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Education Department Shows Little Concern About Lawbreaking Debt Collectors
Mar 16, 2015 | Huffington Post
By Shahien Nasiripour
The U.S. Department of Education acknowledges all of its contract debt collectors have violated federal consumer protection laws. -
There’s a big fight over how student debt gets collected in this country
Mar 16, 2015 | Washington Post
By Danielle Douglas-Gabriel
Three collection agencies are suing the government for canceling their contracts to collect overdue federal student loans, a move the companies say was unjustified and came without warning. -
Education Department cuts ties with five of its debt collectors
Mar 2, 2015 | Washington Post
By Danielle Douglas-Gabriel
The Education Department is canceling its contract with five of the 22 private collection agencies it uses to recoup past-due student loans after years of public criticism over the aggressive practices of some of the debt collectors the department uses. Reposted by: The Journal Star, -
Education Department accuses debt collectors of 'misleading' students
Mar 2, 2015 | The Hill
By Tim Devaney
The Department of Education is severing ties with five student debt collectors accused of misleading borrowers. -
Education Department Terminates Contracts With Debt Collectors Accused Of Wrongdoing
Feb 27, 2015 | Huffington Post
By Shahien Nasiripour
The U.S. Department of Education, under fire for its lackluster oversight of student loan contractors, said Friday it will terminate its relationship with five debt collectors after accusing them of misleading distressed borrowers at "unacceptably high rates." -
Education Department Will Wind Down Contracts With Five Collection Agencies
Feb 27, 2015 | Wall Street Journal
By Mari Armental
The U.S. Department of Education said Friday it will being to wind down contracts with five private collection agencies after finding they had provided inaccurate information to student borrowers. -
U.S. Cuts Off Student-Loan Collectors for Misleading Debtors
Feb 27, 2015 | Bloomberg Business
By John Hechinger
The U.S. Education Department, citing “inaccurate representations” to student-loan borrowers, will end debt-collection contracts with Navient Corp. and four other companies. -
U.S. Department of Education to End Contracts with Several Private Collection Agencies
Feb 27, 2015 | U.S. Department of Education - Press Release
By ED
Following a review of 22 private collection agencies, the U.S. Department of Education announced today that it will wind down contracts with five private collection agencies that were providing inaccurate information to borrowers. The five companies are: Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management. -
Coast Professional lawsuit seeks to stop Department of Education action
Mar 25, 2015 | Livingston County News
By Ben Beagle
Coast Professional Inc., a private collections agency facing the layoffs of hundreds of employees at its three offices, including Geneseo, has filed a lawsuit against the U.S. Department of Education, which terminated a nearly 6-year-old contract with the agency. -
Coast Professional Sues Dept of Education for Yanking Contract
Mar 18, 2015 | Genesee Sun
By Conrad Baker
Coast Professional Inc., a Louisiana-based loan collection agency with an office in Geneseo, is taking the U.S. Department of Education to court in Washington, D.C. for terminating their standing contract, which they have enjoyed since 2009. -
Coast sues Education Department to prevent contract loss
Mar 12, 2015 | The News Star
By Greg Hilburn
Coast Professional, the student loan collections agency headquartered in West Monroe, has asked the U.S. Court of Federal Claims to stop the U.S. Education Department’s plan to terminate its contract with the company. -
Coast Professional to Lay Off 264 Employees
Mar 12, 2015 | TWC News Rochester
By TWC News Staff
About 264 jobs will be lost in Geneseo and Henrietta after a private collection agency announced it is closing two of its offices. -
Local company to lay off 172 workers
Mar 11, 2015 | WROC 8 Rochester
By Staff
A local company is laying off 172 workers in Monroe and Livingston counties. Coast Professional made the decision after a contract with the Department of Education ended. -
Roller Coaster Outlook Causes Layoffs for Coast Collections
Mar 10, 2015 | Genesee Sun
By Conrad Baker
Coast Professional Inc., a Louisiana-based loan collection agency which in December 2014 announced that it is expanding and increasing their work force, has now taken a sharp turn in their outlook and says they will be laying off 172 employees at their Geneseo facility. -
Collection agency to lay off 264 workers locally
Mar 9, 2015 | Rochester Business Journal
By Nate Dougherty
Coast Professional Inc. plans to lay off 172 employees in Geneseo and another 92 in Henrietta after losing a contract last month with the U.S. Department of Education. -
Debt collector laying off 264 in Geneseo and Henrietta
Mar 9, 2015 | Rochester Democrat & Chronicle
By Matthew Daneman
More than 250 local debt collectors are losing their jobs. -
Coast Professional in limbo after feds pull contract
Mar 6, 2015 | The News Star
By Greg Hilburn
The future of Coast Professional, the student loan collections agency, and its 100 employees in West Monroe is unclear after the U.S. Department of Education's decision to terminate its contract with the firm. -
Former Coast Professional employee speaks out about layoffs
Mar 6, 2015 | KNOE 8 News
By Jillian Corder
Jobs at Coast Professional are on the chopping block after the US Department of Education ended its contract with the collection agency. Note: Includes video clip. -
U.S. Department of Education to End Contracts with Several Private Collection Agencies, Including One in West Monroe
Mar 5, 2015 | My ArkLAMiss
By Staff
Following a review of 22 private collection agencies, the U.S. Department of Education announced today that it will wind down contracts with five private collection agencies that were providing inaccurate information to borrowers. The five companies are: Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management. -
US Dept of Education drops 5 student loan debt collectors
Mar 4, 2015 | Daily Nebraskan
By Lauren Reams
The U.S. Department of Education has cancelled its contract with five of the 22 agencies it uses to collect student loan debt. -
Lawsuits Filed in Response to U.S. Department of Education Ending ACA Members’ Contracts
Mar 16, 2015 | ACA International
By Staff
Several ACA International members whose contracts with the U.S. Department of Education were ended last month have responded with lawsuits against the department and one has filed a formal protest with the Government Accountability Office. -
ED Student Loan Debt Collection Contract Mess Moves to the Courts
Mar 13, 2015 | Inside ARM
By Patrick Lunsford
As expected, the fallout from the Department of Education’s decision to end its relationship with five student loan debt collection agencies has moved into the federal court and government adjudication system. Four of the five contractors have filed either formal protests or lawsuits in the U.S. Court of Federal Claims. -
Feds’ Debt Collector Drama
Mar 12, 2015 | Inside Higher Ed
By Michael Stratford
Two of the debt collection companies that the U.S. Department of Education earlier this month accused of misleading borrowers could potentially continue to collect defaulted loans on the department’s behalf under a different contract. -
Education Department Ends Contract with 5 Collection Agencies Accused of Deceiving Borrowers
Mar 11, 2015 | iSchool Guide
By Hanna Sanchez
The U.S Education Department has terminated its agreement with five private collection agencies after learning about their deceitful practices. The announcement was made after reviewing 22 of these agencies, but the agency that promised to become more strict to ensure borrowers are receiving accurate information. -
Feds Fire 5 Debt Collectors
Mar 2, 2015 | Inside Higher Ed
By Michael Stratford
The U.S. Department of Education said Friday it will end contracts with five companies that collect defaulted federal student loans after finding they made “materially inaccurate representations” to struggling borrowers. -
Department of Education Ending Contracts with Five Student Loan Collection Agencies
Mar 2, 2015 | Inside ARM
By Patrick Lunsford
The U.S. Department of Education announced late Friday that it would “wind down” its relationship with five private collection agencies on its student loan debt collection contract that ED says were providing inaccurate information to borrowers regarding rehabilitations. -
Terminated Student Loan Debt Collectors May Get a New Lease on Life from the Department of Education
Mar 23, 2015 | Main Street
By John Sandman
Two of the five student loan debt collectors fired by the Department of Education (ED) last month may not be so fired after all. -
Dept of Ed Ends Contracts with 5 Collection Agencies
Mar 11, 2015 | The Jewish Voice
By JV Staff
Following a review of 22 private collection agencies, the U.S. Department of Education announced today that it will wind down contracts with five private collection agencies that were providing inaccurate information to borrowers. -
Collection Agency To Lay Off 264 Employees Locally
Mar 10, 2015 | WXXI News
By Randy Gorbman
A student loan collections company has notified New York State it plans to lay off 264 people locally, 172 in Geneseo and 92 in Henrietta. -
One Winner In The Trillion-Dollar Student Loan Crisis: Debt Collectors
Mar 6, 2015 | Buzzfeed News
By Molly Hensley-Clancy
The government is on the hook for a huge pool of student debt that is turning sour at an alarming rate. So naturally, it is turning to debt collectors for help. -
5 Rogue Student Loan Debt Collectors Fired by Department of Education
Mar 5, 2015 | Main Street
By John Sandman
The Department of Education (ED) has been criticized for not keeping better tabs on debt collectors that go after students who owe ED money--debt collectors that ED pays to collect loans that it originated. -
Department of Education cuts ties with 'misleading' student debt collection agencies
Mar 3, 2015 | Nerd Wallet
By Doug Gross
The US Education Department is cutting ties with five debt collection agencies – Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery and West Asset Management –saying they were providing inaccurate information to student loan borrowers. Reposted on Christian Science Monitor -
U.S. Department Of Education Cuts Ties With Five Debt Collection Agencies To Protect Borrowers
Mar 2, 2015 | Consumerist
By Ashlee Kieler
Consumer advocates applauded the Department of Education’s announcement last week to end contracts with five private collection agencies that provided inaccurate information to borrowers. -
Education Department Breaks Ties With Student Loan Debt Collectors For Good Reason
Mar 2, 2015 | Bustle
By Lauren Holter
There’s rarely good news when it comes to student loan debt, but college students and graduates won a small victory last week. The U.S. Department of Education announced Friday that it’s ending its relationship with five major debt collectors who misled borrowers trying to repay their debts. Debt collectors were already universally disliked, but lying to borrowers about their options makes it so much worse. -
U.S. fires student debt collectors
Mar 2, 2015 | Talk Radio News Service
By Staff
The Department of Education said it terminated contracts with five debt collection agencies that used unfair and deceptive tactics to collect unpaid student loans. -
U.S. Officials Cut Ties to 5 Debt Collectors for Misleading Student Loan Borrowers
Feb 28, 2015 | eCredit Daily
By Staff
The U.S. Department of Education, which has been under intense criticism for its weak oversight of student loan debt collectors, said Friday that it will terminate its relationship with five firms, accusing them of misleading borrowers at “unacceptably high rates.”
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Education Department Shows Little Concern About Lawbreaking Debt Collectors
Mar 16, 2015 | Huffington Post
By Shahien Nasiripour
The U.S. Department of Education acknowledges all of its contract debt collectors have violated federal consumer protection laws.
But it doesn't much seem to care, according to advocates for borrowers and the debt collectors themselves. Here's why they say that:
Two of the debt collectors say in lawsuits filed this month against the Education Department that the department accused all of its debt collectors in a Feb. 24 email of either violating the Fair Debt Collection Practices Act or federal prohibitions against unfair, deceptive, or abusive acts or practices by misleading distressed borrowers about the benefits of making good on their defaulted federal student debts.
Then, on March 11, Education Undersecretary Ted Mitchell told borrower advocates at a meeting that he wasn’t confident the department’s debt collectors were in compliance with the federal fair debt collection law, according to people at the meeting. Some of the department debt collectors, Mitchell said, needed additional training to be “fully compliant.”
