STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

THERESE L. HODGE, )

)

Petitioner, )

)

vs. ) CASE NO. 93-1218

)

DEPARTMENT OF BANKING AND ) FINANCE, DEPARTMENT OF EDUCATION, ) and DEPARTMENT OF LOTTERY, )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the above matter was heard before the Division of Administrative Hearings by its duly designated Hearing Officer, Stephen F. Dean, on May 17, 1993, in Tallahassee, Florida.

APPEARANCES

Petitioner: Therese L. Hodge, pro se

5855 West Wood Lawn Street Dunnellon, Florida 34433

and

Post Office Box 36 Ocklawaha, Florida 32179

Respondent Department

of Education: Charles S. Ruberg, Esquire

Department of Education

325 West Gaines Street Tallahassee, Florida 32399-0400

Respondent Department

of Lottery: Louisa Warren, Esquire

Department of Lottery

250 Marriott Drive Tallahassee, Florida 32301

Respondent Department of Banking & Finance:

Leslie A. Meek, Esquire Office of the Comptroller The Capitol, Room 1302

Tallahassee, Florida 32399-0350

STATEMENT OF THE ISSUES

Whether the State of Florida, through its agencies, collected the money owed it by the Petitioner prior to receipt of a letter from her doctor certifying her disability.

PRELIMINARY STATEMENT

The Petitioner obtained an educational loan guaranteed by the State of Florida. Thereafter, she suffered a stroke while in school and was unable to repay the loan. The bank which had made the student loan guaranteed by the State advised the Department of Education (DOE) that the Petitioner had defaulted on her loan. DOE repaid the lending bank the money which it had loaned the Petitioner, and undertook to collect the loan. Subsequently, the Petitioner won $5,000.00 in the State lottery. Pursuant to statute, State agencies notify the Department of Lottery (DOL) of individuals who owe the State more than $600.00, and the DOL compares its list of winners against the list of debtors. This cross-check of lottery winners identified the Petitioner's unpaid loan, and DOL transferred the $5,000.00, which the Petitioner had won in the lottery, to the Office of the Comptroller. Thereafter, the $1,231.98 owed by the Petitioner was collected by the Comptroller, and a check for the balance was prepared and sent to the Petitioner. The Petitioner was notified of her right to a hearing on the collection of the loan, and she requested a formal hearing. The matter was then referred to the Division of Administrative Hearings. The case was noticed for hearing and heard.

DOE filed proposed findings, which were read and considered. Appendix A to this Recommended Order states which of the findings were adopted, and which were rejected and why.

FINDINGS OF FACT

1. On or about June 21, 1990, the Petitioner, Therese L. Hodge, applied for a student loan to pursue educational courses at Career City College in Gainesville, Florida. The loan applied for was a Stafford Loan, a student loan administered by the Department of Education (DOE) through the Office of Student Financial Assistance (OSFA).

   
   

2. Under the Stafford Loan program, DOE through OSFA, serves as the guarantee agent performing its responsibilities in accordance with regulations promulgated by the United States Department of Education (USDOE).

   
   

3. The essential elements and operation of the loan program are that a participating bank or financial institution agrees to make a loan to a student on the condition that the DOE will issue a written guarantee that it will repay the loan to the lender if the student defaults on the loan. When DOE repays a defaulted loan to the lender, DOE acquires the promissory note and the right to collect from the student. DOE is required by USDOE to pursue collection in order to receive reimbursement from USDOE of the amount paid to the lender.

   
   

4. On or about July 7, 1990, OSFA issued its guarantee of a student loan to the Petitioner, and Florida Federal loaned her $1,213.00.

   
   

5. While enrolled in her first term at college, the Petitioner suffered a stroke. The Petitioner was observed at the hearing and it was apparent that she had some moderate limitations on her ability to communicate, comprehend, and

   remember. Petitioner lives on Social Security disability income. Her brother- in-law, who had accompanied her to the hearing, assisted in presentation of Petitioner's case without objection from the Respondents.

