US Dept of Education Ends Contracts with 5 Private Collection Agencies

In a recent press release, the United States Department of Education (DoED) announced that it is ending contracts with five private debt collectors.

This news comes to us in the wake an internal review conducted by the DoED’s Federal Student Aid (FSA) office. The FSA evaluated more than 20 private collection agencies in order to ascertain whether they had been adhering to the terms of their contracts with the DoED, including assurances that they would not engage in any activity that violates State and/or Federal laws (e.g. the federal Fair Debt Collection Practices Act).

Upon review, the DoED determined that agents from Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management failed to accurately represent the “loan rehabilitation program” to borrowers – an option that can provide specific benefits to defaulted borrowers once nine on-time payments have been made over the course of a 10 month period.

As a result, these five private collection agencies are no longer collecting debts on behalf of the DoED.

“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,” comments Ted Mitchell, Under Secretary for the U.S. Department of Education.

The DoED also announced its intentions to offer “enhanced… monitoring and guidance” to the private agencies it employs, aspiring to keep collectors consistently accurate when providing consumers with information regarding their loans.

The DoED has been reassigning the accounts held by Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management, mentioning that it will increase monitoring to ensure the students who began rehabilitation under the original agencies will be treated fairly.

Following its decision to end these contracts, the DoED stated its intentions to better internal training for its FSA staff, also announcing plans to refine internal escalation practices while enhancing its private collection agency manual.