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STOP Collector Blog From the law firm of Lemberg & Associates

Student Loan Debt Collection Practices Put Under Microscope

Over the past week, there has been a firestorm over student loan debt collection. Bloomberg ignited the blaze with its story, “Obama Relies on Debt Collectors Profiting From Student Loan Woe,” in which it pulled the curtain back on the unsavory practices of some debt collection agencies. It also touched upon the inherent conflicts of interest involved when private debt collectors are given financial incentives to collect the greatest number of dollars possible – rather than help borrowers who have defaulted on student loans a path toward making affordable repayments and rehabilitating their credit in the process.

Not surprisingly, the fallout from this story caused Congressional Republicans to demand an investigation of the Department of Education by the Government Accountability Office. Another Bloomberg article cited Republican criticism of the Obama administration’s decision to pull all student loans under the federal government’s umbrella and charges of program mismanagement as fueling the call for the probe.

At the end of last week, a third Bloomberg article reported that the Department of Education had reached a decision on a rule proposed a year ago which would mandate that debt collectors allow those with defaulted student loans make minimum payments based on their ability to pay, rather than the actual loan amount. Moreover, the Education Department indicated that it would review debt collection scripts and that it would revisit the commission structure it uses with private debt collection agency. In our opinion, it’s about time.

Kudos to John Hechinger at Bloomberg for highlighting this issue and following up with it as events unfold.


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Sergei Lemberg

Sergei Lemberg is the principal at Lemberg & Associates, a consumer law firm that defends consumer rights in the areas of fair debt collection law, fair credit law, and lemon law, among others. He is regularly labeled by the debt collection industry as one of the “most active consumer attorneys” in the U.S.

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