And last week, an Education Department spokeswoman clarified that when the department announced Feb. 27 that it would “end” contracts with five of its nearly two dozen debt collectors -- a surprise announcement that elicited praise from many borrower advocates -- the department actually was referring to contracts signed in 2009 that are expiring in a few weeks, and not to the new multi-year, potentially billion-dollar contracts two of the five received in September.
The developments come as the Education Department faces increasing pressure from the White House and the U.S. Consumer Financial Protection Bureau to clean up a tainted debt collection program that has been accused of cheating borrowers, forcing seniors into poverty and allowing debt collectors to violate the law with impunity.
“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,” said Chris Hicks, an organizer who leads the Debt-Free Future campaign for Jobs With Justice, a Washington-based nonprofit. “The president has instructed the department to treat borrowers with more fairness and this shows that the department is not taking that message seriously.”
Education Secretary Arne Duncan’s debt collection program -- which now ensnares more than 7 million Americans who collectively owe more than $108 billion -- has been criticized for years by consumer advocates and federal auditors for lackluster oversight and disregard for borrowers’ complaints.
Over the past few years, plaintiffs' lawyers, federal regulators and borrower advocates have urged the department to beef up its oversight after discovering evidence that distressed borrowers were given false information or otherwise mistreated when they tried to make good on their defaulted debts.
In a report last week, the Consumer Financial Protection Bureau said a number of the Education Department’s contracted debt collectors misled troubled borrowers and obstructed some of them from making payments to get out of default, likely violating federal law.
Borrowers’ complaints were ignored, according to the Education Department’s inspector general. Few resources were devoted to policing the debt collectors, the inspector general and the Government Accountability Office charged. But on Feb. 27, the Education Department seemed to turn a corner.
In a news release late that Friday, the department announced it would “end” contracts for five of its debt collectors and accused them of misleading distressed borrowers at "unacceptably high rates."
Some borrower advocates were ecstatic, and lavished rare praise on the department.Sarah Audelo, policy director for Generation Progress, a millennial-focused organization tied to the influential Center for American Progress, tweeted that the announcement was “amazing, buried, long-overdue news that will have a HUGE impact on student loan borrowers lives.”
But the announcement left out a crucial detail. The Education Department had given two of the five debt collectors -- Coast Professional and National Recoveries -- multi-year contracts in September that were worth up to $2 billion. The contracts were basically renewals, and the department wasn’t going to terminate them.
“It feels like they’re not following through on things they said they would do,” Hicks said of Education Department officials. “It seems like the department was talking out of both sides of its mouth and misled borrowers.”
Dorie Nolt, an Education Department spokeswoman, said, “These are different contracts ... and the department has not yet decided what action it will take with regard to these two [debt collectors]. We will consider all relevant information before placing accounts under the 2014 contracts.”
The debt collection industry has been waiting for those contracts to be finalized. Education Department contracts are among the most lucrative in the industry, generating hundreds of millions of dollars a year for debt collectors tasked with recouping cash from borrowers who have defaulted on their federal student loans. In November 2013, Dwight Vigna, the Education Department official who oversees the program, told an industry audience that debt collectors stood to reap nearly $5.8 billion in commissions over the four-year period ending in 2016.
After the Education Department announced it was ending contracts with five of the debt collectors -- Coast Professional, Enterprise Recovery Systems, National Recoveries, West Asset Management and Pioneer Credit Recovery, which is owned by Navient Corp., the student loan giant formerly known as Sallie Mae -- lawsuits quickly commenced.
All except West Asset sued in federal court, accusing the department of violating their rights when it told them in private that they would lose existing business and wouldn’t get any mandates under their present 2009-era contracts.
Two of the lawsuits, filed by Coast Professional and Enterprise Recovery Systems, also contained a twist: The department’s first explanation to them of why their contracts were winding down came in a Feb. 24 email that alleged lawbreaking. But that same email, according to Coast and Enterprise, went to all of the department’s debt collectors.
In the email, Murthlyn Aldridge, an Education Department contracting officer, said the department had found violations of federal consumer protection laws when it discovered through a review of recorded calls that debt collectors had misled borrowers about the benefits to their credit reports and certain collection fees if they tried to get out of default.
In its Feb. 27 news release, the Education Department said the five debt collectors had misled borrowers “at unacceptably high rates.” In court papers, Enterprise claims that the Education Department told the company that its alleged lawbreaking made it an “outlier.”
Coast and Enterprise also claim in court papers that they were simply following guidance from the department, citing the department’s public websites for borrowers and confidential manuals for its debt collectors to back up their case.
Nolt declined to comment.
Last week, Education Undersecretary Ted Mitchell provided a further clue about whether the department's debt collectors are abiding by laws.
In a March 11 meeting at the department’s headquarters in Washington, Mitchell was asked whether he was confident that the department’s remaining debt collectors in good standing were in compliance with the Fair Debt Collection Practices Act. The law forbids debt collectors from misleading borrowers.
Mitchell said no, according to people at the meeting. Some of the debt collectors, he said, needed additional training.
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There’s a big fight over how student debt gets collected in this country
Mar 16, 2015 | Washington Post
By Danielle Douglas-Gabriel
Three collection agencies are suing the government for canceling their contracts to collect overdue federal student loans, a move the companies say was unjustified and came without warning.
The government ended its agreements with these companies after discovering that debt collectors were giving incorrect information to students and families. President Obama has vowed to overhaul the way Americans repay their student loans. And lawmakers and consumer advocates have pressured the Education Department to change the way it compensates debt collectors.
Advocates have accused the government of creating a system that encourages the companies to use high pressure tactics against families.
Two weeks ago, the Education Department said it would end its relationship with five of the 22 private collection agencies it uses after an audit showed the companies misled consumers about a program that helps people who have defaulted on their federal loans to return to good standing.
The firms told borrowers that their late payments would be removed from their credit reports when that was not true. According to the department, employees also misled borrowers into believing that certain collection fees could be waived if they paid up.
The collection agencies say the department’s evaluation was arbitrary and flawed. Coast Professional, Enterprise Recovery Systems and National Recoveries have filed lawsuits against the government over the last few days, while Pioneer Credit Recovery is pleading its case for having the contract decision reversed to the Government Accountability Office.
In a complaint obtained by the Washington Post, the companies suing the government claim examiners used a sample of a few dozen calls out of tens of thousands and arrived at an inflated error rate. They also say that the errors that cost them the contract were a part of the guidance manual provided by the department. The companies say the government did not give them any notice before canceling their contracts or any chance to appeal the decision.
Officials at the department declined to comment, as did Enterprise and Pioneer. National Recoveries and West Asset Management did not return calls for comment.
In a statement, Coast Professional chief executive Brian Davis said, “Coast has followed the Education operations manual regarding offers to remove the negative information regarding repayment from credit reports and the waiving of collection fees, both which are specifically allowed by the Department of Education.”
When the department announced the contract cancellation, Pioneer, which is owned by Sallie Mae’s former subsidiary Navient Solutions, denied any wrongdoing. Officials at the company insisted that the company is “committed to providing … the support needed to help borrowers achieve success.”
Losing its contract with the government would be a costly blow for Pioneer. The company, which has worked with the department since 1997, said it earned $65 million last year alone from recovering past-due student loans payments for the government. It expected to make as much as $48 million this year, before the department called it quits.
Pioneer has filed a formal protest with the GAO, which resolves disputes between federal agencies and contractors as an alternative to litigation. The GAO has 100 days to make a recommendation, which is not legally binding.
Meanwhile, a federal judge has consolidated all three lawsuits and scheduled oral arguments in the case for April 8.
A report from the National Consumer Law Center in the fall accused the department of creating a system that encourages collection agencies to use high pressure tactics. Researchers found that the more money debt collectors recouped in loan payments, the higher they scored and the more money they received from the department.
Agencies, for instance, receive a commission of up to 13 percent of the loan amount if they can get a borrower in default to begin making payments, according to the report. By comparison, the commission for getting a borrower to consolidate a loan is 2.75 percent of the loan amount.
Pioneer and Enterprise had among the highest scores of all the collection agencies. The report also cited complaints from borrowers who said they were given false information from debt collectors about whether they qualified for loan consolidation, forgiveness or income-based repayment.
Many of the same complaints have been documented by the Consumer Financial Protection Bureau. The bureau said last week that its examinations of debt collectors working for the Education Department uncovered instances of companies overstating the benefits of federal student loan rehabilitation or threatening to take legal action against borrowers.
As early as this month, the Education Department is set to release a revised payment structure that factors in consumer complaints in deciding how to rank and pay collectors. The department’s Office of the Inspector General has been critical of officials for not doing enough to track and respond to complaints filed against collection agencies.
Against this backdrop, the Treasury Department said in November that it would launch a pilot program to wrest some student loan accounts out of the hands of the department’s debt collectors. Treasury is trying to determine how to improve the current debt collection system.
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Education Department cuts ties with five of its debt collectors
Mar 2, 2015 | Washington Post
By Danielle Douglas-Gabriel
The Education Department is canceling its contract with five of the 22 private collection agencies it uses to recoup past-due student loans after years of public criticism over the aggressive practices of some of the debt collectors the department uses.
The decision arrives after a lengthy review of hundreds of phone calls between all of the collection agencies and borrowers who had fallen behind on their loan payments. Officials at the department discovered that five of its collectors had duped borrowers into believing that they could repair their credit or waive collection fees if they paid up.
“Federal student aid borrowers are entitled to accurate information as they make critical choices to manage their debt,” Education Under Secretary Ted Mitchell said in a statement. “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.”
Calls to four of the five collection agencies — Coast Professional, Enterprise Recovery Systems, National Recoveries and West Asset Management— were not returned.
Pioneer Credit Recovery, which is owned by Sallie Mae’s former subsidiaryNavient Solutions, denied any wrongdoing, but insisted that the company is “committed to providing … the support needed to help borrowers achieve success.”
Losing its contract with the government is a costly blow for Pioneer. The company, which has worked with the department since 1997, said it earned $65 million last year alone from recovering past-due student loans payments for the government. It expected to make as much as $48 million this year, before the department called it quits.
The Education Department has been under pressure from lawmakers and consumer advocates to crack down on debt collection agencies for their aggressive tactics.
A report from the National Consumer Law Center in the fall accused the department of creating a system that encourages collection agencies to use high pressure tactics. Researchers found that the more money debt collectors recouped in loan payments, the higher they scored and the more money they received from the department. Pioneer was one of the highest scoring companies.
“It’s really interesting that [the Department of Education] is singling out companies that beforehand they were calling top performers,” said Persis Yu, a staff attorney at the National Consumer Law Center. “Now they’re saying they had really unacceptable levels of misinformation. It calls into question the way they evaluate and compensate their debt collectors.”
The report also cited complaints from borrowers who said they were given false information from debt collectors about whether they qualified for loan consolidation, forgiveness or income-based repayment.
As early as this month, the department is set to release a revised payment structure that factors in consumer complaints in deciding how to rank and pay collectors. The department’s Office of the Inspector General has been critical of officials for not doing enough to track and respond to complaints filed against collection agencies.
Against this backdrop, the Treasury Department said in November that it would launch a pilot program to wrest some student loan accounts out of the hands of the department’s debt collectors. Treasury is trying to determine whether debt collection services are best left with the government, rather than third-party contractors.
Meanwhile, the Education Department said it would transfer the accounts of the five collection agencies to its other debt collectors.
