Tags: student loans | education | debt | collections

3 Student Loan Collection Firms Dropped for Abusive Rates

By    |   Tuesday, 17 Mar 2015 08:13 AM

The Department of Education recently announced that it would terminate expiring contracts with five student loan debt collection firms because of their "unacceptably high rates."

Critics say the department is still not taking borrowers' concerns about the practices of the debt collectors seriously, The Huffington Post reported.

But only three of the five are likely to be affected, reported Huffington. According to an Education Department spokeswoman, that late February announcement referred only to contracts signed in 2009 that are expiring soon, not to the multi-year — and potentially quite lucrative — contracts two of those five companies signed in September. The department has contracts with about two dozen debt collection firms.

Borrowers have long complained that collection firms provided them with bogus information about fees or otherwise mislead them about credit reports.

The collection contracts are worth millions of dollars to the agencies in return for recouping money from borrowers who have defaulted on their federal student loans. All told, Americans owe over $108 billion in student loans.

Some of the collection agencies are on their way to earning $5.8 billion in commissions over a four-year period ending in 2016, Huffington reported.

Education Undersecretary Ted Mitchell said at a March 11 meeting that he could not be confident the department's remaining debt collectors were in compliance with consumer protection laws.

"It feels like" the department was "talking out of both sides of its mouth," Chris Hicks, who led the  Debt-Free Future campaign at Jobs With Justice, told Huffington.

The department has repeatedly acknowledged that its debt collection contractors have violated federal consumer protection laws such as the Fair Debt Collection Practices Act.

Hicks said, "We are very disappointed in the Department of Education's inability to hold its contractors accountable, but beyond that it's even more upsetting that they're not standing by what they said they would do."

He added, "The president has instructed the department to treat borrowers with more fairness and this shows that the department is not taking that message seriously."

Citing "inaccurate representations" to student-loan borrowers, the department ended its relationship with Navient Corp., Coast Professional, Enterprise Recovery Systems, National Recoveries and West Asset Management, Bloomberg reported.

Several of the companies are suing the federal government for not renewing their contracts.

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The Department of Education recently announced that it would terminate expiring contracts with five student loan debt collection firms because of their "unacceptably high rates" — but only three are likely affected, The Huffington Post reports.
student loans, education, debt, collections
373
2015-13-17
Tuesday, 17 Mar 2015 08:13 AM
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