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U.S. Dept. of Ed Cuts Off Five Debt Collection Agencies

March 11, 2015 | Adam S. Minsky, Esq. Articles Current Events Default Policy & Reform

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The U.S. Department of Education contracts out the collection of defaulted federal student loans to nearly two dozen private, third-party debt collection agencies. Borrowers, advocates, and the media have been severely criticizing the Department (quite loudly) after various independent reports accused many of these debt collection agencies of engaging in abusive and deceptive practices that violate federal law. These reports have accused the Department of poor and insufficient oversight of its contractors. Despite this, the Department has repeatedly ignored the criticism and renewed its contracts with many such agencies.

This may be changing. Perhaps in response to the growing chorus of criticism, the Department recently announced that it is terminating its contracts with five of its debt collection agencies, including:

Coast Professional
Enterprise Recovery Systems
National Recoveries
Pioneer Credit Recovery
West Asset Management

The Department indicates that it is severing ties with these agencies because (you won’t believe this) these agencies provided “materially inaccurate representations to borrowers” about federal student loan programs on a widespread, systematic basis. In other words, these debt collection agencies systematically lied to borrowers about their rights and options (shocking, I know). Borrowers who have accounts with these five agencies will be reassigned to other collection agencies, unless they are already in some sort of repayment arrangement.

I think this is a step in the right direction, but it’s not enough. Private companies that mislead and defraud consumers should not be rewarded with federal contracts, and I know from experience that these are not the only agencies engaging in shady practices. I hope this is not just a symbolic move by the Department, but rather an indication that they will be taking a more assertive role in supervising and overseeing these agencies to ensure that borrower rights are protected.

We’ll see, won’t we?

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Articles Current Events Default Policy & Reform

About Adam S. Minsky, Esq.

Adam S. Minsky founded the first law office in Massachusetts devoted entirely to assisting student loan borrowers, and he is one of the only attorneys in the country practicing in this area of law. He provides counsel, legal assistance, and direct advocacy for borrowers on a variety of student loan-related matters. He regularly speaks to students, graduates, and advocates about the latest developments in higher education financing.

Books by Adam S. Minsky

The Student Loan Handbook for Law Students and Attorneys

The Student Loan Handbook for Law Students and Attorneys

Student Loan Debt 101

Student Loan Debt 101: The Definitive Guide to Understanding and Managing Your Student Loans

Student Loans for Parents and Cosigners

The Student Loan Guide for Parents and Cosigners

617-936-2788
asminsky@minsky-law.com
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Boston, MA 02110

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