“Young people have told us for years that private debt collectors refuse to play by the rules and use deceptive tactics that jeopardize their financial security,” said Jennifer Wang, policy director of Young Invincibles, an advocacy group. “We commend the Department of Education’s decision. … Fewer people will be faced with harmful debt collection practices that hurt their credit reports, and mislead them about their options to get out of default.”
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Education Department accuses debt collectors of 'misleading' students
Mar 2, 2015 | The Hill
By Tim Devaney
The Department of Education is severing ties with five student debt collectors accused of misleading borrowers.
The Education Department contracted with these private collection agencies to collect unpaid student debt, but an internal review found they were providing borrowers with “inaccurate information at unacceptably high rates.”
These debt collectors mislead students with information about how their credit reports would improve and the potential to waive certain fees if they signed up for loan rehabilitation programs.
The disowned debt collectors include Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management.
"Federal student aid borrowers are entitled to accurate information as they make critical choices to manage their debt,” said Ted Mitchell, under secretary of education. "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."
The changes comes as part of an Education Department review of the collection practices of 22 private collection agencies, five of which failed.
As a result of the review, the Education Department is also issuing new guidance, training and monitoring of the remaining debt collectors, the agency said.
Critics say students have been complaining about these debt collectors for a while.
“Young people have told us for years that private debt collectors refuse to play by the rules and use deceptive tactics that jeopardize their financial security,” said Young Invincibles policy director Jennifer Wang. “We commend the Department of Education’s decision to end the contracts of five debt collectors that have mistreated distressed student loan borrowers.”
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Education Department Terminates Contracts With Debt Collectors Accused Of Wrongdoing
Feb 27, 2015 | Huffington Post
By Shahien Nasiripour
The U.S. Department of Education, under fire for its lackluster oversight of student loan contractors, said Friday it will terminate its relationship with five debt collectors after accusing them of misleading distressed borrowers at "unacceptably high rates."
The surprise announcement follows years of complaints about allegedly illegal debt-collection practices by Education Department contractors, the department's seeming lack of interest in ensuring that borrowers are treated fairly, and the relative opacity of the entire operation.
The most prominent of the debt collectors, Pioneer Credit Recovery, is owned by Navient Corp., the student loan giant formerly known as Sallie Mae. Pioneer, under investigation by the Consumer Financial Protection Bureau, generated $127 million from the contract over the past two years, according to its annual report to investorson Friday. It has worked for the Education Department since 1997.
With the number of borrowers in default now more than 7 million as federal student debt surpasses $1.1 trillion, the contracts have become among the most lucrative Education Department offerings, generating hundreds of millions of dollars a year for debt collectors tasked with recouping cash from borrowers who have defaulted on their federal student loans. In November 2013, Dwight Vigna, the Education Department official who oversees the program, told the financial industry that debt collectors stood to reap nearly $5.8 billion in commissions over the four-year period ending in 2016.
But the department's debt collection program has also become a headache for Education Secretary Arne Duncan, as plaintiffs' lawyers, state and federal regulators and borrower advocates have demanded changes after discovering evidence that borrowers in distress were given false information or otherwise mistreated when they tried to make good on their debts.
The Education Department said Friday that its decision was prompted by what it described as "high incidences of materially inaccurate representations" to borrowers that it discovered in reviews spanning several months. The five debt collectors, according to the department, misled borrowers about their options to get out of default, the resulting benefits to their credit reports and collection fees. Misleading borrowers about their defaulted debts may violate federal fair debt collection laws.
"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," said Education Undersecretary Ted Mitchell. "It is our responsibility -- and our commitment -- to uphold the highest standards of service for America’s student borrowers and consumers."
The admission that some of its contractors likely violated borrowers' rights under fair debt collection laws will likely lead to increased scrutiny of the department's debt collectors, oversight of them, and how borrowers may have been harmed.
The Education Department didn't respond to queries beyond an emailed news release.
The Treasury Department is among federal agencies that have been concerned by the Education Department's debt collection program. The Huffington Post reported in November that the Treasury would soon take some student borrowers' accounts away from the Education Department's contracted debt collectors and give them to federal workers in a pilot program that may cut out student loan middlemen.
The other companies to lose their contracts are: Coast Professional, Enterprise Recovery Systems, National Recoveries, and West Asset Management. The Federal Trade Commission in 2011 accused West Asset of violating the Fair Debt Collection Practices Act. The two sides settled for $2.8 million, which at the time was the FTC's largest civil penalty in a debt collection case.
“Student loan debt collectors that mislead and harm consumers must be held accountable," said Rohit Chopra, the consumer bureau's top official overseeing student loans. "Today, the Education Department took an important step by winding down contracts with five debt collectors for not playing by the rules. The CFPB will continue to work with our federal and state partners to root out bad actors and ensure that debt collectors are treating student borrowers fairly. Consumers need clarity, not confusion."
The Education Department said it would transfer accounts from affected companies, including Pioneer, to its other debt collectors, and would officially terminate its relationship with the companies once all accounts have been moved over. The move is the department's most forceful response in years to alleged misdeeds by its student loan contractors.
The National Consumer Law Center, which advocates on behalf of borrowers, has previously criticized the department's debt collectors for routinely violating borrowers' consumer rights under federal and state laws. Deanne Loonin has been among the borrower advocates most critical of the department's relationship with allegedly-sloppy debt collectors, and has urged the department for years to terminate its contracts as a result.
Federal watchdogs at the Government Accountability Office and the Education Department's inspector general have repeatedly criticized the department's oversight of contractors. In a report last year, the GAO found that the Education Department documented apparent violations of federal debt collection laws by its contractors, yet did nothing about it. The Education Department's inspector general has faulted the department for ignoring both borrowers' complaints and its own debt collectors' potential violations of federal consumer laws.
In its annual report to investors on Friday, Navient indicated it disagreed with the Education Department's decision. "We are engaged with [the department] to learn more about their decision and address any questions or concerns they may have," the company said.
The Education Department's decision is likely to come as a shock to the debt collection industry and the financiers who bankroll the companies. Pioneer, Enterprise and Coast have been among the Education Department's highest-ranking debt collectors, according to the department.
"After years of hearing complaints from borrowers of abusive treatment, we are relieved to hear that the Education Department has taken this first step to protect borrowers and hold the companies they contract accountable," said Chris Hicks, an organizer who leads the Debt-Free Future campaign for Jobs With Justice, a Washington-based nonprofit.
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Education Department Will Wind Down Contracts With Five Collection Agencies
Feb 27, 2015 | Wall Street Journal
By Mari Armental
The U.S. Department of Education said Friday it will being to wind down contracts with five private collection agencies after finding they had provided inaccurate information to student borrowers.
The five companies are: Navient Corp.’s Pioneer Credit Recovery, Coast Professional, Enterprise Recovery Systems, National Recoveries and West Asset Management.
Last summer, the department revamped the contracts with companies that collect student-debt payments, in a bid to steer more troubled borrowers into payment-assistance plans.
Pioneer Credit said in a statement that they were “blindsided” by the decision and that in April it received written confirmation from the department that its policies and practices complied with regulations.
The Education Department is the nation’s primary lender of student debt, but it relies on outside firms to collect payments and contact borrowers when they fall behind on payments.
On Friday, the department said its Federal Student Aid office reviewed the operations of the 22 companies contracted to service federal student loans and found the companies have given inaccurate information to those whose loans had defaulted.
“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 department said.
Navient, which was spun off from Sallie Mae, is the nation’s largest loan servicer with more than $2 billion in revenue. The Pioneer contract to collect money on defaulted loans accounted for $65 million in revenue in 2014. The company projected that for 2015 that contract would produce $48 million in revenue.
Separately, Navient has another contract with the department to service student loans. Under that contract, which was renewed last summer and isn’t affected by the cancellations, has 6.2 million customers and $130 million in revenue in 2014.
Last year, Sallie Mae and Navient agreed to pay a combined $97 million to settle federal charges they ovecharged military members and imposed excessive fees for student loans.
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U.S. Cuts Off Student-Loan Collectors for Misleading Debtors
Feb 27, 2015 | Bloomberg Business
By John Hechinger
The U.S. Education Department, citing “inaccurate representations” to student-loan borrowers, will end debt-collection contracts with Navient Corp. and four other companies.
Representatives of these companies, which pursue students who default on their loans, made misleading statements about programs that help borrowers get back on track, the agency said in a statement late Friday. The companies include Pioneer Credit Recovery, a unit of Wilmington, Delaware-based Navient, which was split off last year from SLM Corp., commonly known as Sallie Mae, the largest U.S. education finance company.
“Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt,” Under Secretary Ted Mitchell said in a statement. “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.”
The government turns to 22 debt-collection companies to put the squeeze on borrowers who are defaulting on their loans. In 2012, Bloomberg News reported that the private contractors chasing these debts collected about $1 billion annually in commissions and faced growing complaints that they were insisting on stiff payments, even when borrowers’ incomes make them eligible for leniency.‘Huge Step’
Pioneer said in a statement that the Education Department has conducted 17 exams since the beginning of 2014, listening to 600 phone calls, and had not raised concerns about the company’s rates of inaccurate or misleading information to borrowers. In April, it received written confirmation from the agency that its policies complied with regulation.
“We were blindsided by the Department of Education’s actions,” Pioneer said. Navient’s revenue from collecting for the Education Department totaled $65 million last year.
The agency said it will “wind down” its contracts with the five companies and transfer their business to other agencies with contracts. The four other companies losing contracts are Coast Professional, Enterprise Recovery Systems, National Recoveries and West Asset Management, according to the statement. Those companies couldn’t be reached for comment after business hours.
“This is a huge step forward for student loan borrowers who are too often the victims of dishonest debt-collection practices,” Maggie Thompson, campaign manager for Higher Ed, Not Debt, said in a statement. “We are happy the Department of Education protected borrowers by ending the contracts of some of the most abusive debt collectors in the business.”
The companies made “materially inaccurate representations to borrowers” about the government’s loan rehabilitation program, which can get former students back in good standing after making nine on-time payments in a 10-month period.
The companies gave borrowers misleading information about “the benefits to the borrowers’ credit report” and about “the waiver of certain collection fees,” the agency said.
The government said it will provide enhanced monitoring of all agencies’ compliance with federal debt collection law.
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U.S. Department of Education to End Contracts with Several Private Collection Agencies
Feb 27, 2015 | U.S. Department of Education - Press Release
By ED
Following a review of 22 private collection agencies, the U.S. Department of Education announced today that it will wind down contracts with five private collection agencies that were providing inaccurate information to borrowers. The five companies are: Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management.
The Department also announced that it will provide enhanced Fair Debt Collection Practices Act and Unfair, Deceptive, or Abusive Acts or Practices monitoring and guidance for all private collection agencies that work with the Department to ensure that companies are consistently providing borrowers with accurate information regarding their loans.
"Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt," said Under Secretary Ted Mitchell. "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."
During the past several months, the Department's Federal Student Aid (FSA) office performed a review of all private collection agencies that FSA works with. In these reviews, the Department sought to ensure that its private collection agencies were complying with the terms of the contract, which includes assurances that the agencies would not engage in unfair or deceptive practices and would comply with all applicable Federal and State laws.
In its review, the Department found that agents of the companies made materially 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 Department will reassign accounts held by these five agencies which are not already in repayment to other agencies. The Department will also increase monitoring to ensure that the students who began rehabilitation under the five private collection agencies will be treated fairly as they complete the rehabilitation process. Lastly, the Department will issue enhanced guidance to all remaining private collection agencies, increase internal training for FSA staff, enhance the private collection agency manual, expand monitoring for these types of issues, and refine its internal escalation practices.
