closes, unless a relationship exists between the lender and the school that would make the school’s failure to render educational services a defense to repayment of the loan to the lender.... The agency has termed such an agency rela-origination relationship.” 34 C.F.R. § 682.200. tionship an Ex. 2, attached to Complaint. The Secretary acknowledges the existence of this long-standing policy in his Motion to Dismiss. See Secretary’s Motion to Dismiss at 14. Given that the Secretary has unequivocally expressed an intention to be bound by these statements, the students may assert school-based claims arising out of an origination relationship against the Secretary. See Tipton v. Secretary of Education, 768 F.Supp. 540, 570 (S.D.W.Va., 1991). Cf. Morton v. Ruiz, 415 U.S. 199, 235, 94 S.Ct. 1055, 1074, 39 L.Ed.2d 270 (1974) (agency obligated to adhere to its own internal guidelines). Vietnam Veterans v. Secretary of the Navy, 843 F.2d 528, 538 (D.C.Cir.1988). B. Plaintiffs Have Adequately Alleged a Basis for an Estoppel Against the Secretary Due to the Alleged Agency Relationship Between the Secretary and CSW. According to the Plaintiffs, the Secretary “as the principal in all the transactions with the named Plaintiffs and members of the class, is responsible for the acts of its agents, the Guaranty Agencies and CSW.” Complaint at 76, 11270. Plaintiffs disavow any attempt to impose liability upon the Secretary in tort. See Pl.Opp. at 70. However, Plaintiffs apparently proceed under a contract theory of fraudulent inducement or under principles of equitable estoppel. Id. The Secretary moves to dismiss these claims, arguing that the Plaintiffs cannot, as a matter of law, posit the existence of an agency relationship between the Secretary and CSW and the Guaranty Agencies. See Secretary’s Reply at 24. Upon consideration of the arguments, the Court must deny the Secretary’s Motion to Dismiss the Plaintiffs’ estoppel claims arising from the alleged agency relationship between CSW and the Secretary. However, the Court shall grant the Secretary’s Motion with respect to the remaining estoppel claims and shall dismiss the estop-pel claims with respect to the alleged wrongdoing of the Secretary himself and the Guaranty Agencies. The Secretary first contends that the agency issue is of limited importance because the Secretary has already agreed to forbear from collecting loans determined to be legally unenforceable under applicable state law. In the Secretary’s view, the agency argument would address “only ... those loans held to be legally enforceable.” Secretary’s Reply at 24, n. 27. The Secretary’s attempt to mitigate the impact of the agency argument fails. If CSW or the Guaranty Agencies are, in fact, agents of the Secretary, then the Secretary, as a principal, may be charged with the alleged misrepresentations of these agents as a matter of law. See, e.g., 3 C.J.S. Agency § 401, at 238-240 (1973). Thus, the existence of an agency relationship with the Secretary may influence the Secretary’s ability to enforce the underlying loan contracts because the agent’s misrepresentations may well spawn a defense to the Secretary’s collection efforts. Id. The Secretary vociferously challenges Plaintiffs’ attempt to define CSW or the Guaranty Agencies as agents of the Secretary. In his reply, the Secretary abandoned the analogy to the Federal Tort Claims Act and instead sought to show that the Plaintiffs could not, as a matter of law, make out an agency relationship. According to the Secretary, Plaintiffs failed to “identify a task or function that the Department as a principal performs, and show that this function was delegated by the Department” to CSW. Secretary’s Reply at 24. This defense to the Plaintiffs’ agency claim is weak. Contrary to the Secretary’s contention, the Plaintiffs do identify certain functions which the Secretary performs, such as administration of the HEA, which are delegated to the participating schools. See, e.g., Complaint at 23-24, ¶ 51 (by regulation, the Secretary designated each school as a “fiduciary of the Secretary in administering Higher Education Act programs"); id. at 24-25, if 56 (Secretary paid CSW an administrative cost allowance). Second, the Secretary incorrectly assumes that an agency relationship cannot exist when a private entity, such as CSW or a Guaranty Agency, undertakes the performance of tasks at the request of the government pursuant to a government program. The Supreme Court has frequently described independent entities which provide administrative assistance to the government as “agents” of the government. Heckler v. Community Health Services, 467 U.S. 51, 104 S.Ct. 2218, 81 L.Ed.2d 42 (1984), is among those Supreme Court cases. In Community Health Services, the Court described the Travelers Insurance Company, which was serving as a fiscal intermediary in the Medicare program, as a “responsible Government agent.” 467 U.S. at 51, 104 S.Ct. at 2218. In fact, the Court referred to agency principles throughout the Community Health Services Opinion. Thus, the Court cannot dismiss this claim under Fed.R.Civ.P. 12(b)(6) on the Secretary’s bald assertion that an agency relationship cannot arise pursuant to a federal program. The existence of an agency relationship is ordinarily a question of fact which, depending upon the existence of any disputed issues of material fact, is more appropriately addressed on summary judgment or at trial. See, e.g., Henderson v. Charles E. Smith Management, Inc., 567 A.2d 59, 62 (D.C. 1989). Plaintiffs charge that the Secretary is “estopped from insulating [himself] from the school-related claims and defenses of the students as a result of [his] pattern of control as hereinbefore alleged.” Complaint at 74, ¶ 268. Plaintiffs make this estoppel claim “based on the statements of the Defendants’ agent, CSW, and based on the omissions of the Defendants themselves.” Pl.Opp. at 59-60. The Secretary has moved to dismiss this claim, contending that equitable estoppel cannot lie against the Government because, inter alia, Plaintiffs have not, and cannot, allege affirmative misconduct on the part of the Secretary. See Secretary’s Motion at 25-30. The Secretary also moves to dismiss the estoppel claims made with respect to the actions of CSW and the Guaranty