Update on Department of Education and Debt Collection

The U.S. Department of Education (DOE) has been relying on private debt collection companies to collect unpaid or overdue student loan debt, and many consumers have experienced problems with those debt collection companies and their tactics. In some cases, consumers have alleged that the private debt collecting firms contracting with the DOE have engaged in unlawful debt collection practices in violation of the Fair Debt Collection Practices Act (FDCPA). According to a recent article in The Wall Street Journal, a federal judge just “cleared the way for the Education Department to stop using private debt collectors and revamp the way it handles overdue student loans.”

What do debtors in Illinois need to know about the recent federal case and its impact on debt collection practices?

Plans to Change the Scope of Student Loan Servicing
If the DOE no longer plans to rely on private debt collection companies to recoup money owed by student debtors, what does it plan to do instead? As the article explains, the Education Department “wants to fold [debt collection] duties into student loan servicing as part of a broader overhaul called the Next General Financial Services Environment, or NextGen.” In other words, the DOE wants to change the scope of student loan servicing to include debt collection activities.

Yet this kind of “bundling” is not necessarily so simple to do. It would require companies either to provide additional services or to work together with other companies in order to offer a wider range of services. There is currently no easy answer for having debt collection as part of general student loan serving practices.

Private Debt Collectors Do Not Like the New Plans
The DOE’s new plans do not appeal to private debt collectors. As the article explains, debt collection companies “argue that the Education Department arbitrarily restricted competition and illegally canceled a contract solicitation they were vying to win.” Since last year, private debt collectors have been in court to prevent the DOE from moving forward with NextGen plans, or the solicitation of proposals.

Those debt collection companies sustained a significant loss when U.S. Court of Federal Claims Judge Thomas C. Wheeler decided that the DOE had “provided sufficient justification for consolidating loan servicing and default collection work.”

Now that the Education Department is permitted to move forward with NextGen, it will seek proposals that will involve managing approximately $1.5 trillion in student loan debt. For quite some time, consumer protection advocates have encouraged the DOE to stop using private debt collection companies and to consider ways of helping debtors to repay student loans. It is not yet clear whether the Education Department’s decision to stop relying on private debt collection companies through NextGen ultimately will be better for student loan debtors.

Contact a Consumer Protection Lawyer in Oak Park
If you have been harassed or treated unfairly by a debt collection company, you may have options. An experienced Oak Park consumer protection lawyer can speak with you today about your case. Contact the Emerson Law Firm to learn more about the services we provide to debtors and their families.


See Related Blog Posts:

How to Defend a Debt Collection Lawsuit

7th Circuit Says Debt Collector Can Charge Percentage-Based Fees

Comments

Post a Comment

Popular posts from this blog

New Information on Debts That Bankruptcy Cannot Discharge

If you are thinking about filing for bankruptcy in the Oak Park area, it is important to know that certain kinds of debts cannot be discharged in a bankruptcy case. Under U.S. bankruptcy law, these are known as non-dischargeable debts, or exceptions to discharge. There are certain types of debts that have long been identified clearly as non-dischargeable debts, while there are misconceptions about other types of debts that may or may not be dischargeable. As an article in CNBC discusses, the U.S. Supreme Court recently issued a ruling in the case of Bartenwerfer v. Buckley , which clarifies that debts incurred due to another party’s fraud cannot be discharged in an individual’s bankruptcy case. Our Oak Park bankruptcy attorneys can explain the Court’s recent ruling and provide you with additional information on dischargeable and non-dischargeable debts. Supreme Court Says Debt Incurred Due to Another’s Fraud is Non-Dischargeable The recent Bartenwerfer case involved a debtor attempti
Read more

Learning About Different Types of Wills

Whether you are young or old, single or married, wealthy or with limited financial means, healthy or dealing with a medical condition, it is important to make a will. Many people have incorrectly heard that wills are only necessary for particular people, such as those with a substantial amount of assets or for older adults in poor health. Yet wills are critical for adults of all ages, and an experienced Oak Park estate planning lawyer can help you to make one. Before you begin working with a lawyer on a will, you might start conducting your own research into wills in Illinois and the requirements for a valid will. In so doing, you are likely to come across information about many different types of wills, and you are probably going to wonder whether you will need more than one kind of will. In short, there are different terms that can be used to describe the form or function of a will, as well as some distinct types of wills. Our Oak Park estate planning attorneys can explain in more
Read more

Younger Parents Need an Estate Plan

It is critical for younger parents to have an estate plan, even if they know they are healthy and do not anticipate that anything will happen in the near future. Much too often, younger parents assume that they can wait until they are older to consider estate planning or until there is a health-related reason to begin the estate planning process. Yet estate planning is critically important for parents who have minor children. While estate planning is important for adults of all ages, it can allow parents to make important decisions about who will care for their children in the event that they become unable to do so themselves. Our Oak Park estate planning lawyers can explain in more detail. Naming a Guardian for Your Minor Children in Your Will Most importantly for younger parents, making a will allows you to name a guardian who can care for your child in the event of your unexpected death. Nobody anticipates a deadly accident or a sudden situation in which there is a need for another
Read more