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BIG ED Cancels Contracts with Five Private Collection Agencies

As reported on February 28, 2015 by Student Loan Borrower Assistance, the Department of Education announced late in the day on Friday that following a review of 22 private collection agencies, the Department will “wind down” contacts with five agencies that were “…providing inaccurate information to borrowers.” The five companies are: Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery (owned by Sallie Mae/Navient), and West Asset Management.

BIG ED Under Secretary Ted Mitchell stated: “Every company that works for the Department must keep consumers’ best interests at the heart of their business practices by giving borrowers clear and accurate guidance. It is our responsibility-and our commitment-to uphold the highest standards of service for America’s student borrowers and consumers.” The CFPB supported the Department’s action, stating tht: “Student loan debt collectors that mislead and harm consumers must be held accountable….consumers need clarity, not confusion.”

The NCLC uncovered widespread problems with the collection agencies, including inaccurate representations to borrowers about loan rehabilitation. NCLC has been sending examples of these inaccuracies and other legal violations to BIG ED for years. Finally – BIG ED is taking some action in standing up to the thugs in the collection industry.

Unquestionably – the use of private debt collectors “,,,, has been a disaster for financially distressed borrowers who are desperate for help. Dispute resolution is, obviously, not the primary mission of loan collection agencies. Debt collectors are not adequately trained to understand and administer the complex borrower rights available under the Higher Education Act, and the government does not provide sufficient oversight of their activities.”

BIG ED needs to eliminate the use of private thug minded collection agencies. The new pilot program at the Department of Treasury is a great opportunity to test different models with the goal of understanding how to collect money when appropriate AND inform and counsel borrowers about the full range of available options. In the meantime, the Department should keep engaging in aggressive oversight. This should include a focus on how the collectors are explaining and implementing the new rehabilitation program.

BIG ED also announced that it will issue enhanced guidance to the remaining agencies, increase internal training, enhance the private collection agency manual, expand monitoring for these types of issues, and refine the internal escalation process. Now it’s up to BIG ED Secretary Arne Duncan to walk the walk, not just talk the talk.