The U.S. Department of Education announced it will wind down contracts with five private collection agencies, including one owned by a Delaware-based company.
The five companies are: Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management.
Pioneer is a subsidiary of Wilmington-based Navient. Pioneer employs more than 1,000 in New York, Florida, and New Jersey. The Buffalo News reported the contract termination could lead to the loss of 400 Pioneer jobs in New York State.
Navient issued the following statement, defending the work of Pioneer and questioning the findings of the education department.
As a leading provider of asset recovery services, Pioneer Credit Recovery has a long track record of assisting individuals who default on their student loan payments recover from the negative consequences of default. Pioneer Credit Recovery was recently notified by the Department of Education that Pioneer’s contract, which had been month-to-month, was not extended on Feb. 21.We were blindsided by the Department of Education’s actions. Since the beginning of 2014 the Department conducted 17 exams — listening to 600 phone calls — including a final audit report issued this week, and the Department raised no concerns about any rates of inaccurate or misleading information to borrowers.In April, we received written confirmation from the Department that our policies and practices related to areas covered in the press release complied with department regulations, and as recently as last month submitted a recommendation about our exceptional performance. Despite repeated requests, ED has declined to provide any details.This news has a direct impact on our dedicated and high-performing employees, and we will defend their integrity and performance.
The Education Department also announced that it will provide enhanced 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.”
In its review, the department reported it 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 borrowers who had defaulted after they have made nine on-time payments in a period of 10 months.
The five 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 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.
Navient’s predecessor Sallie Mae purchased the company in 2002. Navient has also come under fire for its collection practices. The company has countered with information indicating that it ranks high in customer service and in coming up with payment alternatives.