Agencies as alleged agents of the Secretary. The Secretary is correct that the Complaint does not support an estoppel claim with respect to actions performed by the Secretary himself. In order to successfully maintain an estoppel claim against the government, Plaintiffs must demonstrate the existence of an egregious injustice and must convince the Court that estopping the government will not cause undue damage to the public interest. See, e.g., Int’l Org. of Masters v. Brown, 698 F.2d 536, 551-552 (D.C.Cir.1983). Moreover, the Plaintiffs may assert an estoppel claim against the government only in the event of affirmative misconduct by the government or its agents. See Office of Personnel Management v. Richmond, 496 U.S. 414, 110 S.Ct. 2465, 2469-2470, 110 L.Ed.2d 387 (1990) (although equitable estoppel “will not lie against the Government as against private litigants,” the Court recognized that “some type of affirmative misconduct might give rise to an estoppel against the government”). Plaintiffs have not made an allegation of affirmative misconduct with respect to the Secretary’s own actions. Even if the Secretary “knew or should have known” that CSW was not technically eligible to participate in the GSL program, see Complaint at 43, II158, this allegation is not tantamount to an allegation of affirmative misconduct by the Secretary. The Court cannot, as a matter of law, infer affirmative misconduct from the Secretary’s inaction. As explained in Section I.D., infra, the Secretary has broad enforcement prerogatives and may decline to suspend a school for policy reasons. However, Plaintiffs have stated an estoppel claim against the Secretary with respect to the acts of the Secretary’s alleged agent, CSW. The Plaintiffs have alleged affirmative misconduct on the part of CSW. See Complaint at Counts IV and V. This alleged misconduct implicates the school’s educational program as well as the school’s compliance with the HEA rules and regulations. See Complaint at 11-12, ¶ 2 (CSW flaunted the rules and failed to properly credit and calculate student refunds). Moreover, the Plaintiffs have alleged that they “were induced by CSW’s false and misleading representations to take out guaranteed student loans.” Complaint at 25, ¶ 59. Assuming for purposes of the instant Motion to Dismiss that CSW is the agent of the Secretary, these estop-pel claims may proceed.' Although, as explained above, the Plaintiffs have alleged the existence of an agency relationship between the Secretary and the Guaranty Agencies sufficient to withstand a motion to dismiss, the Court must dismiss the Plaintiffs’ estoppel claim with respect to the alleged action or inaction of the Guaranty Agencies. In order to withstand a motion to dismiss the estoppel claim, the Complaint must allege (1) that the Guaranty Agencies made a false representation or wrongly concealed material facts; (2) that the Guaranty Agencies intended for the students to act upon this representation or omission; (3) that the Guaranty Agencies had knowledge of the misrepresentation or omission; (4) that the students did not have knowledge of the actual situation; and (5) that the students reasonably relied upon the misrepresentation or omission to their detriment. See, e.g., Int’l Org. of Masters v. Brown, supra; Perpetual Bldg. Ltd. Partnership v. District of Columbia, 618 F.Supp. 603 (D.D.C.1985). Plaintiffs cannot make out an estop-pel claim with respect to the acts or omissions of the Guaranty Agencies because, by Plaintiffs’ own admission, the Guaranty Agencies did not make any statement or representation upon which the students could have placed reliance. See Complaint at 37, If 119 (“the consumer never met with, or talked to, anyone from the banks or guaranty agencies”). In fact, the students did not even know of the Guaranty Agencies’ existence at the time these transactions were consummated. See Id. (“As a result of this regulatory framework, the class members had no knowledge that any entity was involved in the guaranteed student loan except ‘the government’ [Defendant Secretary of the U.S. Department of Education] and the school”). In light of the utter lack of contact between the Plaintiffs and the Guaranty Agencies, the Complaint fails to state an estoppel claim with respect to the Guaranty Agencies as a matter of law. See Banze v. American Int’l Exports, Inc., 454 A.2d 816, 818 (D.C.1983). Plaintiffs’ resort to the equities and pleas to prevent manifest injustice cannot not salvage an estoppel claim which falls short of the required technical elements. American Savings v. Bell, 562 F.Supp. 4, 9 (D.D.C.1981). C. The Higher Education Act Does Not Wholly Preempt State Law Governing the Enforceability of Student Loan Promissory Notes. Plaintiffs also challenge the enforceability of the student loan promissory notes on the basis of state law. See Complaint at 72-74, ¶¶ 266(b), (g) (claims against all defendants); id. at 77, 11274 (Guaranty Agencies). Although the Secretary concedes that the Higher Education Act, 20 U.S.C. § 1070, et seq., does not close off state law contract remedies, the Secretary contends that none of the D.C. statutes are applicable to the case at bar. For the reasons indicated below, the Court finds that state law defenses are available to student borrowers. However, the Court shall deny the Secretary’s Motion to Dismiss the state law defenses asserted by the Plaintiffs herein with respect to D.C.Code § 28-3809(a)(3) and § 28-3904 (1981). The Secretary’s Motion to Dismiss the remaining state law claims pursuant to D.C.Code §§ 28-3808, 28-3807, and D.C.Mun.Regs., tit. 16, §§ 1212, shall be granted, however. The 85-page Opinion issued by Judge Copenhaver in Tipton v. Secretary of Education, supra, exhaustively discusses the preemption issue presented herein. Upon analyzing California Fed. Sav. & Loan v. Guerra, 479 U.S. 272, 280-81, 107 S.Ct. 683, 689, 93 L.Ed.2d 613 (1986) and United States v. Kimbell Foods, Inc., 440 U.S. 715, 99 S.Ct. 1448, 59 L.Ed.2d 711 (1979), the Tipton Court correctly concluded that the HEA does not explicitly preempt state law defenses, and that the statute, the legislative history and the agency’s subsequent regulations leave certain matters to be regulated by the states. However, as the Tipton Court found, state law is