The National Consumer Law Center’s Student Loan Borrower Assistance Project aims to provide consumers with information regarding student loan issues, borrower rights and responsibilities. The project relies on the cooperation of loan issuers, but the NCLC claims that the Dept. of Education is refusing to cooperate.
The lawsuit, filed in a federal court in Boston this week, seeks documents related to the financial incentives and oversight that the Dept. of Education provides to private companies collecting from borrowers with federal student loans.
According to NCLC, taxpayers paid nearly $1 billion in commissions to private student loan debt collectors in 2011, and it projects that number to reach over $2 billion by 2016.
“Collection agencies routinely violate consumer protection laws and prioritize profits over borrower rights,” National Consumer Law Center attorney Persis Yu says in a new release [PDF]. “Abuses by these debt collection agencies cause significant hardship to the millions of students struggling to pay off their federal student loans. Taxpayers and student loan borrowers have a right to information about the impact of the Education Department’s policy of paying outside debt collectors on the rights of borrowers.”
Attorneys with NCLC’s Student Loan Borrower Assistance Project first requested the information from the Dept. of Education in March 2013. However, the department denied NCLC’s request and the information it did provide was heavily redacted.
In addition to filing the lawsuit, the officials with NCLC sent a letter to Secretary of Education Arne Duncan expressing concerns about the department’s policies and practices related to debt collection.
The letter noted that the department is moving toward a model that “justifies withholding basic information because of supposed proprietary arrangements” in order to avoid accountability.
Consumerist has extensively covered the sometimes abusive practices used by debt collectors. Both the FTC and the Consumer Financial Protection Bureau have reported that debt collection was the top issue consumers faced when filing complaints.
Earlier this month, consumer advocates voiced their disapproval of a bill that would require the Internal Revenue Service to use private debt collection agencies to collect taxes.
NCLC Files Lawsuit against U.S. Department of Education for Access to Public Documents Regarding Private Debt Collectors [National Consumer Law Center]