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.
Read more at The Washington Post: http://www.washingtonpost.com/news/business/wp/2015/03/16/theres-a-big-fight-over-how-student-debt-gets-collected-in-this-country/?wpisrc=nl_headlines&wpmm=1