The Department of Education (DOE) announced in a press release on Feb. 27, 2015 that it would wind down the contracts of 5 private debt collectors, including Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery (owned by Sallie Mae/Navient), and West Asset Management. It's about time that the DOE took some action to control its debt collectors.
DOE said that the five debt collectors were "...providing inaccurate information to borrowers." As I've stated before, many borrowers that come into my west Houston law office have received false or misleading information about their student loans and their options for repaying them from debt collectors working for the U.S. Government.
In a review of its contracted debt collectors, the DOE found that collection agents of the 5 companies made 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 National Consumer Law Center (NCLC) has called on the DOE to stop using private collection agencies to collect student loan debt. The DOE also announced that it will issued "enhanced guidance" to the remaining agencies. Hopefully this action will put the "fear of God" in the remaining agencies that are collecting student loan debt, so they treat federal student loan borrowers better in the future.
Do you think the Department of Education was correct in taking this step? Why or why not? Have any personal experience with student loan debt collectors?