preempted to the extent that it would “stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,” Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941), or to the extent that compliance with both federal and state law would be impossible. See Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-143, 83 S.Ct. 1210, 1217-1218, 10 L.Ed.2d 248 (1963). Given the range of the Tipton opinion, there is no need for a full exegesis of the case law and regulatory framework. Rather, the Court shall address the arguments advanced by the Guaranty Agency and lender Defendants in opposition to the Tipton ruling and shall apply the Tipton standards to the District of Columbia law. First, the Guaranty Agency and lender Defendants contend that the HEA occupies the student loan field. According to these Defendants, Congress did not intend for Plaintiffs to resort to state law because Congress specifically addressed the potential for school misconduct by providing for administrative remedies. See HEAF Motion to Dismiss at 15-16. This claim is not convincing. Although the HEA did not provide Plaintiffs with a remedy to prosecute school wrongdoing as a matter of federal law, the HEA and its implementing regulations do not divest Plaintiffs of any contract-based defenses. See Tipton, supra, 768 F.Supp. at 553-560. See generally 20 U.S.C. § 1077(a)(2)(A) (federal government can insure only those Stafford loans which are valid obligations “under the applicable law”). See also 34 C.F.R. § 682.206(d)(1) (1986) (lenders in the GSL program “shall obtain from the borrower an executed legally-enforceable promissory note for each loan”). Congress delineated which state contract laws would be preempted and, by implication, suggested that the remaining contract defenses would lie. Finally, as Tipton, supra, 768 F.Supp. at 553, pointed out, there is no indication that Congress meant to exclude from liability those lenders which had a close connection to a participating school, provided that the close connection is not purely a product of the HEA itself. In short, because Congress did not manifest any desire to deprive consumers of student loans of their traditional state-based contract remedies, Defendants cannot overcome the “presumption against finding pre-emption of state law in areas traditionally regulated by States.” California v. ARC America Corp., 490 U.S. 93, 109 S.Ct. 1661, 1665, 104 L.Ed.2d 86 (1989). See also Hillsborough County v. Automated Medical Laboratories, Inc., 471 U.S. 707, 716, 105 S.Ct. 2371, 2376, 85 L.Ed.2d 714 (1985); Florida Lime & Avocado Growers, supra, 373 U.S. at 146, 83 S.Ct. at 1219 (regulation to prevent deception of consumers is within the power traditionally reserved to states). The Guaranty Agency and lender Defendants also protest that the Tipton Court ignored the commercial realities of the GSL program. See HEAF Motion, supra, at 14. According to these Defendants, application of state law contract defenses “would convert student loans into an investment nightmare.” Id. at 17. These claims are also not well-founded. Although the GSL program depends upon the infusion of capital from the private sector, the program is not designed to insulate wayward lenders and Guaranty Agencies from liability stemming from fraudulent activities or unfair business practices. Rather, as the Tipton Court explained, the HEA permits students to proceed under state law if the actions or omissions of the lender or Guaranty Agency would render recission of the underlying promissory note appropriate. See Tipton, supra, 768 F.Supp. at 560-563. See Veal v. First American Sav. Bank, infra, 914 F.2d at 914-915, n. 1 (dicta) (“[I]f sued by a lender in state court for collection of one of these [GSL] loans, each of these plaintiff students would be entitled to assert any defenses available under state law that are applicable to his or her particular loan”). Allowing students to protect themselves from vendors who abuse the GSL program comports with broad social purposes advanced by the HEA. Cf. United States v. Griffin, 707 F.2d 1477, 1482-1483 (D.C.Cir.1983) (preserving students’ state law defenses for FISLP loans “seems a sound way to protect the interests of student borrowers and to deter lenders from abusing the program”). The lenders and Guaranty agencies’ argument also proceeds on the erroneous premise that “lenders have been encouraged to make funds available to the program around the country without being burdened by oversight responsibilities that may apply in other consumer loan situations.” HEAF Motion, supra, at 20. The Defendants do not specify the onerous oversight responsibilities which allegedly inhere in the “other consumer loan situations.” In fact, this claim completely ignores the Defendants’ due diligence responsibilities under the HEA for which they may be subject to civil liability. See 20 U.S.C. § 1082(h); 34 C.F.R. §§ 682.206-208; 682.411. While the federal government endeavored to make the student loan program an attractive investment for private lenders, nothing in the statute or its legislative history suggests that the government endeavored to protect lenders and Guaranty Agencies from the litigation risks inherent in the business of extending and collecting loans. Lending institutions and other commercial entities can rarely avoid the risk of lawsuits in which the law of another state might govern the outcome. To the extent possible, the govern-merit’s loan guarantee already compensates for the inability to raise interest rates, to impose additional closing costs, or to otherwise cover the costs associated with default or legal challenge to the enforceability of the promissory note. Finally, the lenders and Guaranty Agencies point to 20 U.S.C. § 1082(g)(5) which provides, in relevant part, that: If a loan affected by a violation, failure, or substantial misrepresentation is assigned to another holder, the lender or guaranty agency responsible for the violation, failure, or substantial misrepresentation shall remain liable for any civil money penalty provided under paragraph (1) of this subsection, but the assignee shall not be liable for any such civil money penalty. (emphasis added). According to these Defendants, this provision incapacitates the students’ efforts to rescind the loan contract or to