Debt collectors hired by feds were fined for illegal practices
In an attempt to obtain a measure of debt relief/reduce the deficit, the federal government has officially increased its efforts to collect on debts owed. In fact, during the last fiscal year, the Department of Education referred $28.8 billion in debt – the majority of which was overdue student loan debt – to 23 private debt collection companies for action.
According to a recent report, however, two of these debt collection companies were fined over $4 million in combined penalties by the Federal Trade Commission (FTC), the agency in charge of enforcing the Fair Debt Collection Practices Act (FDCPA). (The FDCPA prohibits debt collection agencies from using deceptive, abusive or unfair practices to collect debt.)
These debt collection companies – West Asset Management Inc. (West) and Allied Interstate Inc. (Allied) – were given the task of collecting $745 million and $895 million in delinquent payments respectively by the Department of Education as of June 30.
In March, West – a subsidiary of the Nebraska-based West Corporation and one of the major debt collection agencies here in the United States – agreed to pay $2.8 million to the FTC – the largest civil penalty in history – after the agency accused its debt collectors of using both misleading and aggressive tactics in its dealings with consumers.
According to the thousands of complaints received by the FTC, West debt collectors allegedly used abrasive and threatening language on the phone, called multiple times during the day and often late at night, and even withdrew consumer’s funds or used their credit cards without permission.
Allied – based in Minneapolis, Minnesota – agreed to pay $1.75 million to the FTC in October 2010. Here, the FTC accused Allied of “making improper harassing phone calls to consumers,” failing to stop debt collection efforts after being informed that the people in question didn’t owe money, and informing third parties of the alleged debts owed by consumers.
For their part, officials with the Department of Education have indicated that they were aware of these actions by the FTC and claim that that none of their accountholders were affected.
“We closely monitor government contractors to ensure they are working in the best interests of students and taxpayers and, most importantly, that they are obeying the law,” said Justin Hamilton, a department spokesperson. “If we believe a contractor has violated the public trust and broken the law, that case will be referred to the inspector general for investigation.”
What are your thoughts on this story?
Source:
Google News, “Debt collectors with govt contracts paid penalties” Oct. 7, 2011
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