Earlier this year, the Department of Education (DoE) announced it would be ending contracts with five collection agencies responsible for delinquent student loans. According to the DoE, the collection agencies had lied to borrowers in default by promising them a chance to rehabilitate their loans if they would start making payments. After firing the five collection agencies, the DoE announced that it would more closely monitor debt collectors in the future.
The DoE will look into whether the debt collectors working for them are engaging in “unfair or deceptive practices”, meaning lying to and threatening borrowers late on payments. By engaging in these practices, it is possible that the fired collection agencies were in violation of the Fair Debt Collection Practices Act (FDCPA), which protects consumers from harassment and deception.
Debt collectors have gotten so out of control, that the DoE is completely rebuilding their customer service system. In 2016, the DoE will mandate that all customer service representatives, including debt collectors, treat borrowers fairly and provide accurate information.
Will Filing for Bankruptcy End Collection Agency Harassment?
While this scenario is dealing with collection agencies attempting to recover federal loans and not private ones, debt collector harassment can happen to any student or college graduate behind on payments. However, the FDCPA does protect private student loan borrowers from harassment, and there have been recent attempts by the White House and leaders in Congress to allow private student loans to become dischargeable in bankruptcy.
The Sader Law Firm – Kansas City Bankruptcy Attorneys