Education Department accuses debt collectors of ‘misleading’ students

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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