seek other money penalties from the assignees of a loan due to a lender’s wrongdoing. See HEAF Motion, supra, at 21. Although the District Court in Graham, infra, 125 F.R.D. at 693, credited this argument, this Court finds that the Defendants’ argument does not pass muster. See Tipton, supra, 768 F.Supp. at 556, n. 31 (declining to follow Graham Court’s analysis of this provision). Section 1082(g)(5) does not address contract-based defenses at all. By its own terms, this provision only speaks to the transferability of a “civil money penalty provided for under paragraph (1) of this subsection.” Thus, § 1082(g)(5) provides that a subsequent holder is not responsible for a prior holder’s violation of the statute or regulations, absent a specific finding by the Secretary to that effect pursuant to the procedures established by § 1082(g)(1). Had Congress wished to insulate subsequent assignees from all liability arising from the actions of the prior holder, Congress would have omitted the specific reference to the “civil penalties provided by paragraph (1)” in favor of a provision much broader than the current version of § 1082(g)(5). At bottom, the language of the statute clearly suggests Congress’ intent not to enact the type of blanket immunity which the Defendants seek herein. See, e.g., Consumer Products Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980) (“[T]he starting point for interpreting a statute is the language of the statute itself. Absent a clearly expressed legislative intent to the contrary, the language must ordinarily be regarded as conclusive.”) 1. Plaintiffs Have Stated A Cause of Action Pursuant to D.C.Code § 28-3809(a)(3) and the Secretary’s Motion to Dismiss this Claim Shall Be Denied. Plaintiffs seek to assert state law claims and defenses against all Defendants pursuant to D.C.Code § 28-3809 (1981). See Complaint at 72-73, II 266(b) (against all Defendants); id. at 77-78, ¶ 274 (only against Guaranty Agencies). D.C.Code § 28-3809 (1981) provides: (a) A lender who makes a direct installment loan for the purpose of enabling a consumer to purchase goods or services is subject to all claims and defenses of the consumer against the seller arising out of the purchase of the goods or service if such lender acts at the express request of the seller, and— (1) the seller participates in the preparation of the loan instruments, or (2) the lender is a person or organization controlled by or under common control with the seller, or (3) the seller receives or will receive a fee, compensation, or other consideration from the lender for arranging the loan. (b) The lender’s liability under this section may not exceed the amount of the loan. Rights of the debtor can only be asserted affirmatively in an action to cancel and void the sale from its inception, or as a defense to or set-off against a claim by the lender. The Secretary of Education contends that a claim under § 28-3809(a)(l) is preempted by the HEA, and that the Plaintiff has not adequately alleged claims under the remaining subdivisions. For the reasons that follow, the Court finds that the Plaintiffs have stated a claim pursuant to § 28-3809(a)(3). All remaining claims under this provision shall be dismissed. In a typical GSL transaction, the private lender acts at the request of the student. See 34 C.F.R. § 682.102(a) (1986). However, the school must certify the application before it is forwarded to the private lender. Id. Once the application is forwarded to the private lender, the lender obtains a loan guaranty from either a Guaranty Agency or the Secretary. Id. Thus, while the student actually initiates the process, the typical lender does communicate with the sehool/seller. For purposes of imposing liability under § 28-3809, however, it is critical to distinguish between this general procedure of forwarding an application, which is mandated by the HEA, and a transaction in which the school makes an “express request” for the lender to make the loan in spite of the lender’s considered business judgment to do otherwise. The Court must draw this distinction because a state law claim cannot lie to the extent that it would penalize participants in the GSL program for following Congressional directives. Tipton, supra, at 768 F.Supp. at 557, 558 n. 32. Plaintiffs have made sufficient allegations to surpass this hurdle. Plaintiffs allege that the named bank Defendants had a “business arrangement” with CSW, see Complaint at 51, ¶ 178, that the banks “knew or had reason to know” of the school’s high default and withdrawal rates, id. at 11182, and “failed to exercise reasonable business judgment.” Id. at ¶ 183. Preemption law impedes the Plaintiffs’ attempt to impose liability pursuant to § 28-3809(a)(l), however. The GSL program requires the seller/school to participate in the preparation of the loan documents. See 20 U.S.C. § 1078(a)(2) (school must provide information to the lender concerning the student’s estimated cost of attendance, estimated financial assistance and a schedule for the disbursement of loan proceeds). The Plaintiffs practically concede that a law-abiding participant in the HEA would confront liability. Plaintiffs state that “[t]he regulatory framework in effect resulted in the school setting the loan amount.” Complaint at 37, ¶ 120. See also Pl.Opp. at 29. At bottom, Plaintiffs’ Complaint dramatizes the fact that any school which followed the chain-of-command specified in the HEA would run afoul of D.C.Code § 28-3809(a)(l). Accordingly, the Court must dismiss Plaintiffs’ claim under this subsection. Plaintiffs also have not stated a cognizable claim under D.C.Code § 28-3809(a)(2). This provision is not wholly preempted by the HEA; it is consistent with the HEA’s overall mission to protect students from overbearing corporate conglomerates which ignore the due diligence duties of the GSL program for mutual pecuniary gain. Plaintiffs have not alleged that CSW and the two named bank Defendants are commonly controlled as that term is interpreted in the corporate law context, however. Although Plaintiffs do allege that CSW was an agent of the banks, see Complaint at 50, 11176, the delegation of certain responsibilities to the school does not fall within the range of transactions covered by § 28-3809(a)(2). Subsection (a)(2) imposes liability when “the lender is ... controlled by ... the seller/’ and does not speak to the converse situation in which the lender gives directions to the seller. Furthermore, preemption principles do not permit the Court to expand the contractual liability of the lenders and Guaranty Agencies merely because they are under the “common control” of the Secretary through the HEA apparatus. Imposition of liability in these circumstances would surely frustrate the achievement of Congressional objectives, as these private parties would confront state law liability solely because of their involvement in a program sponsored by the federal government. See Tipton, supra. Plaintiffs have stated a claim pursuant to D.C.Code § 28-3809(a)(3): Plaintiffs’ allegation that the lenders received an administrative fee from the Secretary pursuant to the HEA, see Complaint at 24-25, 11 56, does not make out a cognizable claim. As the Court explained in Tipton, supra, Plaintiffs cannot assert such a claim for it would penalize activity expressly permitted by Congress. However, Plaintiffs have made a sufficient allegation that the school/seller receives “other consideration” within the meaning of § 28-3809(a)(3) in return for directing borrowers to the two named lenders. Plaintiffs have alleged that the school and the lender enjoy a “business arrangement”, see Complaint at 51, 11178, that the banks “knew or had reason to know" of the school's high default and withdrawal rates, id. at 11182, and “failed to exercise reasonable business judgment” in making loans to CSW students. Id. at 11183. See also Pl.Opp. at 30, n. 6 (“CSW also received other consideration in that the banks in return for the business that CSW generated for them relaxed their business judgment and ignored CSW’s high default rate and high withdrawal rate.”) In order to prove their § 28-3809(a)(3) claim at trial, though, Plaintiffs must demonstrate that the lender intentionally provided this preferential treatment in return for the business provided by CSW, i.e., Plaintiffs must prove that there was an explicit quid pro quo between the lender and CSW. If Plaintiffs can make out this claim, Plaintiffs can rescind the contract as void ab initio or can assert the claim as a defense in a collection action. See D.C.Code § 28-3809(b) (1981). The Guaranty Agencies and Sallie Mae further argue that, even if the Plaintiffs could successfully assert a claim, D.C.Code § 28-3809 does not permit Plaintiffs to assert claims against entities other than original lender. According to these Defendants, § 28-3809 only subjects the original lender to the contract defenses. See HEAF Memorandum, supra, at 28. Basic contract law requires the Court to reject this argument. First, the Plaintiffs and the Secretary correctly state, and Defendants essentially concede, that the student loan contracts are not negotiable instruments. See Secretary’s Motion to Dismiss at 18; Pl.Opp. at 33-35. See also D.C.Code § 28:3 — 104(1). Because these loan instruments are not negotiable instruments, the Defendants cannot qualify as holders in due course and thereby preclude Plaintiffs from raising defenses attributable to the original lender’s conduct. Second, because the Guaranty Agencies and other secondary holders of these GSLs cannot qualify as holders in due course, traditional assignment principles resolve this dispute. 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 also D.C.Code § 28:9-318(1) (1981) (unless account debtor has contracted otherwise, the assignee of an account is subject to “all the terms of the contract between the account debtor and assignor and any defense or claim arising therefrom”). See generally 3 E.A. Farnsworth, Farnsworth on Contracts, § 11.8, at 106 (1990) (“the assignee is vulnerable to defenses of the obligor that affect the enforceability of the obligor’s agreement with the assignor”) (citing, Restatement (Second) of Contracts § 336(1)). 2. Although the FTC Holder Rule Does Not Provide Plaintiffs Relief as a Matter of Federal Law, Plaintiffs Have Stated a Claim for Failure to Include the Notice of Defenses Clause Pursuant to D.C.Code § 28-3904 and the Motions to Dismiss with Respect to this Claim Shall Be Denied. Plaintiffs contend that their student loan contracts are void for failure to include the notice of claims and defenses required by Federal Trade Commission’s (FTC) Holder Rule which is codified at 16 C.F.R. § 433. See Complaint at 73, II 266(c). In the alternative, Plaintiffs contend that the Court should imply the FTC Holder Rule into the contracts and thereby allow Plaintiffs to assert certain enumerated state law claims and defenses against the lenders, Guaranty Agencies and the Secretary. See Complaint at 74, ¶¶ 269(a)-(f). While the Secretary takes no position on whether the FTC Holder Rule applies to student loan transactions, the Guaranty Agencies, the lenders and Sallie Mae contend that the Holder Rule need not be included in student loan promissory notes. Upon further consideration of the evidence presented herein, the Court finds that the FTC Holder Rule does apply to student loan transactions. Moreover, although the Holder Rule does not provide a remedy as a matter of federal law, D.C.Code § 28-3904 does provide a cause of action against all Defendants for failure to include the notice of defenses clause in the promissory notes. Accordingly, the Secretary’s Motion to Dismiss the state-based Holder Rule claims shall be denied. The FTC Holder Rule applies only to those consumer credit sales which are consummated through purchase money loans or which qualify as financed sales. See 16 C.F.R. § 433 (1976). As the regulatory language makes clear, the FTC Holder Rule incorporates the Truth in Lending Act, 15 U.S.C. § 1601, et seq., and Regulation Z, 12 C.F.R. 226, et seq. Congress expressly exempted student loans from the purview of the Truth in Lending Act in 1982, see 15 U.S.C. § 1603(6) (1982), and the FTC expressly exempted student loans from Regulation Z soon thereafter. See 12 C.F.R. § 226.3(f) (1983). Based on these statutory and regulatory amendments, the Defendants (with the exception of the Secretary of Education) contend that the FTC Holder Rule does not apply to student loan transactions. See Veal v. First American Sav. Bank, supra, 