Student Loan Companies Tell Congress: Debt-Collection Robocalls Are In Borrowers’ Best Interest

Image courtesy of (thisisbossi)

Show me someone who supports robocalls, and I’ll show you someone that has very few friends. Which is why it’s baffling that the Senate has yet to act on a bill introduced last fall that would close a loophole allowing the government to make debt-collection robocalls. But you know who does support robocalls? The student loan companies that are currently trying to convince Congress that these invasive annoyances are really for our benefit.

Quick catch-up: Federal law forbids most non-emergency, pre-recorded and/or autodialed robocalls without express permission of the recipient. But last fall, with the government on the brink of shutdown, the President signed a stopgap spending bill that included a completely unrelated rider granting itself an exemption to the rules when those calls involve the collection of debts owed to the federal government.

That means, starting as early as this summer, we could all be on the receiving end of automated phone calls trying to collect student loan debts, taxes, federally insured loans, or any other debt.

Immediately after that spending bill was passed, Sen. Ed Markey of Massachusetts introduced the HANGUP Act, which would rollback the exemption and close the new loophole. Even though much was made of the bill when it was announced, it’s been gathering dust in committee ever since.

So last week, in an effort to kickstart interest in the issue, Rep. Tammy Duckworth (IL) and Rep. Anna Eshoo (CA) introduced a House version of the same legislation, which D.C. insiders tell Consumerist still faces an uphill battle to even get out of committee.

But if everyone — from the Dalai Lama to (we assume) Dolly Parton — hates robocalls, why isn’t Congress doing anything to stop them?

Because a student loan industry lobbyists are telling them not to.

“Hi, This Is Rachel From Lobbyist Services”

In a letter [PDF] sent this week to the heads of the House Committee on Energy and Commerce, three groups — the Education Finance Council, the National Council of Higher Education Resources, and the Student Loan Servicing Alliance — make the argument that robocalls are an efficient way of collecting debts that “will help student loan borrowers nationwide by enabling federal student loan servicers and collectors to effectively contact and communicate with those who are struggling, helping them to navigate the often‐confusing array of student loan repayment options and working to provide tailored solutions that prevent unnecessary delinquencies and defaults.”

Yes, that’s right — this is all for your benefit, by helping to explain the byzantine system of loan repayment.

Here’s a better solution — as proffered by the Consumer Financial Protection Bureau — rather than annoy millions of Americans with robocalls, how about making loan servicing and repayment less complicated?

Who Really Benefits?

The groups, who have collectively spent more than $1.5 million lobbying the government on these issues since 2010, say that their members have a “long history of educating, informing, and guiding borrowers through the complicated world of federal loan repayment plans.”

Let’s look at some of their members: Bank of America, Wells Fargo, Apollo Education [parent company of University of Phoenix], and DeVry Education — all of them having either paid billions in penalties for their failure to handle loans properly, or have come under federal investigation for their business practices.

And yet, the groups insist they “have been disappointed by several detractors’ attempts to portray the provision as a tool to harass consumers,” when “To the contrary, this important consumer protection will help those struggling with student loan debt.”

The letter points to the $115 billion of federal student loan debt currently in default, but ignores data from the White House — which actually supported this legislation — which shows that debt collection robocalls would like result in a net zero gain for the government. At best, the government stands to make $500,000 a year from the robocalls, but it could also lose the same amount. The only people who really stand to gain from this loophole are the debt collectors and loan servicers.

We’re Here To Help [Insert Name Here]

These groups rightly contend that it’s important to educate students and their parent borrowers about repayment plans and options and to give them “an efficient way to communicate with their servicer to increase their chances of successfully managing their debt.”

But how does a pre-recorded call from a student loan servicer do any of that? The letter does not explain, but anyone who has ever lost their cool and shouted “GIVE ME A REAL &*%%ING HUMAN!!” into a phone knows it’s a little difficult to have a meaningful dialog with a recording.

If the loan servicers and debt collectors want to connect with human borrowers, they should use humans to call them.

Hating Robocalls Is So 1990s

The groups go so far as to justify robocalls by saying that the law that limits their use — the Telephone Consumer Protection Act — isn’t really needed anymore because most people have flat-rate calling plans, meaning they won’t be charged extra for the constant, unwanted, pre-recorded calls that may not even be going to the right number.

This rationalization completely ignores the fact that the TCPA doesn’t just cover cellphone calls, but calls to landlines as well. And it’s not just about preventing people from paying for unwanted calls; it’s about limiting nuisance telephone calls in general.

Sorry, Wrong Number

We’ve heard several stories over the years of people being repeatedly harassed by human debt collectors who are trying to reach someone else and refuse to believe they have the wrong number. Imagine how bad it will be if robocalling debt collectors are legally unleashed on consumers.

This is one of the concerns raised in a separate letter [PDF] from Sen. Sherrod Brown (OH) to FCC Chair Tom Wheeler.

The loophole, writes Sen. Brown “could potentially allow robocalls and texts to unrelated persons who have the reassigned cell phone numbers of the original borrowers, or to the borrowers’ relatives and references.”

With the debt-collection loophole still on the books, the FCC has the unenviable task of drafting the new rules for the government collectors to follow.

In his letter, Sen. Brown, Ranking Member of the Senate Banking Committee, calls on Wheeler to add consumer protections into these rules, like:
• prohibiting calls to anyone but the borrower;
• limiting the number and duration of debt collection calls made per month;
• barring calls to reassigned phone numbers;
• requiring the robocalled to verify that the called party is indeed the borrower.

The FCC guidelines are expected to be released this summer, after which the robocalls can commence. That is, unless legislators roll back the exemption.

Just Say No To Robocalls

In addition to telling your local senator and representative how you feel about this robocall loophole, our colleagues at Consumers Union are gathering signatures for their End Robocalls campaign, which seeks to push the telecom companies to give consumers the tools to prevent these unwanted calls from reaching their homes in the first place.