FSA administers and oversees the federal student financial assistance programs, authorized under Title IV of the Higher Education Act of 1965 (HEA). These programs represent the largest source of student aid for postsecondary education in the United States. The Office of the Under Secretary manages policies, programs, and activities related to postsecondary education.
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Coast Professional lawsuit seeks to stop Department of Education action
Mar 25, 2015 | Livingston County News
By Ben Beagle
Coast Professional Inc., a private collections agency facing the layoffs of hundreds of employees at its three offices, including Geneseo, has filed a lawsuit against the U.S. Department of Education, which terminated a nearly 6-year-old contract with the agency.
The suit challenges the Department’s decision to end Coast’s collection contract for allegedly misleading borrowers and asks the U.S. Court of Federal Claims to issue a restraining order and injunction to prevent the Education Department’s action.
“We believe that the Department’s recent actions regarding our small business contract are unwarranted and arbitrary given the excellent service we have provided in full compliance with the law,” Coast President Roxanne Baker said in a statement to The Livingston County News.
“Because the Department’s actions affect our ongoing operations, we were forced to file notices to our employees and begin layoffs,” Baker said. “We hope the Department’s actions are reversed and we can begin rehiring.”
Coast, with around 175 employees at its Geneseo office before layoffs were announced this month, is one of Livingston County’s largest private employers.
Four other private collection agencies, including Pioneer Credit Recovery Inc., which has its headquarters in Wyoming County, also lost Education Department contracts.
The future of Coast — which said it plans to lay off 172 employees in Geneseo, 92 in Henrietta and more than 100 in West Monroe, La. — could hinge on obtaining relief in the lawsuit.
Coast’s only contract is with the Education Department. It’s current contract was awarded in July 2009 and was set to expire April 21, according to the lawsuit.
“We look forward to a full, fair and open adjudication of our complaint, something we expect from an Administration committed to transparency,” Coast CEO Brian Davis said in a statement.
Coast, in its lawsuit, accuses the Department of Education of acting arbitrarily and not following proper procedures.
Coast’s lawsuit said the company has the second highest rating among the Education Department’s contractors during the past 12 quarters. The company said its contract provides no other evaluation criteria for the Education Department to consider when deciding to award a contract.
“As evidence of our good work, we have never had any violations — major or minor — that would help us understand this latest action,” Davis said in a statement.
“Specifically, in helping students rehabilitate their loans, Coast has followed the Education operations manual regarding offers to remove the delinquency of repayment from credit reports and the waiving of collection fees, both which are specifically allowed by the Department of Education,” Davis said.
Coast is also awaiting word on the fate of a contract awarded by the Education Department in September 2014. The contract was expected to start in August.
The Education Department has not yet purchased debt collection services from any company under those contracts, according to the online journal Inside Higher Ed, which focuses on college and university topics.
An Education Department official, who declined to be named, told the journal that the agency had not yet decided what action it would take regarding the companies’ 2014 contracts.
Coast officials are “greatly concerned” about the status of the more recent contract, said William A. Pierce, a consultant for Coast.
Action follows review
The Education Department announced in late February that it would “wind down” contracts with Coast and four other private collections agencies the feds said were providing inaccurate information to borrowers following a review of 22 private collection agencies that work with the department’s Federal Student Aid office.
The Department said in a news release it found agents of the companies “made materially 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 agencies were found to have given inaccurate information at “unacceptably high rates about these benefits.” In particular, the agencies gave borrowers misleading information about benefits to the borrowers’ credit report and the waiver of certain fees.
The Department of Education will reassign accounts held by the five agencies. The Department will also increase monitoring to ensure that the students who began rehabilitation under the five private collection agencies will be treated fairly as they complete the rehabilitation process.
There will also be enhanced guidance to remaining private collection agencies, increased internal training for FSA staff, an enhanced private collection agency manual and expanded monitoring for these issues.
Other agencies fight
Two other agencies — National Recoveries Inc. and Enterprise Recovery Systems Inc. — are also suing the Department of Education. The three cases have been consolidated, with oral arguments scheduled for April 8, according to Inside Higher Ed.
A fourth agency, Navient-owned Pioneer Credit Recovery, which has offices in Wyoming County, filed a formal protest of the Education Department’s decision with the Government Accountability Office, which resolves disputes between federal agencies and contractors as an alternative to litigation. The GAS has 100 days to make a recommendation, which is not technically binding, but is customarily followed by federal agencies, according to Inside Higher Ed.
The other affected agency is West Asset Management.
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Coast Professional Sues Dept of Education for Yanking Contract
Mar 18, 2015 | Genesee Sun
By Conrad Baker
Coast Professional Inc., a Louisiana-based loan collection agency with an office in Geneseo, is taking the U.S. Department of Education to court in Washington, D.C. for terminating their standing contract, which they have enjoyed since 2009.
According to CEO of Coast Professional Brian Davis, the Department of Education has not presented any specific reasons for terminating the contract, a move which the recently prosperous Coast says forced them to make drastic cutbacks and lay off more than 172 employees at their Geneseo office.
“We look forward to a full, fair and open adjudication of our complaint, something we expect from an Administration committed to transparency,” said Davis. “We believe this because Coast Professional is dedicated to helping persons in default on their student loans rehabilitate their loans through repayment and return money to the American taxpayer. In performing this valuable service, Coast has been a top performing Private Collection Agency receiving the highest scores and has at all times complied with applicable law and regulation, including the Fair Debt Collection Practices Act. As evidence of our good work, we have never had any violations – major or minor – that would help us understand this latest action.”
Coast spokesperson William Pierce with APCO Worldwide, an international communications consultancy, the Department of Education has made some general allegations but not laid out any specific problems with Coast.
“Coast was following the operations manual they were given and trained on,” said Pierce. “For the last 21 periods they have been constantly audited.”
Davis added that Coast has been especially prudent helping students rehabilitate their loans.
“Specifically in helping students rehabilitate their loans, Coast has followed the Education operations manual regarding offers to remove the delinquency of repayment from credit reports and the waiving of collection fees,” added Davis. “Both which are specifically allowed by the Department of Education.”
Coast Professionals and the Department of Education will be in court in D.C. on April 8 to address the lawsuit.
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Coast sues Education Department to prevent contract loss
Mar 12, 2015 | The News Star
By Greg Hilburn
Coast Professional, the student loan collections agency headquartered in West Monroe, has asked the U.S. Court of Federal Claims to stop the U.S. Education Department’s plan to terminate its contract with the company.
The lawsuit asks the court to issue a restraining order and injunction to prevent the U.S. Education Department’s action.
Coast said its future as a company depends on relief from the court. Its only contract is with the Education Department. More than 100 employees work at Coast’s West Monroe office.
Officials with the U.S. Department of Education announced last month the agency will “wind down” contracts with Coast Professional and five other private collection agencies the feds said were providing inaccurate information to borrowers.
The other companies losing U.S. Education Department contracts include Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery and West Asset Management.
Officials with the U.S. Education Department said a months-long review of all its private collections agencies found agents of the companies made materially inaccurate representations to borrowers about the loan rehabilitation program.
The rehabilitation program is an option that can create benefits to defaulted borrowers after they have made nine on-time payments in a period of 10 months. Officials said the five private collection agencies gave inaccurate information at unacceptably high rates about the benefits.
In particular, the agencies gave borrowers misleading information about the benefits to the borrowers’ credit report and about the waiver of certain collection fees, the U.S. Education Department’s news release said.
Coast’s lawsuit said the company has the second highest rating among the Education Department’s contractors during the past 12 quarters. The company said its contract provides no other evaluation criteria for the Education Department to consider when deciding to award a contract.
Brian Davis, Coast’s chief executive, declined to comment Thursday.
Coast Professional, which opened its West Monroe office in 2007 with 10 employees, has created a high profile as a company on the rise in northeastern Louisiana.
The firm earned a spot on Inc. magazine’s 5,000 fastest growing U.S. companies in 2012.
Coast earned the 2012 Spirit of Distinction Award as part of the Thomas H. Scott Awards of Excellence, a program presented annually by The News-Star, DeltaBusiness magazine, the Monroe Chamber of Commerce and the University of Louisiana at Monroe College of Business. It also won a Scott Award in 2011.
Last year Coast Professional earned the Community Champion Award during the West Monroe-West Ouachita Chamber of Commerce Small business Awards program for its community service and giving.
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Coast Professional to Lay Off 264 Employees
Mar 12, 2015 | TWC News Rochester
By TWC News Staff
About 264 jobs will be lost in Geneseo and Henrietta after a private collection agency announced it is closing two of its offices.
Coast Professional filed a notice with the labor department, stating it will layoff 172 employees in Geneseo and 92 in Henrietta by April 22.
Coast and other debt collection agencies recently lost U.S. Education Department contracts.
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Local company to lay off 172 workers
Mar 11, 2015 | WROC 8 Rochester
By Staff
A local company is laying off 172 workers in Monroe and Livingston counties. Coast Professional made the decision after a contract with the Department of Education ended.
Coast Professional is a private collection agency. The layoffs start immediately and will continue until April 22nd. This decision may also lead to a plant closing in Henrietta. -
Roller Coaster Outlook Causes Layoffs for Coast Collections
Mar 10, 2015 | Genesee Sun
By Conrad Baker
Coast Professional Inc., a Louisiana-based loan collection agency which in December 2014 announced that it is expanding and increasing their work force, has now taken a sharp turn in their outlook and says they will be laying off 172 employees at their Geneseo facility.
During the Livingston County Industrial Development Agency Meeting in December, Coast representatives proudly informed the committee of their growth and potential new employment opportunities, but now say that a contract with the U.S. Department of Education has fallen through and they need to make layoffs.
“This area has really exceeded every expectation,” said Roxanne Baker, Coast Chief Operating Officer in December. “The labor pool is is fantastic here in Livingston County.”
Baker said at the time that the agency will be adding 15,000 square feet to their existing facility on Volunteer Road, and expanding the parking lot for additional hires.
Coast said in December that they hope to add 125 new jobs over the next three years.
Coast Professional Inc. said in a Worker Adjustment and Retraining Notification to the state Department of Labor said that 172 employees will be laid off from their Geneseo facility as the result of the Department of Education ending their contract with Coast.
The Department of Education announced it is ending contracts with five private collection agencies nationwide, including Coast Professional and Pioneer Credit Recovery Inc., which has its headquarters in Arcade, Wyoming County.
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Collection agency to lay off 264 workers locally
Mar 9, 2015 | Rochester Business Journal
By Nate Dougherty
Coast Professional Inc. plans to lay off 172 employees in Geneseo and another 92 in Henrietta after losing a contract last month with the U.S. Department of Education.
The private collection agency filed a notice with the New York State Department of Labor stating it will lay off the workers from March 5 to April 22, or within 14 days of those dates.
The plant layoffs are at the company’s Volunteer Road location in Geneseo, Livingston County, and its Methodist Hill Drive site in Henrietta.
The Education Department on Feb. 27 announced it was ending contracts with five private collection agencies nationwide, including Coast Professional and Pioneer Credit Recovery Inc., which has its headquarters in Arcade, Wyoming County.
The move came after the department's Federal Student Aid office performed a review of all private collection agencies FSA works with. The department said the review found the agencies were providing inaccurate information to borrowers.It opened here in 2009.
