Following a review of 22 private collection agencies, the U.S. Department of Education announced today that it will wind down contracts with five private collection agencies that were providing inaccurate information to borrowers. The five companies are: Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management.
The Department also announced that it will provide enhanced Fair Debt Collection Practices Act and Unfair, Deceptive, or Abusive Acts or Practices monitoring and guidance for all private collection agencies that work with the Department to ensure that companies are consistently providing borrowers with accurate information regarding their loans.
“Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt,” said Under Secretary Ted Mitchell. “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.”
During the past several months, the Department’s Federal Student Aid (FSA) office performed a review of all private collection agencies that FSA works with. In these reviews, the Department sought to ensure that its private collection agencies were complying with the terms of the contract, which includes assurances that the agencies would not engage in unfair or deceptive practices and would comply with all applicable Federal and State laws.
In its review, the Department found that agents of the companies made materially inaccurate representations to borrowers about the loan rehabilitation program, which is an option that can create benefits to defaulted borrowers after they have made nine on-time payments in a period of 10 months. The five private collection agencies listed above were found to have given inaccurate information at unacceptably high rates about these benefits. In particular, these agencies gave borrowers misleading information about the benefits to the borrowers’ credit report and about the waiver of certain collection fees.
The Department will reassign accounts held by these five agencies which are not already in repayment to other agencies. The Department will also increase monitoring to ensure that the students who began rehabilitation under the five private collection agencies will be treated fairly as they complete the rehabilitation process. Lastly, the Department will issue enhanced guidance to all remaining private collection agencies, increase internal training for FSA staff, enhance the private collection agency manual, expand monitoring for these types of issues, and refine its internal escalation practices.
FSA administers and oversees the federal student financial assistance programs, authorized under Title IV of the Higher Education Act of 1965 (HEA). These programs represent the largest source of student aid for postsecondary education in the United States. The Office of the Under Secretary manages policies, programs, and activities related to postsecondary education.
2 Responses to “U.S. Department of Education to End Contracts with Several Private Collection Agencies”
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March 12th, 2015 at 9:23 pm
“Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt,” said Under Secretary Ted Mitchell. “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 Department will reassign accounts held by these five agencies which are not already in repayment to other agencies. The Department will also increase monitoring to ensure that the students who began rehabilitation under the five private collection agencies will be treated fairly as they complete the rehabilitation process. Lastly, the Department will issue enhanced guidance to all remaining private collection agencies, increase internal training for FSA staff, enhance the private collection agency manual, expand monitoring for these types of issues, and refine its internal escalation practices. As a former student loan, and credit card holder recipient it is good to hear that someone finally has listened. the disregard that the borrowers are sometimes submitted to by the companies has left a lot to be desired. poor planning often is one of the causes for borrowers not fully paying in a timely manner; but there are no consideration when the other party on the other end is not compassionate. there are suppose to be an open exchange to resolving the issue but, often it result in collection agencies badgering, threatening borrowers not fully paying on time or a substantial amount to lessen the debt. now with the job situation will there be added consideration given for borrowers to pay down student loans or credit card debts. speaking to a number of individuals who are still in debt for student loans, they often state that they are not treated fairly by collection agencies looking to lower the rate, going into default puts them back several years, and not being able to pay on any of the principal loan has been a disadvantage. with the current development the fsa and other agencies involved in monitoring, persons who would like to start the process of repayment of debt will not feel so threatned. persons who will be looking to look into student loan will be not disswayed into not applying. those misleading information to borrowers will be monitored not just now but in the future so that young people who now owe huge amount of student loan may one day be able to repay.
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May 20th, 2015 at 10:50 am
It is truly great news that the US Dept of Education are cancelling contracts with five of their private collection agencies that were providing inaccurate information to borrowers. This is a practice that should have been dealt with a long time ago. However, better now than never. It has always been my feelings that an audit should be conducted on these collection agencies. Some of them sell their companies and received payments on these debts which they pass on to the new owner of that agency. The Agency that takes over sends another bill to borrowers to recollect on that already paid debt. So many borrowers are ignorant to these illegal practices and end up paying a debt twice. It is good news to hear that some agencies contracts are being cancelled. To think, these are the agencies that harass borrowers the most. Hmmmmmm!
Kudos to Ted Mitchell in blowing the whistle on unfair Financial Agencies who are not disseminating accurate information to borrowers and keeping the borrowers best interests at heart. This is truly unfair practices that needed to be addressed a long time ago.
In dealing with some of these Agencies, I have accused some of them for not keeping consumers’ best interests at the heart of their business practices by giving borrowers clear and accurate guidance. Of course, some of us release this type of energy to the counselors and not the managers so the buck stops there but no more. Whistler Mr. Ted Mitchell has blown the whistle and it is working in the favor of borrowers. This is what I call a politician that did not forget where he came from and how he too was dealt with by these type of crooked practices. These Agencies need to be held more responsible and accountable for their actions and I believe the time has come…Send them packing.
I agree that when borrowers make financial commitments they should honor that commitment but sometimes things do happen. Some of us become permanently unemployed or permanently disabled on the same job you borrowed the money to serve. Sometimes you become injured on the job and you are now unemployed and was never compensated by agencies like the Board of Education. You have to walk away with any kind of compensation and that is truly unfair. It shows that many of these agencies care nothing about their people. Can you keep that commitment? Not with the little check that Social Security Disability gives you. What should borrowers do? In my opinion, if you worked as an Educator, you have already honored that commitment by giving back of you time, energy, skills etc to that institution. What should happen? Those borrowers by no mean should be released from those loans and not be harassed by those agencies that are so tactless.
President Obama released information about such practices to the public and also releasing some borrowers from these type of illegal practices, loans, etc. In speaking to many of the Financial Agencies about what you know about their illegal practices, many treat you as if you are from Mars and they are from Venus. It is good to see changes are taking place.
This is truly very comforting….The Department will reassign accounts held by these five agencies which are not already in repayment to other agencies. Also, this is long overdue…..The Department will also increase monitoring to ensure that the students who began rehabilitation under the five private collection agencies will be treated fairly as they complete the rehabilitation process. Lastly, the Department will issue enhanced guidance to all remaining private collection agencies, increase internal training for FSA staff, enhance the private collection agency manual, expand monitoring for these types of issues, and refine its internal escalation practices.
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