Two private debt collection agencies that had contracts to collect delinquent student loans for the U.S. Department of Education have announced layoff plans prompted by the federal agency ending collection contracts with some vendors.

Coast Professional told New York state officials it could cut up to 260 jobs between two call centers. The firm also might need to close one office. 

National Recoveries Inc. expects an unspecified number of layoffs, company officials told the officials with Minnesota’s state government.

Collection agency Pioneer Credit Recovery has not filed any official layoff notice, although Rep. Chris Collins, R-NY, previously told the media that the loss of the Education Department contract likely would cost 400 jobs at Pioneer Credit, which is based in New York. Pioneer Credit officials have not confirmed potential job losses and have indicated the firm has enough work for its employees. The company’s workforce totals nearly 1,000.

The five agencies losing the Education Department contract include: Coast Professional,National Recoveries, Pioneer Credit, Enterprise Recovery Systems and West Asset Management.

The decision to terminate the contracts comes after the department's review of 22 private collection agency contracts. The review sought to ensure that the agencies were complying with contract terms, including assuring that the agencies would not engage in unfair or deceptive practices and would comply with relevant federal and state laws.The Education Department found that some collectors made inaccurate representations to borrowers about a loan rehabilitation program, an option that can create benefits to defaulted borrowers after they have made nine on-time payments in a period of 10 months. The five private collection agencies in question were found to have given inaccurate information at unacceptably high rates about those benefits. In particular, the agencies gave borrowers misleading information about the benefits to the borrowers' credit report and about the waiver of certain collection fees.

The Education Department will reassign accounts held by the five agencies that are not already in repayment to other agencies. It also will increase monitoring to ensure that the students who began rehabilitation under the five private collection agencies will be treated fairly as they complete the process. The department also will issue new guidance to all remaining private collection agencies under contract, increase internal training for the department’s Federal Student Aid staff, improve the private collection agency manual, expand monitoring for many issues and refine its internal escalation practices.

  

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