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Audit Faults Federal Oversight of Student Debt Collectors

Audit Faults Federal Oversight of Student Debt Collectors
July 15, 2014

WASHINGTON -- The U.S. Department of Education has not properly overseen the companies it hires to collect defaulted federal student loan debt, according to an audit released Monday by the agency’s inspector general.

The report found that officials at the department did not “effectively” make sure that the 22 companies that the department hired were collecting debt in accordance with federal law  and the terms of their contract. The inspector general also said that the department did not do enough to make sure that borrowers' complaints against debt collectors were properly received and resolved.

Under the terms of the government’s contract with the debt collectors, recurring borrower complaints are supposed to lead to a reduction in their performance scores. The audit says that, in spite of the more than 3,000 complaints the department received between the 2010 and 2012 fiscal years, officials never docked the scores of any of the companies. The department said in response to the audit’s findings that it had taken steps to “close gaps in our oversight” of the companies, including new directions to the debt collectors and a promise to take borrower complaints into account when evaluating the debt collectors.

The department has previously faced other criticism for its oversight of federally contracted debt collectors. A May 2013 inspector general report found that the department had paid out bonuses to the companies without verifying that they had actually been earned.  A leading consumer advocacy group has also criticized department officials for keeping secret how it pays out bonuses to the debt collection companies. The National Consumer Law Center earlier this year filed a lawsuit to force the department to turn over records relating to those bonuses. 

 

 

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