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Debt collector laying off 264 in Geneseo and Henrietta
Mar 9, 2015 | Rochester Democrat & Chronicle
By Matthew Daneman
More than 250 local debt collectors are losing their jobs.
Louisiana-based Coast Professional Inc., which has a pair of offices in the Rochester area, has notified the state Labor Department that 172 of its Geneseo workers and 92 of its Henrietta workers are being cut.
The cuts come as Coast and four other debt collection firms around the country saw their U.S. Education Department contracts canceled last month. Wyoming County's Pioneer Credit Recovery also lost its contract.
Pioneer has declined to say how the contract problems might affect its roughly 1,000-person workforce in Perry and Arcade.
According to Coast, the job cuts are to happen by April 22.
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Coast Professional in limbo after feds pull contract
Mar 6, 2015 | The News Star
By Greg Hilburn
The future of Coast Professional, the student loan collections agency, and its 100 employees in West Monroe is unclear after the U.S. Department of Education's decision to terminate its contract with the firm.
Officials with the U.S. Department of Education announced last week the agency will "wind down" contracts with Coast Professional and five other private collection agencies the feds said were providing inaccurate information to borrowers.
Everett Stagg, Coast's chief financial officer and co-chairman of the company, said in an email to The News-Star Friday the firm's legal team in Washington, D.C., is preparing a response to the decision. He declined to comment further.
The other companies losing U.S. Education Department contracts include Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery and West Asset Management.
Officials with the U.S. Education Department said a months-long review of all its private collections agencies found agents of the companies made materially inaccurate representations to borrowers about the loan rehabilitation program.
The rehabilitation program is an option that can create benefits to defaulted borrowers after they have made nine on-time payments in a period of 10 months. Officials said the five private collection agencies gave inaccurate information at unacceptably high rates about the benefits.
In particular, the agencies gave borrowers misleading information about the benefits to the borrowers' credit report and about the waiver of certain collection fees, the U.S. Education Department's press release said.
"Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt," Undersecretary Ted Mitchell in a press release. "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."
Officials said the department will reassign accounts held by the five agencies that aren't already in repayment to other agencies.
Coast Professional, which opened its West Monroe office in 2007 with 10 employees, has created a high profile as a company on the rise in northeastern Louisiana.
The firm earned a spot on Inc. magazine's 5,000 fastest growing U.S. companies in 2012.
Coast earned the 2012 Spirit of Distinction Award as part of the Thomas H. Scott Awards of Excellence, a program presented annually by The News-Star, DeltaBusiness magazine, the Monroe Chamber of Commerce and the University of Louisiana at Monroe College of Business. It also won a Scott Award in 2011.
Last year Coast Professional earned the Community Champion Award during the West Monroe-West Ouachita Chamber of Commerce Small business Awards program for its community service and giving.
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Former Coast Professional employee speaks out about layoffs
Mar 6, 2015 | KNOE 8 News
By Jillian Corder
Jobs at Coast Professional are on the chopping block after the US Department of Education ended itscontract with the collection agency.
In an exclusive interview, one employee who was fired just this week is speaking out. To remain anonymous we distorted her voice in our interview, and are calling her Jane.
"There's people walking out with boxes," says Jane, "I don't want to see people walking out with boxes anymore."
She's stepping forward hoping to shine a light on what's happening to her coworkers.
After reviewing 22 private collection agencies, the Department of Education is phasing out contracts with five of them, including Coast Professional in West Monroe.
After the initial panic, Jane says employees banded together.
"We will be there for y'all, we are in this together," Jane remembers hearing Monday at work. As the week went on, administration became less confident, "We don't know still. We are trying to get our politicians in Washington to fight for us."
Senator David Vitter's office says he is trying to ensure Louisiana businessesare being treated fairly.
The Department of Education cites two violations made by Coast Professional: (1)Consumers were misled to believe the loanrehabilitation program would remove any delinquency on their credit report, and (2) all collection costs would be waived when a student loan was rehabilitated.
Both of these promises are false.
"Probably false now, but they weren't several years ago," says Jane, "but the Department of Education has not updated anything."
Jane admits that both violations were happening at Coast, but says employees were simply following instructions.
"These were the guidelines, this is what Coast Professional was given," she says, "they've been given guidelines to go by and that's what we've been doing."
Jane says she was one of five this week to be let go from a job she loved, but all one hundred employees were warned of future cuts. She says she understands why Coast is having to let people go, and honestly she hopes to one day work again for thecompany. Until then, she's stepping forward with her story to help stop what she calls unfair layoffs.
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Mar 5, 2015 | My ArkLAMiss
By Staff
Following a review of 22 private collection agencies, the U.S. Department of Education announced today that it will wind down contracts with five private collection agencies that were providing inaccurate information to borrowers.
The five companies are: Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management.
Coast Professional is based in West Monroe.
The Department also announced that it will provide enhanced Fair Debt Collection Practices Act and Unfair, Deceptive, or Abusive Acts or Practices monitoring and guidance for all private collection agencies that work with the Department to ensure that companies are consistently providing borrowers with accurate information regarding their loans.
"Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt," said Under Secretary Ted Mitchell. "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."
During the past several months, the Department's Federal Student Aid (FSA) office performed a review of all private collection agencies that FSA works with. In these reviews, the Department sought to ensure that its private collection agencies were complying with the terms of the contract, which includes assurances that the agencies would not engage in unfair or deceptive practices and would comply with all applicable Federal and State laws.
In its review, the Department found that agents of the companies made materially 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 Department will reassign accounts held by these five agencies which are not already in repayment to other agencies. The Department will also increase monitoring to ensure that the students who began rehabilitation under the five private collection agencies will be treated fairly as they complete the rehabilitation process. Lastly, the Department will issue enhanced guidance to all remaining private collection agencies, increase internal training for FSA staff, enhance the private collection agency manual, expand monitoring for these types of issues, and refine its internal escalation practices. -
US Dept of Education drops 5 student loan debt collectors
Mar 4, 2015 | Daily Nebraskan
By Lauren Reams
The U.S. Department of Education has cancelled its contract with five of the 22 agencies it uses to collect student loan debt.
The cancellation came because the department saw aggressive practices being used to reclaim the debt.
The five debt collectors: Coast Professional, Enterprise Recovery Systems, Inc., National Recoveries, West Asset Management and Pioneer Credit Recovery were terminated by the department for “misleading borrowers about their options to get out of default, resulting benefits to the collector’s credit reports and collection fees,” according to the U.S Department of Education.
The number of borrowers in default for student loan debt has grown to more than 7 million totaling more than $1.1 trillion, according to the Federal Reserve Bank of New York.
Hoping to prevent students from having to deal with excessive debt, the University of Nebraska-Lincoln offers students free advice and coaching sessions though the Student Money Management Center.
The SMMC encourages students to use its one-on-one money management advising sessions, the financial education resources on the center’s website or attend one of the many workshops offered during the semester.
When students begin to pay back their student loans, officials with the center want students to plan ahead.
“Typically students don’t begin paying back their loans until six months after graduation, but it can depend of if someone used federal or private loans,” said Megan Scherling, SMMC program coordinator. “If you can’t afford a payment plan then there are other plans that will be more supportive of your income and age.”
Typically, students can expect a payment plan that lasts 10 years of consistent monthly payments, but it can depend of one’s payment plan. Some plans can extend up to a period of 20 years with a reduced payment, which depends on the service they use and what they can afford.
The SMMC said that information is the best way to stay on top of loan payments as well as knowing when a student’s payment plan begins, making that monthly payment on time and knowing whom to contact in case of payment issues.
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Lawsuits Filed in Response to U.S. Department of Education Ending ACA Members’ Contracts
Mar 16, 2015 | ACA International
By Staff
Several ACA International members whose contracts with the U.S. Department of Education were ended last month have responded with lawsuits against the department and one has filed a formal protest with the Government Accountability Office.
On Feb. 27, the Department of Education announced it would wind down contracts with five private collection agencies, Coast Professional Inc., Enterprise Recovery Systems, National Recoveries Inc., Pioneer Credit Recovery and West Asset Management.
During the past several months, the department’s Federal Student Aid office performed a review of all private collection agencies that it works with, according to a news release from the department.
In the reviews, the department sought to ensure that its private collection agencies were complying with the terms of their contracts, which includes assurances that the agencies would not engage in unfair or deceptive practices and would comply with all applicable federal and state laws, according to the news release.
It states the department found the five private collection agencies provided inaccurate information about the benefits 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.
Inside Higher Ed reports that Coast Professional Inc., National Recoveries Inc. and Enterprise Recovery Systems Inc. have filed complaints with the U.S. Court of Federal Claims in response to the department’s decision to end their contracts.
Pioneer Credit Recovery has responded to the department’s actions with a formal protest filed with the Government Accountability Office, according to the Inside Higher Ed article. The protest is an alternative to a lawsuit and the GAO’s recommendations, while not binding, are typically followed by federal agencies, according to the article.
Inside Higher Ed obtained a redacted copy, included in the article, of Coast Professional Inc.’s complaint.
It states the department’s decision to end the contracts has caused the company to lose revenue and reduce its staff and that the company is challenging the violations alleged by the Department of Education.
Coast Professional Inc. CEO Brian Davis also submitted a declaration, obtained by Inside Higher Ed, about the impact of the department’s decision to end its contract with the Louisiana-based agency.
Davis said in the declaration that Coast Professional Inc. has serviced the Department of Education for more than eight years. The department made its first transfer of accounts to Coast Professional in October 2009 and the company began its collection services under the contract.
According to Coast Professional’s complaint, the department contracted for the services of private collection agenies to, “support collection and administrative resolution activities on debts maintained by [the department] resulting from non-payment of student loans made under several federal student loan programs.”
As part of the contract, the department conducted regular performance reviews, known as “Competitive Performance and Continuous Surveillance (CPCS)” for Coast Professional. For the last 12 CPCS quarterly periods, according to the company’s complaint, it had an average rating of 97.85 out of 100, which is the second highest rating of any of the department’s contractors. Contractors with an average performance rating of 85 or higher over the life of a contract, or the last 12 CPCS periods, whichever is shorter, may be issued an extension, according to the complaint.
However, on Feb. 20, 2015, the company learned the contract would not continue as a result of findings from an audit of collection calls, according to the declaration.
Credit and collection professionals’ work in the student loan debt market supports the economy.
Student loan debt represents more than 25 percent of what is collected by professionals in the credit and collection industry, second to healthcare debt, according to the ACA International and Ernst & Young study of the Impact of Third-Party Debt Collection on the U.S. National and State Economies in 2013. Total, debt recovered returned nearly $44.9 billion to creditors and the U.S. economy in 2013, according to the study.
According to the Inside Higher Ed article, the complaints from Coast Professional, Enterprise Recovery Systems and National Recoveries were combined by the court and there will be oral arguments in the case on April 8.
ACA International has contacted the member companies impacted by the Department of Education’s decision for more details and will continue to report on this story.
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ED Student Loan Debt Collection Contract Mess Moves to the Courts
Mar 13, 2015 | Inside ARM
By Patrick Lunsford
As expected, the fallout from the Department of Education’s decision to end its relationship with five student loan debt collection agencies has moved into the federal court and government adjudication system. Four of the five contractors have filed either formal protests or lawsuits in the U.S. Court of Federal Claims.
Education publication Inside Higher Ed first reported the development.