914 F.2d at 914 (declining to apply FTC Holder Rule to student loans); Higher Education Assistance Foundation v. Merritt, slip op., Civ. 91-1576 (Fla.Cir.Ct., Sept. 19, 1991) (citing Veal); Molina v. Crown Business Institute, N.Y.C., Inc., slip op., Civ. No. 24332/88 (N.Y.Sup.Ct., Sept. 10, 1990) (citing Veal). The Plaintiffs urge the Court to follow a recent informal FTC staff opinion advising that the FTC Holder Rule does apply to student loans. See July 24, 1991 Letter to Mr. Jonathan Sheldon from Jean Noonan of the FTC, Ex. 5 to Plaintiffs’ Complaint. However, this staff opinion, by its own terms, is “not binding on the Commission,” id. at 5, and carries no legal significance in this Court. Moreover, the persuasive value of this informal opinion is minimal since the FTC has vacillated on this issue. As Plaintiffs’ own exhibits indicate, a 1990 FTC staff opinion advised that student loans are not covered by the Holder Rule. See June 20, 1990 Letter to Mr. Joseph Esposito from Mr. John LeFevre of the FTC, Ex. 6 to Plaintiffs’ Complaint (retracting this pri- or informal staff opinion). Plaintiffs also argue that well-established principles of statutory interpretation render the 1982 amendments to the Truth in Lending Act inapplicable to the FTC Holder Rule. The FTC promulgated the Holder Rule in 1975 — long before the amendments to the Truth in Lending Act exempted student loans from the Act’s coverage. At the time the Commission adopted the FTC Holder Rule, the Truth in Lending Act’s definitional terms for “purchase money loan” and “finance charge” encompassed student loans, as evidenced by the fact that student loans were specifically exempted from the Truth in Lending Act and Regulation Z in 1982. See Florida Gulf Coast Bldg. & Constr. Trades Council v. Nat’l Labor Relations Bd., 796 F.2d 1328, 1341 (11th Cir.1986), affd sub nom, Edward DeBartolo Corp. v. Florida Gulf Coast Building and Construction Trades Council, 485 U.S. 568, 108 S.Ct. 1392, 99 L.Ed.2d 645 (1988) (absent legislative history to the contrary, “an exemption exists only to exempt something which would otherwise be covered”). See generally 2A C. Sands, Sutherland on Statutory Construction § 47.11, at 53 (N. Singer ed., 4th ed. 1991). According to the Plaintiffs, the standard rules of statutory construction dictate that the later-enacted amendments to the Truth in Lending Act do not influence the definitional terms from that statute which the Commission specifically incorporated into the FTC Holder Rule as of 1975. A statute [or regulation] of specific reference incorporates the provisions referred to from the statute as of the time of adoption without subsequent amendments, unless the legislature has expressly or by strong implication shown its intention to incorporate subsequent amendments within the statute. 2A, Sutherland’s Statutory Construction, supra, § 51.08 at 516 (4th ed., 1984) (citing Kendall v. United States ex rel. Stokes, 37 U.S. (12 Pet.) 524, 9 L.Ed. 1181 (1838)). See also Curtis Ambulance of Florida, Inc. v. Bd. of County Commissioners, Shawnee County, 811 F.2d 1371, 1378-79 (10th Cir.1987) (same). Nothing in the language or legislative history of the Truth in Lending Act or the FTC Holder Rule indicates that Congress or the FTC intended to include any and all subsequent amendments to the Truth in Lending Act in the Holder Rule’s definitional terms. The two provisions are not interrelated. The Truth in Lending Act addresses only a limited range of practices in the banking arena. In fact, Congress has authorized the Federal Home Loan Bank Board and the Federal Reserve to promulgate rules to prevent deceptive or unfair trade practices by banking institutions and has recommended that these agencies look to the FTC for guidance. See 15 U.S.C. § 57a(f) (1974). Moreover, in amending the Truth in Lending Act in 1982, Congress did not purport to limit the FTC’s ability to protect against consumer fraud. The legislative history of the Truth in Lending Act suggests that student loans were removed from the coverage of that Act and also exempted from state law disclosure rules because the Higher Education Act, supra, already governed the lenders' disclosure obligations with respect to student loans. See S.Rep. No. 641, 97th Cong., 2d Sess. 91 (1982), U.S.Code Cong. & Admin.News 1982, pp. 3054, 3134. Nothing in the legislative history of the Truth in Lending Act indicates that Congress made a determination that student loans, in toto, should be removed from the protection of consumer protection laws. Furthermore, the FTC rulemaking does not indicate that the FTC desired the definitional terms for the Holder Rule to change depending upon subsequent exemptions applied to the Truth in Lending Act. See 40 Fed.Reg. 53,506 (Nov. 18, 1975). Rather, at the time the FTC Holder Rule was promulgated, the Commission identified for-profit proprietary schools as an area in which consumers needed protection. Id. at 53,510. Thus, there is no intent on the part of Congress or the FTC to circumscribe the reach of the Holder Rule by way of later-enacted amendments to the Truth in Lending Act. Based upon the traditional precepts of statutory interpretation, the Court finds that the definitional terms in the FTC Holder Rule should be read without regard to the 1982 amendments to § 1603(6) of the Truth in Lending Act. These definitional terms in the FTC Holder Rule clearly suggest that the FTC Holder Rule applies to the student loans at issue in this case. Although the FTC Holder Rule applies to these student loan transactions, the Guaranty Agencies and lenders correctly note that it does not afford Plaintiffs any relief as a matter of federal law. Violation of the FTC Holder Rule does not furnish private parties with a cause of action as a matter of federal law. See Holloway v. Bristol-Meyers Corp., 485 F.2d 986 (D.C.Cir.1973) (enforcement of the Act solely entrusted to FTC). In wielding its remedial powers, the FTC may impose a cease and desist order, 15 U.S.C. § 45, or may institute a civil action pursuant to 15 U.S.C. § 57b. Because an enforcement action has not been instituted against the CSW, there exists no basis upon which this Court could rescind the contract as a matter of federal law. See 15 U.S.C. §§ 57b(a), (b) (1975) (in a civil action