Department of Education cuts ties with 'misleading' student debt collection agencies
The U.S. Education Department is cutting ties with five debt collection agencies, saying they were providing inaccurate information to student-loan borrowers.
Over the past several months, the department reviewed contracts with 22 private agencies that were working with the Federal Student Aid program. It will stop working with Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery and West Asset Management.
鈥淔ederal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt,鈥� department Under Secretary Ted Mitchell said聽. 鈥淓very company that works for the Department must keep consumers鈥� best interests at the heart of their business practices by giving borrowers clear and accurate guidance.鈥�
The five collection agencies were found to have been giving misleading information about a loan rehabilitation program, which can provide some benefits to borrowers who have defaulted on their loans.
Specifically, the agencies 鈥済ave borrowers misleading information about the benefits to the borrowers鈥� credit report and about the waiver of certain collection fees,鈥� according to the release.
The Education Department will reassign borrowers who had been assigned to those five agencies. It also plans to implement enhanced monitoring and guidance for the remaining private agencies that collect student debt to police for unfair, deceptive or abusive practices.
The release says there also will be extra monitoring for students, or former students, who began loan rehabilitation under those five agencies to make sure they are treated fairly going forward.
The department鈥檚 move was welcomed by consumer advocates.
鈥淭his move illustrates a commitment to responsible lending practices and is a strong step to protect consumers and taxpayers,鈥� Maura Dundon, senior policy analyst with the Center for Responsible Lending, said in. 鈥淣o matter what type of debt owed, consumers have the right to be treated fairly and in accordance with the law.鈥�
Doug Gross is a staff writer covering personal finance for聽. Follow him on Twitter聽and on聽.