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On Wednesday, a judge in the Court of Federal Claims – the court that hears monetary claims against the U.S. government – consolidated three suits filed against ED by companies that lost the debt collection contract: Coast Professional, Enterprise Recovery Systems, and National Recoveries.
The consolidated action asks the court for a preliminary injunction that would prevent ED from distributing accounts to the other collection agencies that did not have their contracts terminated pending the outcome of a formal protest.
The suits were filed under seal, but Inside Higher Ed did obtain a redacted copy of Coast’s action. The judge in the case set a date of April 8 to hear oral arguments in Washington, DC on the matter.
Taking a different tack, Pioneer Credit Recovery filed a formal protest with the Government Accountability Office (GAO) against ED’s decision, its parent company Navient revealed in an SEC filing this week. The due date for GAO adjudication on the issue is June 17.
Navient also revealed that the five collection agencies named by ED in its announcement will begin the formal contract wind-down process as early as next week. On Tuesday, Navient said that ED “instructed Pioneer to prepare accounts that are not enrolled in payment programs or that are not actively working towards resolution for transfer back to the Department. Transfers of these accounts will occur on March 19, 2015 or April 17, 2015, depending on account activity. Accounts in active repayment will not be part of this recall process.”
The fifth collection agency set aside by ED, West Asset Management, does not appear in any docket within GAO or the Court of Federal Claims as of Friday. But WAM’s situation is somewhat complicated. BPO giant Alorica completed a transaction just last week for much of West Corp.’s agent business, including the ARM unit WAM. Alorica, likewise, does not yet appear in GAO protest or court searches.
Protests are nothing new for ED’s student loan debt collection contract. The GAO currently has at least two other protests currently open under the contract, not including Pioneer’s, and eight other protests have been resolved in the past year alone.
Those protests, along with other issues, have led to the significant delay in the awarding of new student loan collection contracts in ED’s unrestricted category. ED announced contract awards to small business collection vendors in October of last year.
Interestingly, two of the companies awarded small business contracts in October were among the five dismissed by ED recently. An anonymous ED official told Inside Higher Ed that “the agency had not yet decided what action it would take regarding the companies’ 2014 contracts.”
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Mar 12, 2015 | Inside Higher Ed
By Michael Stratford
Two of the debt collection companies that the U.S. Department of Education earlier this month accused of misleading borrowers could potentially continue to collect defaulted loans on the department’s behalf under a different contract.
Coast Professional and National Recoveries were among the five companies whose contracts the department said it would end, citing “materially inaccurate representations” they made to borrowers who were trying to get their loans out of default.
But while the department won’t give the two companies any more business under their 2009 contracts, newer agreements they have with the department so far appear to be unaffected by the allegations of misleading borrowers.
Coast Professional and National Recoveries were among the 11 entities that were awarded new debt collection contracts last September as part of the department’s effort to redo all of its 2009 agreements with debt collectors.
A department official, who declined to be named, said Wednesday that the agency had not yet decided what action it would take regarding the companies’ 2014 contracts. (The department has not yet purchased debt collection services from any company under those contracts, federal recordsshow.)
Lawsuits, Protest Filed
Meanwhile, the department’s crackdown on federal debt collectors, which was widely praised by consumer advocates and some Senate Democrats, is facing a legal backlash.
Both Coast Professional and National Recoveries -- as well as a third company -- have filed lawsuits against the Department of Education over its decision to end the earlier 2009 contracts.
Coast Professional last week filed a complaint under seal in the U.S. Court of Federal Claims, a redacted copy of which was obtained by Inside Higher Ed. The company accuses the department of acting arbitrarily and not following proper procedures. It asks a judge to order, among other things, that the department stop providing new student accounts to its competitors who had their contracts extended.
National Recoveries and a third debt collector whose contract was also being ended, Enterprise Recovery Systems Inc., are seeking similar relief. Their full complaints were also filed under seal.
A federal judge on Wednesday consolidated all three cases. He has scheduled oral arguments in the case on April 8.
Separately, a fourth debt collection agency, the Navient-owned Pioneer Credit Recovery, last week filed a formal protest of the department’s decision with the Government Accountability Office, which resolves disputes between federal agencies and contractors as an alternative to litigation. The GAO has 100 days to make a recommendation, which is not technically binding, but the office's recommendations are customarily followed by federal agencies.
The swift response by the debt collection companies to the department’s ending of their contracts illustrates the complexities of a federal student loan system that is administered largely by outside third parties.
It also comes as President Obama this week unveiled a Student Aid Borrower Bill of Rights, promising to improve and standardize the customer service experience of federal student loan borrowers.
But even as Obama orders the Education Department to strengthen protections for borrowers, the agency’s efforts can be complicated by the political clout of contractors or a complicated set of federal procurement rules and procedures.
The debt collection contracts are particularly lucrative, bringing in tens of millions of dollars for the companies each year. The companies also employ hundreds of people, which means the local member of Congress where companies are located usually has an interest in the deals.
After Coast Professional officials learned late on a Friday evening last month that the department was ending their contract, court documents show, three executives flew to Atlanta to stake out the department’s field office there at 7:30 a.m. the following Monday.
When the appropriate department employee wasn’t there, they hopped on a plane the same day to Washington and went to the department’s headquarters. They eventually were able to meet with some of the department’s top officials, but were unable to persuade them to change the decision.
New CFPB Findings
Separately, the Consumer Financial Protection Bureau on Wednesday said that its oversight of some student loan debt collectors that work for the Department of Education revealed a number of problems in recent months.
The CFPB found that some of the companies, which it did not name, overstated the benefits of federal programs, misrepresented the requirements of certain benefits for defaulted borrowers and falsely gave the impression that the company intended to take legal action against borrowers (when in, fact, it did not).
The consumer bureau said that the companies with such violations had undertaken corrective actions that regulators are now reviewing.
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Education Department Ends Contract with 5 Collection Agencies Accused of Deceiving Borrowers
Mar 11, 2015 | iSchool Guide
By Hanna Sanchez
The U.S Education Department announced in a press release last February 27 its decision to cut ties with five of the 22 private collection agencies after learning about their deceitful practices. Following a review of these agencies, the Department said it would enhance its compliance monitoring of the Unfair, Deceptive, or Abusive Acts of Practices and Fair Debt Collection Practices Act to ensure that borrowers receive accurate information.
The five collection agencies are Enterprise Recovery Systems, Coast Professional, National Recoveries, West Asset Management, and Pioneer Credit Recovery.
Under Secretary Ted Mitchell said "Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt."
"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," Mitchell added. "It is our responsibility - and our commitment - to uphold the highest standards of service for America's student borrowers and consumers."
The Education Department's office of the Federal Student Aid (FSA) has conducted a review of its accredited private collection agencies. The review was done to ensure that all of these agencies were complying with the terms stated in the contract. Their agreement includes making sure that they would not engage in deceptive or unfair practices and comply with state and federal laws that apply.
The Department, in its press release, also said agents of these companies deceived borrowers through inaccurate representations of the loan rehabilitation program. This program serves as an option that could provide defaulted borrowers with benefits after making nine on-time payments in a span of 10 months.
The five agencies were found to have been deceiving borrowers at "unacceptably high rates." The Department also said these agencies provided misleading data about the benefits to the credit reports, as well as about the waiver of certain collection fees.
To address the issue, the Department plans to reassign accounts that were held by the five collection agencies. It also plans to increase its monitoring to ensure that students who started rehabilitation under these agencies would receive fair treatment as they complete the process. Lastly, the Department will release an enhanced guidance to the remaining agencies, improve the private collection agency manual, increase FSA staff training, polish up its internal escalation practices, and tighten its monitoring for these issues.
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Mar 2, 2015 | Inside Higher Ed
By Michael Stratford
The U.S. Department of Education saidFriday it will end contracts with five companies that collect defaulted federal student loans after finding they made “materially inaccurate representations” to struggling borrowers.
The agency said it was winding down its debt-collection agreements with Navient-owned Pioneer Credit Recovery, as well as Coast Professional, Enterprise Recovery Systems, National Recoveries and West Asset Management.
Those companies are among the 22 collection agencies that the department hires to pursue borrowers who have fallen behind on their loan payments.
The five debt collectors being terminated, the department said, provided borrowers with “inaccurate information at unacceptably high rates” about the benefits of a federal program that allows borrowers to get their loans out of default.
“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 department said in a statement.
Friday’s announcement comes as the department has faced growing criticism for its oversight of the various federal contractors who manage its $744.3 billion portfolio of direct student loans.
Aside from complaints by student advocates, consumer groups and some Democratic lawmakers, the agency’s own inspector general has taken department officials to task for not doing enough to monitor those contractors.
Last year the inspector general said that officials were not “effectively” making sure that the debt collection companies were following the law. And in May 2013, the inspector general found that the department was paying out bonuses to those companies without first verifying that they had actually been earned.
The department also said Friday that it would provide enhanced monitoring of all of the companies that collect federal student loan debt.
"Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt," Under Secretary of Education Ted Mitchell said in astatement. "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."
Crackdown on Navient
The department’s decision is a victory for a collation of student and consumer advocates, unions and some Senate Democrats who have been particularly critical of the agency’s relationship with Navient, which was spun off last year from Sallie Mae.
The company last May paid $97 million to settle allegations by the federal government that it overcharged military service members.
“We are engaged with [the Department of Education] to learn more about their decision and address any questions or concerns they may have,” Navient told investors on Friday.
The company said that it had earned $65 million in revenue under the debt collection contract in 2014 and $62 million in 2013.
Representative Chris Collins, a Republican who represents the upstate New York district where Navient-owned Pioneer Credit Recovery operates, told The Buffalo News that the decision to end the contract would lead to the loss of about 400 jobs at the company.
Navient separately works with the Department of Education to collect and manage the payments of federal direct loan borrowers. The department renewed that loan-servicing contract last August.
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Department of Education Ending Contracts with Five Student Loan Collection Agencies
Mar 2, 2015 | Inside ARM
By Patrick Lunsford
The U.S. Department of Education announced late Friday that it would “wind down” its relationship with five private collection agencies on its student loan debt collection contract that ED says were providing inaccurate information to borrowers regarding rehabilitations.
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ED also announced that it will provide enhanced Fair Debt Collection Practices Act (FDCPA) and Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) monitoring and guidance for all private collection agencies still on the contract to ensure that companies are consistently providing borrowers with accurate information regarding their loans.
In a press release, ED said that a review of all 22 of its private debt collection contractors had revealed “unacceptably high rates” of misinformation regarding rehabilitations among five collection vendors: Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management.
The review, conducted by ED’s Federal Student Aid (FSA) office, found that agents of the companies made materially inaccurate representations to borrowers about the loan rehabilitation program. The five private collection agencies named were found to have given inaccurate information at unacceptably high rates about these benefits. In particular, the agencies gave borrowers misleading information about the benefits to the borrowers’ credit report and about the waiver of certain collection fees.
ED said that it will reassign accounts held by these five agencies. The agency will also increase monitoring to ensure that the students who began rehabilitation under the five private collection agencies will be treated fairly as they complete the rehabilitation process. The agency will issue enhanced guidance to all remaining private collection agencies, increase internal training for FSA staff, enhance the private collection agency manual, expand monitoring for these types of issues, and refine its internal escalation practices.
“Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt,” said Under Secretary Ted Mitchell. “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.”