commenced by the Commissioner, the Court can fashion appropriate relief including “reeission or reformation of contracts”). Moreover, since the Court can act only upon the initiation of proceedings by the appropriate government agency, Plaintiffs here cannot circumvent these procedures by asking the Court to imply the Holder Rule into the contracts as a matter of federal law. Finally, Plaintiffs have no rights ■under the student loan contracts as a matter of federal law when the FTC’s notice of defenses clause is not contained therein. See Vietnam Veterans of America v. Guerdon Industries, Inc., 644 F.Supp. 951, 964-65 (D.Del.1986) (“any rights against holders ... are contractual rights only, and can be enforced by plaintiffs only if their contracts contained this provision.”) Plaintiffs do allege, however, that D.C.Code § 28-3904 (1981) permits them to rescind the student loan contracts due to the failure to include the FTC notice of defenses clause in the GSL promissory notes. See Complaint at 74-75, ¶¶ 269(a)-(c) (against the Guaranty Agencies and the Secretary). The Secretary, as well as the lenders and Guaranty Agencies, move to dismiss this state law claim on various grounds. Upon review of the arguments presented, the Court shall deny the Motion to Dismiss and shall allow this state-based claim to proceed. The Secretary claims § 28-3904 is preempted because it would frustrate the achievement of federal objectives by encouraging students to assert non-meritorious defenses in order to avoid repayment. Secretary’s Reply at 10. This claim proves too much, as it supports depriving students of any available defenses. Nothing in the HEA or its legislative history suggests that Congress intended to close off access to state law remedies due to the fear of non-meritorious claims. The Secretary’s argument also fails because the Court cannot assume, without evaluating the circumstances of the loan transactions, that failure to include a notice of defenses clause in the contract is a non-meritorious defense. Moreover, allowing students to obtain relief pursuant to § 3904 would not necessarily frustrate the student loan program. Section 3905(k) permits the Court to fashion whatever relief is appropriate, and does not mandate the recission of every student loan contract. For example, the Court could imply the notice of defenses clause into the contract and then place the burden on the Plaintiff to prove a substantive defense to repayment. Alternatively, the Secretary is free to argue that the failure to include the notice of defenses clause does not create substantive unfairness because there are no contract-based defenses of which the Plaintiffs could be deprived. The Guaranty Agencies also contend that the failure to include a notice of defenses clause in the contract cannot sustain a claim because claims “based on state law regarding the enforceability of GSLs are preempted, especially where, as here, the DOE approved the note without the language required by the FTC Rule.” HEAF Reply at 42. This contention is misplaced for two reasons. First, Defendants’ argument fails to the extent that it rests on their preemption theory. For the reasons described, supra, the Plaintiffs may pursue any available state law defenses to the extent that these claims do not frustrate the achievement of federal objectives. Second, the Defendants have not advanced any basis upon which the Secretary’s approval of the notes could constitute a separate basis for preemption. A contract with the government is also subject to existing law. See 15 S. Williston, A Treatise of the Law on Contracts, supra, § 1763, at 207, n. 12. While the Secretary’s representations may give rise to a cross-claim vis-a-vis the Guaranty Agencies, these representations do not prevent the Plaintiffs from stating a claim for relief herein. Citing Nelson v. Nationwide Mortgage Corp., 659 F.Supp. 611 (D.D.C.1987), the Defendants claim that the District of Columbia Consumer Protection Procedures Act (CPPA), D.C.Code § 28-3901 (1981) et seq., does not apply to this transaction. Nelson stands for the proposition that the CPPA was not “intended to apply to every commercial transaction involving a District of Columbia resident, whenever and with whomever that transaction occurs.” 659 F.Supp. at 616. The Nelson Court dismissed the CPPA claims because none of the fraudulent conduct occurred in the District and because the “actions in reliance— the signing of the loan papers — also occurred in Virginia.” Id. The instant case presents a closer connection to the District of Columbia. Although only one Plaintiff is a resident of the District, see Complaint at 3-4, ¶¶[ 1-9, the alleged perpetrator of the fraud, CSW, was incorporated here. Moreover, some of the Plaintiffs applied for the GSLs at the offices of the Culinary School of Washington. Complaint at 55, if 193 (Plaintiff Stokes signed loan papers at CSW’s offices); id. at 65, ¶ 230 (Plaintiff Hildebrand applied for loans at CSW’s offices). Finally, Plaintiffs allege that the student loan checks were indorsed to CSW at CSW’s offices in Washington. These allegations present a sufficient nexus to assert a claim under the CPPA. The CPPA enacts a broad scheme to protect consumers from unscrupulous merchants connected with the supply side of the consumer transaction. Howard v. Riggs Nat’l Bank, 432 A.2d 701, 709 (D.C.1981). A merchant includes one who sells consumer credit as well as those entities which take an assignment of the credit account and continue the extension of credit to the consumer. See D.C.Code § 28-3901(3), (7). See also Lawson v. Nationwide Mortgage Corp., 628 F.Supp. 804, 807 (D.D.C.1986) (Family Federal Savings & Loan was a merchant under CPPA because it was in the business of providing consumer credit); Chrysler First Financial Services Corp. v. Fuller, Civ. No. 5686-87, slip op., published in 52 Wash. Law Reporter 537 (D.C.Sup.Ct., Mar. 17, 1988) (merchant includes those entities which, by assignment, are involved in the continuing extension of credit to the consumer in an installment sales contract). In this case, the Plaintiffs assert that the Secretary and the Guaranty Agencies were involved in the continuing extension of credit to the students. See Complaint at 16, 1119 (alleging that the Guaranty