Two collection agencies that work for the Education Department paid more than $4 million combined in civil penalties in the past year after another federal agency accused them of using abusive language with consumers, making illegal threats and committing other violations of the law.
West Asset Management Inc. agreed in March to pay $2.8 million (
The enforcement actions came as part of what the FTC said was an effort "to protect consumers affected by the struggling economy," a goal that coincides with yet another administration objective of pursuing payment of debts owned the government in hopes of reducing federal deficits.
Education Department officials were aware of the enforcement actions at the time, and claims that none of its borrowers had been impacted. It is unclear what impact, if any, the cases had on the firms' contracts to recover funds from holders of delinquent student loans.
West Asset Management was seeking collections on $745 million in delinquent payments for the Education Department as of June 30. Allied Interstate was pursuing $895 million as of that date.
As part of their agreements, neither company acknowledged violating federal law, and both agreed not to do so in the future.
The Obama administration has asked Congress to loosen the rules under which collection agencies may call the cell phones of consumers who are delinquent on their debts to the federal government.
Under the proposal, a ban on robocalls to cellphones would be lifted, a step the administration says "is expected to provide substantial increases in collections, particularly as an increasing share of households no longer have landlines and rely instead on cellphones."
While the proposal was included in the president's plan to reduce deficits by $3 trillion over a decade, officials have yet to provide an estimate of the money it would raise.