Last year, the Government Accountability Office (GAO) issued a report blaming massive problems in the ED rehabilitation program on a poorly-managed computer system upgrade undertaken by the Department. The GAO found that because of limited planning and oversight, ED was unable to provide most borrowers who completed loan rehabilitation with timely benefits for more than a year following the October 2011 upgrade of its defaulted loan information system. As a result, borrowers who made a good faith effort to rehabilitate their loans experienced delays in having the defaults removed from their credit reports and reinstating their federal student aid eligibility.
Although ED noted that the FSA review was initiated to “ensure that its private collection agencies were complying with the terms of the contract, which includes assurances that the agencies would not engage in unfair or deceptive practices and would comply with all applicable Federal and State laws,” there were no allegations of FDCPA violations in its press release.
The companies involved have said that they had no indication from ED that the move was imminent. The five collectors were notified of ED’s decision on February 21. All have been working with the Department and other officials to understand exactly what happened.
“We had no warning,” said Joel Kunza, EVP and ED contract administrator with National Recoveries. “We have been an excellent performer on the contract, in both performance scorecards and internal audits. We are keeping all of our options open right now.”
Similarly, Pioneer Credit Recovery said that it was “blindsided” by the notification. Navient, Pioneer’s parent company, also noted in an SEC filing Friday, “We are engaged with ED to learn more about their decision and address any questions or concerns they may have.”
The announcement is already making waves in national and local news, especially in areas that the five collection agencies call home.
Newspaper Buffalo News and TV station WGRZ are running pieces focused on potential job losses in the Buffalo area, headquarters to Pioneer Credit Recovery. WGRZ noted that as many as 400 jobs could be at stake, although the company said in a statement that it has plenty of work for all current employs.
Buffalo News was the first to get statements from Congressional members in the area, quoting Republican U.S. Rep. Chris Collins as saying, “They didn’t like that Pioneer was making it seem like they were the magnanimous one waiving the fee, when it was the DOE. That’s easily fixed. That’s not worth terminating a contract, in my opinion.” A spokesman for U.S. Sen. Chuck Schumer (D-N.Y.) said the Senator is “doing everything in his power to help.”
The procurement process for the new unrestricted debt collection contract is still ongoing. As of Monday morning, ED had made no update to the procurement documents to reflect the announcement Friday.
Last year, ED awarded spots to 11 collection agencies on the contract’s small business set aside. Two of the small business awardees, Coast Professional and National Recoveries, were among the five announced Friday.
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Terminated Student Loan Debt Collectors May Get a New Lease on Life from the Department of Education
Mar 23, 2015 | Main Street
By John Sandman
Two of the five student loan debt collectors fired by the Department of Education (ED) last month may not be so fired after all.
Coast Professional Inc. and National Recoveries Systems were two of the five that ED announced were having their contracts signed in 2009 terminated. The other three who lost out were Enterprise Recovery Systems; Pioneer Credit Recovery, owned by Sallie Mae spin-off Navient; and West Asset Management. The contracts were ended when ED concluded that the debt collectors made "materially inaccurate representations" to borrowers who were attempting to pull their loans from default.
But while the 2009 contracts are toast, new deals signed in September 2014, also for debt collection on student loans and by the same debt collectors, may be still be good to go.
The contracts were among 11 handed out to private collection agencies, or PCAs. Why ED has had a change of heart about two of them is not clear.
“These are different contracts," said Dorie Nolt, a press secretary at ED, concerning the deals signed in 2009 and the deals signed in 2014. "On February 27, the Department announced it was winding down a set of 2009 contracts with five PCAs."
She added that "two of the PCAs on that list had won separate contracts in 2014.""Accounts will not be assigned to any PCA under the 2014 contracts until August 2015," said Nolt, "and the Department has not yet decided what action it will take with regard to these two PCAs."
"We will consider all relevant information before placing accounts under the 2014 contracts," she added. "We want to make sure that these companies are doing right by student borrowers, and we will not hesitate to step in and take any action that’s needed.”
Coast Professional, based in land-locked Genesco and Rochester, N.Y., and National Recoveries Systems of Blaine, Minn., are suing the Department and will likely have their day in court between now and August. In a filing in the U.S. Court of Federal Claims, Coast Professional accused ED of not following proper procedures and arbitrarily cutting ties with its contractors. It wants the court to prevent ED from sending new business to collectors who had their deals extended.
Enterprise Recovery Systems Inc., of Oak Brook, Ill. is seeking similar relief. A federal judge consolidated all three cases—Coast Professional, National Recoveries and Enterprise Recovery--on March 11. Oral arguments will be heard on April 8.
Separately, a fourth debt collection agency, the Navient-owned Pioneer Credit Recovery of Arcade, N.Y., formally protested ED’s decision with the Government Accountability Office, which resolves disputes between federal agencies and contractors that want to stay out of court. The GAO has 100 days to make a non-binding recommendation.
A Department of Education official who spoke on background emphasized that none of its borrower accounts that have been ear-marked for collection have been distributed to any of the collection agencies awarded contracts in 2014. Without specifying dates, the official stated that "'[d]uring the past several months, Federal Student Aid (FSA) began performing systematic reviews of all of its 22 contracted private agencies." Part of the Department of Education, the FSA is essentially a repository for federal student loan data. The official also said Coast Professional and National Recoveries were not under any investigation when the 2014 contracts were awarded. All of the contracts, the official said, were for debt collection.
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Dept of Ed Ends Contracts with 5 Collection Agencies
Mar 11, 2015 | The Jewish Voice
By JV Staff
Following a review of 22 private collection agencies, the U.S. Department of Education announced today that it will wind down contracts with five private collection agencies that were providing inaccurate information to borrowers. The five companies are: Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management.
The Department also announced that it will provide enhanced Fair Debt Collection Practices Act and Unfair, Deceptive, or Abusive Acts or Practices monitoring and guidance for all private collection agencies that work with the Department to ensure that companies are consistently providing borrowers with accurate information regarding their loans.
"Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt," said Under Secretary Ted Mitchell. "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."
During the past several months, the Department's Federal Student Aid (FSA) office performed a review of all private collection agencies that FSA works with. In these reviews, the Department sought to ensure that its private collection agencies were complying with the terms of the contract, which includes assurances that the agencies would not engage in unfair or deceptive practices and would comply with all applicable Federal and State laws.
In its review, the Department found that agents of the companies made materially 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 Department will reassign accounts held by these five agencies which are not already in repayment to other agencies. The Department will also increase monitoring to ensure that the students who began rehabilitation under the five private collection agencies will be treated fairly as they complete the rehabilitation process. Lastly, the Department will issue enhanced guidance to all remaining private collection agencies, increase internal training for FSA staff, enhance the private collection agency manual, expand monitoring for these types of issues, and refine its internal escalation practices.
FSA administers and oversees the federal student financial assistance programs, authorized under Title IV of the Higher Education Act of 1965 (HEA). These programs represent the largest source of student aid for postsecondary education in the United States. The Office of the Under Secretary manages policies, programs, and activities related to postsecondary education.
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Collection Agency To Lay Off 264 Employees Locally
Mar 10, 2015 | WXXI News
By Randy Gorbman
A student loan collections company has notified New York State it plans to lay off 264 people locally, 172 in Geneseo and 92 in Henrietta.
Coast Professional filed a notice with the State Labor Department that the layoffs would occur within the next several weeks.
As far as a reason for the layoffs is concerned, the company listed the termination of a contract with the U.S. Department of Education.
That department announced last month that it was ending contracts with five private collection agencies that were providing inaccurate information to borrowers, including Coast Professional.
Pioneer Credit Recovery is on that list as well. It has operations in Wyoming County. The Buffalo News reported last month that about 400 jobs could be lost there because of the loss of the contract.
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One Winner In The Trillion-Dollar Student Loan Crisis: Debt Collectors
Mar 6, 2015 | Buzzfeed News
By Molly Hensley-Clancy
There are few winners in America’s trillion-dollar student debt crisis. The government has become the guarantor of a giant pool of increasingly bad debt, low-income borrowers are saddled with decades of repayments, and taxpayers foot the bill. The class of 2014 was the most indebted in history.
But at least one industry is making money off of the crisis: the debt collectors that the Education Department pays to service and collect on federal student loans.
Payouts from the Education Department to private debt collectors topped $1 billion in 2014, the National Consumer Law Center reported. And business is booming — by 2016, the center said, it will have doubled to $2 billion.
“There’s just an explosion of the amount of loan debt. Default rates are incredibly high, and federal loans are very hard to discharge in bankruptcy,” said Persis Yu, an attorney with the National Consumer Law Center, in an interview with BuzzFeed News. “There’s a lot of opportunity for these companies to get new accounts.”
Swelling debt levels — and debt delinquency — mean a major headache for the Education Department: how to adequately oversee the private companies that deal with the growing portfolio of loans made with taxpayer dollars. The billion-dollar debt collection industry is only a piece of the puzzle; the department also pays private companies to service its federal loans, making sure nondelinquent borrowers keep paying on time.
The debt collectors don’t always live up to what the Education Department expects of them, and their drive for profit is often at the root bad behavior. The department recently said it had ended contracts with a group of collectors after they misled borrowers about ways they could get out of default. Though the Education Department did not specify motive, the NCLC report found debt collectors failed to help borrowers negotiate affordable loan payments because they wanted to maximize their payout under the Education Department’s contracts.
Christy, a borrower quoted in the NCLC report, said that she had been told by her debt collector that if she wanted to rehabilitate her loan, her monthly payments would be based on her loan balance, not her income, and that there was nothing she could do to lower her payments. When she asked about the income-based repayment plan she had heard about, she was told her loan was ineligible, because it had been consolidated.
Those were all misrepresentations. Christy was, in fact, eligible for income-based repayment. But at the time, her debt collector would have been paid just $150 if she had enrolled in income-based repayment, compared with a hefty 13% commission if she made the higher payments. The department later made changes to their contracts, hoping to change those practices.
“If I could have rehabbed this loan making regular payments based on my income, I would have done so many years ago,” she told the NCLC. “Now the loan went from $70,000 to $170,000.”
For years, Pioneer Credit Recovery was one of the Education Department’s star debt collectors, sitting near the top of the department’s rankings of 22 agencies. It raked in millions in performance bonuses for successfully chasing after student loan debtors who had defaulted on their payments. In 2014, Pioneer generated $65 million in revenue for its parent company, the former Sallie Mae subsidiary Navient Corp.
But an internal Education Department review found Pioneer had been misleading borrowers at “unacceptably high rates,” leading the mostly poor students to miss out on benefits that would have made it easier for them to pay back their loans. Late last Friday night, it was one of the companies the department said it was cutting ties with, alongside four other debt recovery agencies that had misled borrowers.
Pioneer said in a statement it had been “blindsided” by the announcement. The Education Department also promised to step up oversight of the 17 remaining debt collectors it contracted with.
Some observers called the department’s move to suspend Pioneer and other debt collectors’ contracts long overdue: Experts had been sounding the alarm about the agencies for years, saying that they violated borrowers’ rights in the pursuit of profit. Three separate 2014 reports by the Government Accountability Office and the Office of the Inspector General, as well as the NCLC, found that the department’s oversight of debt collectors was inadequate and had opened the door to a litany of abuses.