   
   

6. After the Petitioner defaulted on her student loan, the Petitioner won

   $5,000 in a Florida lottery game. The Petitioner made demand for payment of the prize money. The Department of Lottery checks winnings of more than $600 to determine if the winner owes any money to the State. In the course of its comparison, the Department of Lottery determined that the Petitioner owed the State money on the defaulted student loan.

   
   

7. The Department of Lottery confirmed the indebtedness with the Department of Education, and it was determined that the Petitioner owed

   $1,231.98 including interest on the defaulted student loan. On January 9, 1993, the Department of Lottery forwarded the $5,000 to the Office of the Comptroller, and notified the Petitioner of her right to request a formal hearing to controvert the Department's collection of the indebtedness.

   
   

8. On January 12, 1993, the Petitioner called the Department of Lottery and advised the Department that she was disabled. The Department forwarded to the Petitioner medical forms on January 20, 1993. Subsequently, the Petitioner's physician certified to the state that she was totally and permanently disabled.

   
   

9. Documents introduced at hearing show that the Petitioner advised the lending bank on June 17, 1991 that she was disabled due to a stroke and unable to work. The bank sent the Petitioner medical forms in order for her to have her disability certified. The Petitioner did not return the forms due to her financial inability to obtain the required physical.

   
   

10. After the Department of Education had repaid the student loan and had turned the matter over to a collection agency, the Petitioner advised the collection agency that she was disabled and the collection agency sent her medical certification forms which she did not have completed due to her financial inability.

    
    

11. After she had won the lottery, the Petitioner had the medical certification forms which were forwarded to her by the Department of Education completed by a physician and these were returned to the State after the end of January, 1993 certifying that the Petitioner was totally and permanently disabled.

    
    

    CONCLUSIONS OF LAW

    
    

12. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties in this case pursuant to Section 120.57(1), Florida Statutes.

    
    

13. Section 24.115(4), Florida Statutes, provides:

    
    

    It is the responsibility of the appropriate state agency and of the judicial branch to identify to the Department (of Lottery), in the form and format prescribed by the Department, persons owing an outstanding debt to any State agency or owing child support collected through a court. Prior to the

    payment of a prize of $600 or more to any claimant having such an outstanding obligation, the Department may transmit the prize money to the Comptroller who may authorize payment of the balance to the prize winner after deduction of the debt. If a prize winner owes multiple debts subject to offset under this subsection and the prize is insufficient to cover all such debts, the amount of the prize shall be applied in the manner that the Comptroller deems appropriate.

    
    

14. The DOE and DOL, acting pursuant to Section 24.115(4), Florida Statutes, identified that the Petitioner owed the State a debt of $1,231.98, and transmitted the Lottery prize to the Office of the Comptroller. The Petitioner contends that her condition of total and permanent disability entitles her to cancellation of her obligation to repay the debt. The DOE contends that the cancellation of the obligation to repay the indebtedness does not apply to money collected before the DOE was placed on notice of Petitioner's permanent and total disability and that the collection from the Lottery prize money occurred prior to such certification.

    
    

15. The provisions of 34 C.F.R. Section 682.402(c), provide as follows:

    
    

    (c) Total and permanent disability.

    1. If the lender determines that an individual borrower is totally and permanently disabled the borrower's obligation to make further payments of principle and interest on the loan is cancelled. A borrower is not considered totally and permanently disabled on the basis of a condition that existed before he or she applied for the loan, unless the borrower's condition has substantially deteriorated since he or she submitted the loan application, so as to render the borrower totally and permanently disabled.

    2. After being notified by the borrower or the borrower's representative that the borrower claims to be totally and permanently disabled, the lender shall promptly request that the borrower or borrower's representative obtain a certification from a physician who is a doctor of medicine or osteopathy and legally authorized to practice, on a form provided or approved by the Secretary, that the borrower is totally and permanently disabled. The lender shall continue collection until it receives the certification or receives a letter from a physician stating that certification has been requested and that additional time is needed to determine if the borrower is totally and permanently disabled. After receiving the physician's certification or letter, the lender may not attempt to collect from the borrower or any endorser.