Agencies and the Secretary are “creditors”). Plaintiffs also allege that the Guaranty Agencies are either “original lenders or assignees” of the notes. See Complaint at 5-7, 111113-14, 17-20. Accordingly, by its terms, the CPPA applies to these parties. Section 28-3904(r) makes it unlawful for any merchant to “make or enforce unconscionable terms or provisions of sales or leases.” The Guaranty Agencies contend that the Plaintiffs have not made out a claim of unconscionability because Plaintiffs have not isolated any provision in the contract which is manifestly unfair. According to these Defendants, unconsciona-bility cannot rest upon an assertion that an additional term, such as the notice of defenses clause, should have been included in the contract. See HEAF Reply at 42. Defendants’ interpretation of unconscionability is too stingy, however. A contract as a whole may be unconscionable due to an “overall imbalance of the whole bargaining contract.” 15 S. Williston, A Treatise on the Law of Contracts, § 1763A, at 225 (W. Jaeger ed., 3rd ed., 1973 & Supp.1991). Thus, the alleged failure to include a notice of defenses clause in the standard form student loan contract may enable Plaintiffs to void the contract if the Plaintiffs can demonstrate “the absence of meaningful choice ... together with contract terms which are unreasonably favorable to the other party.” Williams v. Walker-Thomas Furniture Company, 350 F.2d 445, 449 (D.C.Cir.1965). Whether the failure to include the notice of defenses clause gives rise to an unconscionable agreement is a question of law for the Court to decide once the record in this ease is fully developed. Id. at 450 (remanding question of unconscionability to trial court for development of factual record). See also 15 S. Williston, A Treatise on the Law of Contracts, supra, § 1763A, at 217. Plaintiffs also assert that the failure to include the notice of defenses clause constitutes an unfair trade practice within the meaning of § 3904(x). Complaint at 75, 11269(a). See also Pl.Opp. at 15. This provision prohibits merchants from “sell[ing] consumer goods in a condition or manner not consistent with that warranted by operation ... of federal law.” D.C.Code § 28-3904(x). The Guaranty Agencies argue that this clause does not apply to the Defendants because "the non-school defendants were not the sellers of services, the school was.” HEAF Reply at 42 (emphasis in original). This focus on the actual “seller” is unavailing, though, in light of Chrysler First Financial Services Corp. v. Fuller, supra. As the Chrysler First case made clear, an entity which provides consumer credit is a seller of goods and services. Moreover, a consumer can maintain a CPPA action against an assignee of the seller which was extending credit to the consumer. Id. Accordingly, the Plaintiffs have stated a claim under this provision. 3. Plaintiffs Have Failed to State a Claim Upon Which Relief Can Be Granted With Respect to D.C.Code § 28-3808 (1981) and the Motions to Dismiss Shall Be Granted. Plaintiffs contend that D.C.Code 28-3808 (1981) allows them to defend against payment of their student loans due to CSW’s alleged misconduct. See Complaint at 73, ¶ 266(b) (against all Defendants); id. at 77-78, II 274 (with respect to Guaranty Agencies). The Secretary moves to dismiss this claim, making two principal arguments. First, the Secretary contends that, in order for 28-3808 to apply to those consumer credit sales, the bank would have to be an assignee of the rights of the seller of the consumer good, i.e., the school. Second, the Secretary argues that, by the terms of the statute, the students can only assert a claim under 28-3808 as a defense to a collection action, and cannot employ the provision as affirmative grounds for relief. Upon further consideration of the claims herein, the Court shall grant the Secretary’s Motion and shall dismiss these claims. Section 28-3808 does riot define the meaning of “seller” and “assignee.” See also D.C.Code § 28-3802 (1981) (setting out definitional terms for this Chapter of the Code). On this basis, Plaintiffs attempt to argue creatively, claiming that the lender is a “seller” in an overall consumer credit sale and that the Guaranty Agencies therefore qualify as “assignees.” However, the structure of Chapter 38 of the D.C.Code makes clear that § 28-3808 does not apply to a consumer credit sale in which a private lender finances the purchase of the school’s services. Section 28-3809 addresses the scenario in which a consumer of goods and services seeks to assert claims arising from the seller’s activities against the lender. See discussion, infra, at Section I.C.l. Section 28-3809 imposes more stringent requirements for lender liability than does § 28-3808. The legislature’s clear decision to impose more rigorous requirements on parties seeking to assert claims against a lender which finances consumer purchases must guide the Court’s interpretation of § 28-3808. For this reason, the Court cannot interpret the terms “seller” and “as-signee” in 28-3808 to apply to this case; the GSL contract is one between the lender and the student and therefore falls under the aegis of § 28-3809. Plaintiffs’ claim under § 28-3808 fails for an independent reason. Plaintiffs assert 28-3808 as a affirmative grounds for a declaratory judgment, injunctive relief and recission of the GSL promissory notes. As all of the Defendants point out, § 28-3808(b) makes clear that this provision “can only be asserted as a matter of defense to or set-off against a claim by the assignee.” Thus, on this basis alone, Plaintiffs’ claims at ¶¶ 266(b) and 274 of the Complaint cannot lie. 4. Plaintiffs Have Failed to State a Claim Upon Which Relief Can Be Granted With Respect to D.C.Code § 28-3807 (1981) and the Motions to Dismiss Shall Be Granted. Plaintiffs also assert that D.C.Code § 28-3807 (1981) permits them to raise defenses against the lenders, Guaranty Agencies and the Secretary. See Complaint at 73, ¶ 266(g). All Defendants, including the Secretary of Education, have moved to dismiss this claim pursuant to Fed.R.Civ.P. 12(b)(6). Upon further consideration, the Court finds that this state law provision is preempted by the HEA; imposing liability under § 28-3807 would penalize participants in the GSL p