One of the most troubled debt collection agencies, NCO Group, was not among the groups terminated, despite paying a $3.2 million penalty to the FTC in 2013 for consumer violations. NCO Group, the FTC’s complaint alleged, called borrowers three or four times a day, at all hours of the day, “with the intent to annoy, harass or abuse.” They allegedly harassed borrowers at their workplaces, even after they had been told the calls were forbidden, and promised to remove numbers from their call lists, only to call again repeatedly. In 2011, NCO received the department’s highest bonus.
The Education Department’s rankings, which put Pioneer first and another agency it cut ties with, Coast Professional, third, also prioritized profit. In ranking its debt collectors, the department took into account only the amount that agencies had collected for them, without taking into consideration consumer experiences, according to a representative from the Education Department. Bonuses are paid out to collectors based on those rankings — which is how Pioneer Credit ended up with the government’s biggest bonus, almost $6 million, in 2012.
Though the department said last week that it would step up oversight of debt collectors, a representative would not answer whether or not it planned to change the profit-based criteria it used to rank agencies and pay out bonuses.
“The Department of Education’s rankings are misaligned with borrowers’ interests,” said Persis Yu of the NCLC. “We see it as putting profits above anything else.”
Yu said she was “cautiously optimistic” about the department’s moves to step up oversight of debt collectors. “It shows they’re moving in the right direction.”
The private companies that the department pays to service student loans that are not yet in default are also vitally important, said Rohit Chopra, of the Consumer Financial Protection Bureau. When it comes to federal loans, servicers are the step before debt collectors: They handle those who are paying their loans on time or who have missed only a few payments, and it is their job, Chopra said, to enroll borrowers in programs like income-based repayment, intended to keep people out of default.
Navient, which owns Pioneer Credit, gets more than $100 million from servicing federal loans, a number that it said in an earnings filing was only expected to grow. Navient and Sallie Mae, which it spun off from last year, agreed to pay $139 million to settle allegations by the Department of Justice and the FDIC that it misled and overcharged active-duty soldiers, many of whom were stationed in Afghanistan and Iraq.
The department recently renewed its contracts with all of its student loan servicers, including Navient.
The vast majority of students who go into default on their federal loans, running afoul of debt collectors, are not those with huge outstanding balances, like graduate students who rack up hundreds of thousands in debt. Instead, they are usually poor students with small outstanding balances, according to Federal Reserve data — many of them students at for-profit colleges, or those who dropped out after only a semester.
Mellissa Deleau, of Altimont Springs, Florida, paid $19,000 for a degree at Everest College, a for-profit school that was later shut down by the government in the wake of a long list of investigations. After a year and a half of looking for a job, Deleau, a mother of five, went into default on her loans, unable to make the payments after leaving an abusive marriage.
Then the debt collectors began to call. “They blew up my phone,” she said. “They call me constantly. I don’t answer anymore.”
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5 Rogue Student Loan Debt Collectors Fired by Department of Education
Mar 5, 2015 | Main Street
By John Sandman
The Department of Education (ED) has been criticized for not keeping better tabs on debt collectors that go after students who owe ED money--debt collectors that ED pays to collect loans that it originated.
Last Friday ED revealed that it would step up the monitoring of debt collectors and, as if to demonstrate its seriousness, fired five of the 22 collectors it has contracts with.
Debt collectors Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery and West Asset Management got the boot. ED stated last week that it would continue to monitor the ones that remain but declined to say which, if any, had been issued a warning or had been put on notice.
Pioneer Credit Recovery, which is owned by Newark, Dela.-based student loan originator and servicer Navient, was said to have drawn the most complaints from borrowers to the Consumer Financial Protection Bureau and the Federal Trade Commission. What Pioneer's next steps to recover what will be a significant loss of business was not clear. Navient spokesperson Nikki Lavoie could not be reached for comment.
ED's examination of the debt collectors looked at whether they were observing federal requirements and whether or not they "engage in unfair or deceptive practices” and follow state laws. ED found that the five firms whose contracts were terminated misled borrowers about their ability to go into loan rehab programs which, after making a series of loan payments, would have gotten them out of default.
"It's encouraging to see the Department take steps towards a more accountable debt collection system," said Deanne Loonin, director of the National Consumer Law Center's Student Loan Borrower Assistance Project. "We also urge the Department to explain what this long overdue action means for borrowers. It is essential to provide relief to borrowers harmed by abusive collection practices." Promoted StoriesThis App is Quickly Replacing Human Financial Advisors (Business Insider)11 Things You Should Never Do Again After 50 (AARP) 1 Dirty Little Secret To Eliminate 15 Years Of Mortgage Payments (LowerMyBills)6 worst home fixes for the money (Bankrate)Recommended by
Others were less sanguine. The message to the Department of Education from Higher Ed Not Debt's campaign manager, Maggie Thompson, was a little blunter: "Thanks for firing five debt collectors that cheated students. Next, break up with Navient and Sallie Mae entirely.” Sallie Mae used to consist of a private lender and servicer of private and public student loans and a consumer bank. Last year the entity was separated into different companies, with the student loan and loan servicing arm being re-branded Navient and the bank retaining the Sallie Mae name, which will continue to offer consumer banking products while also originating student loans.
The National Council of Higher Education Resources, a trade association representing four of the five debt collectors as well as other loan collectors and servicers, criticized ED in a press release last week for failing to “provide details of the alleged findings to the impacted agencies” before taking action against them.
“The five affected debt collectors should have the opportunity to respond to the allegations before losing their contracts,” said James Bergeron, the council’s president.
Borrowers whose loan accounts have been held by the five agencies, but who are not in repayment, will be reassigned to other debt collectors, the department said. It was not clear when the shift to new debt collecting agencies will begin.
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Department of Education cuts ties with 'misleading' student debt collection agencies
Mar 3, 2015 | Nerd Wallet
By Doug Gross
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.
“Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt,” department Under Secretary Ted Mitchell said in a news release. “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.”Recommended: Student loans and college finance: Take our quiz!
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.TEST YOUR KNOWLEDGE Student loans and college finance: Take our quiz!PHOTOS OF THE DAY Photos of the weekend
Specifically, the agencies “gave borrowers misleading information about the benefits to the borrowers’ credit report and about the waiver of certain collection fees,” 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’s move was welcomed by consumer advocates.
“This move illustrates a commitment to responsible lending practices and is a strong step to protect consumers and taxpayers,” Maura Dundon, senior policy analyst with the Center for Responsible Lending, said in a news release. “No matter what type of debt owed, consumers have the right to be treated fairly and in accordance with the law.”
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U.S. Department Of Education Cuts Ties With Five Debt Collection Agencies To Protect Borrowers
Mar 2, 2015 | Consumerist
By Ashlee Kieler
Consumer advocates applauded the Department of Education’s announcement last week to end contracts with five private collection agencies that provided inaccurate information to borrowers.
On Friday, the Dept. of Education revealed that it would wind down contracts with Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management after conducting a review of agency practices.
The Department’s Federal Student Aid (FSA) office reviewed all private agencies under contract to ensure they were complying with terms of the agreements, including provisions that the agencies would not engage in unfair or deceptive practices and would comply with all applicable federal and state laws.
According to the review, the five private collection agencies in question were found to have given inaccurate information at unacceptably high rates about the benefits of federal loan rehabilitation programs.
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 rehabilitation programs are an option that can create benefits to defaulted borrowers after they have made nine on-time payments in a period of 10 months.
“Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt,” Under Secretary Ted Mitchell said in a statement. “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.”
In addition to cutting ties with the agencies, the Dept. of Education says it will provide enhanced Fair Debt Collection Practices Act and Unfair, Deceptive, or Abusive Acts or Practices monitoring and guidance for all private collection agencies that work with the Department to ensure agencies are consistently providing borrowers with accurate information regarding their loans.
The Center For Responsible Lending called the Department’s announcement a bold step.
“Student loan debt is now a trillion-dollar business – and as the financing of higher education increasingly shifts to federal student loans, the Department of Education must insist on the highest consumer protection standards,” Maura Dundon, senior policy analyst for CRL said in a statement. “This move illustrates a commitment to responsible lending practices and is a strong step to protect consumers and taxpayers. No matter what type of debt owed, consumers have the right to be treated fairly and in accordance with the law.”
Consumer accounts held by the five agencies being dropped by the Department will be reassigned.
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Education Department Breaks Ties With Student Loan Debt Collectors For Good Reason
Mar 2, 2015 | Bustle
By Lauren Holter
There’s rarely good news when it comes to student loan debt, but college students and graduates won a small victory last week. The U.S. Department of Education announced Friday that it’s ending its relationship with five major debt collectors who misled borrowers trying to repay their debts. Debt collectors were already universally disliked, but lying to borrowers about their options makes it so much worse.
After reviewing private collection agencies, the Education Department will stop working with five companies who gave borrowers inaccurate information, and the department will better monitor and guide the agencies that collect federal student loan debt. The reviews uncovered that certain collectors were misleading borrowers who had defaulted on their loan payments about the loan rehabilitation program, which benefits defaulted borrowers after they’ve made nine on-time payments in 10 months. They also gave wrong information about benefits to borrowers’ credit reports and the waiver of certain collection fees. In the press release announcing the decision, Under Secretary Ted Mitchell says:Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt. 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.
Because debt collection companies make so much money off of people’s loans, it’s crucial that the Department of Education properly manage its contractors. Pioneer Credit Recovery, one of the most prominent collectors under scrutiny, is owned by Navient Corp., formerly known as Sallie Mae, which has been criticized by student loan activists for years. Currently under investigation by the Consumer Financial Protection Bureau,Pioneer Credit Recovery made $127 million from its contract with the Education Department in the past two years, according to its annual report to investors.
The other companies are: Coast Professional, Enterprise Recovery Systems, National Recoveries, and West Asset Management. The Education Department will reassign their accounts that are not already in repayment to to other collectors and increase monitoring of these companies to ensure that students who are already repaying with them are not misinformed.
Student loans have become a widely debated topic, as 40 million Americans now have student loan debt and more than 7 million borrowers are in default. Although eliminating student debt would be ideal, better oversight of collection agencies is an important step toward improving the problem. Misleading borrowers in default only makes it harder for them to get out of debt, and when this happens nationwide, the issue intensifies. Student loan borrowers aren’t in the clear yet, but at least this lying will stop.
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U.S. fires student debt collectors
Mar 2, 2015 | Talk Radio News Service
By Staff
The Department of Education said it terminated contracts with five debt collection agencies that used unfair and deceptive tactics to collect unpaid student loans. Violations of the Fair Debt Collection Practices Act were uncovered during an examination of 22 private debt collection agencies. The five companies were identified as Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management.
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U.S. Officials Cut Ties to 5 Debt Collectors for Misleading Student Loan Borrowers
Feb 28, 2015 | eCredit Daily
By Staff
The U.S. Department of Education, which has been under intense criticism for its weak oversight of student loan debt collectors, said Friday that it will terminate its relationship with five firms, accusing them of misleading borrowers at “unacceptably high rates.”
After a review of 22 private debt collectors contracted with the Education Department, government auditors found that agents of five agencies were providing inaccurate information to borrowers. The five companies are: Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management.
“The companies made materially 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 U.S. Education Dept. said in its press release.
The Education Department also said it will provide enhanced monitoring to more broadly enforce the Fair Debt Collection Practices Act and provide guidance for all private collection agencies that work with the government “to ensure that companies are consistently providing borrowers with accurate information regarding their loans.”
“Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt,” said Under Secretary Ted Mitchell. “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.”
The five private collection agencies 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 Education Department said it will reassign accounts held by these five agencies which are not already in repayment to other agencies.
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