    3. After receiving the physician's certification described in Paragraph (c)(2) of this section, the lender shall return any payments that it received from or on behalf of the borrower after the date the borrower or borrower's representative notified the lender of the borrower's claim described in Paragraph (c)(2) of this section.

    
    

16. The facts reveal that the Petitioner originally notified the lender on June 17, 1991 that she was disabled.

    
    

17. The portion of the Code of Federal Regulations cited above states that after receiving the physician's certification which is provided after notification of the pending disability, the lender shall return any payments that it received after being notified. In this instance the original notification occurred in June of 1991. Notwithstanding that the doctor's certification was not received until after January 20, 1993, that certification confirmed the Petitioner's earlier notification of her disability.

    
    

18. In order to justify its retention of the funds given the provisions of Subparagraph (3), above, the Department must treat moneys it "collects" differently from those which are "paid" by borrowers. As the Department pointed out in its Proposed Order, "collect" is defined by Black's Law Dictionary, Revised Fourth Edition, as:

    
    

    To collect a debt or claim is to obtain payment or liquidation of it, either by personal solicitation or legal proceedings. (Cite deleted.)

    
    

19. Subparagraph (3) of the Code of Federal Regulation cited above clearly mandates repayment of all payments received after notification and before the physician's certification. There is no legal difference between money received as a result of (1) voluntary payment, (2) solicited payment, or (3) legal proceedings. The Federal Code requires return of all payments made after notification of the claim and certification of disability by a physician. The Department urges that because the lender did not annotate that the Petitioner claimed "total and permanent" disability, that her notice was inadequate. The lender's annotation states that she is "disabled due to stroke and can't work." The fact that the lender sent her forms to confirm a temporary total disability does not alter the fact that the lender was on notice of Petitioner's condition. Further, the term "total and permanent disability" is a medical determination to which a physician certifies. The Petitioner's claim that she was disabled due to stroke and unable to work is sufficient to raise the issue and place the lender and Department on notice. The certification in this instance would be retroactive until June 17, 1991, the first time that the bank had notice of the Petitioner's disability.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Office of the Comptroller return to the Petitioner the

amount $1,231.98.

DONE AND ENTERED this 16th day of June, 1993, in Tallahassee, Florida.

STEPHEN F. DEAN

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 16th day of June, 1993.

APPENDIX TO RECOMMENDED ORDER CASE NO. 93-1218

The Petitioner's sister wrote a letter in the Petitioner's behalf which was read and considered, and is treated as a final argument. The Department of Education filed a proposed order which was read and considered. The following proposed findings were adopted, or rejected for the reason stated:

Respondent's (DOE)

Proposed Findings: Recommended Order:

Paragraph 1-6 Adopted

Paragraph 7 Irrelevant

Paragraph 8 Adopted

Paragraph 9 The Department was on notice of the Petitioner's disability. Total and permanent disability is a medical determination based upon medical certification. The lender was on notice of Petitioner's disability on June 17, 1991. The purpose of the bank sending Petitioner the medical forms was to confirm the medical determination.

Paragraph 10-15 Adopted

COPIES FURNISHED:

Therese L. Hodge and

5855 West Wood Lawn Street Post Office Box 36 Dunnellon, FL 34433 Ocklawaha, FL 32179

Charles S. Ruberg, Esquire Department of Education

325 West Gaines Street Tallahassee, FL 32399-0400

Louisa Warren, Esquire Department of Lottery

250 Marriott Drive Tallahassee, FL 32301

Leslie A. Meek, Esquire Office of the Comptroller The Capitol, Room 1302 Tallahassee, FL 32399-0350

Gerald Lewis, Comptroller Department of Banking and Finance Tha Capitol

Tallahassee, FL 32399-0350

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit to the agency written exceptions to this Recommended Order. All agencies allow each party at least ten days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the Final Order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.

Docket for Case No: 93-001218

Orders for Case No: 93-001218