Monday, March 26, 2012
According to story on Bloomberg, those who have defaulted on student loans are also being victimized by debt collectors. The author relates, "The debt collector on the other end of the phone gave Oswaldo Campos an ultimatum: Pay $219 a month toward his more than $20,000 in defaulted student loans, or Pioneer Credit Recovery, a contractor with the U.S. Education Department, would confiscate his pay. Campos, disabled from liver disease, makes about $20,000 a year. 'We’re not playing here,' Campos recalled the collector telling him in December. 'You’re dealing with the federal government. You have no other options.'"
The author notes, "With $67 billion of student loans in default, the Education Department is turning to an army of private debt-collection companies to put the squeeze on borrowers. Working on commissions that totaled about $1 billion last year, these government contractors face growing complaints that they are violating federal laws by insisting on stiff payments, even when borrowers’ incomes make them eligible for leniency." "Education Department contracts -- featuring commissions of as much as 20 percent of recoveries -- encourage collectors to insist on high payments. Former debt collectors said they worked in a “boiler-room” environment, where they could earn bonuses of thousands of dollars a month, restaurant gift cards and even trips to foreign resorts if they collected enough from borrowers."
"Debt collectors are the subject of more complaints to the Federal Trade Commission than any other industry -- almost 181,000 last year. Within the past 17 months, three companies working for the Education Department -- including one that is majority owned by JPMorgan Chase & Co. (JPM)’s private-equity arm -- settled federal or state allegations of abusive debt collections. The companies didn’t acknowledge wrongdoing, and Chase declined to comment. The Education Department said the government investigations didn’t involve the companies’ work for the agency."
"'Student-loan debt collectors have power that would make a mobster envious,' Harvard Law Professor Elizabeth Warren, who helped establish the Consumer Financial Protection Bureau and is now running for a U.S. Senate seat from Massachusetts, said in 2005."
This article contains even more shameful practices here. According to the article, "the Education Department this week will hold meetings with industry, government and consumer representatives to consider requiring that debt collectors automatically offer payments based on income to defaulted borrowers who qualify. If approved, the rules could take effect in July 2013."
The situation reported by the article is terrible. Those who are already in trouble are being victimized by unscrupulous debt collectors working for the government. Hopefully, the Department of Education will do something about these awful practices.