Latest Deadline Passes in Dept of ED Collection Case; Judge Sets New Deadline

Late yesterday afternoon, Chief Judge Susan Braden issued an order directing the Department of Education (ED) to file another report on the status of the RFP for Private Collection Agency (PCA) Services “Do Over.” insideARM last reported on this matter on September 18, 2017.  Judge Braden has set a new deadline of October 20, 2017 for ED to file another status report.

A copy of Judge Braden’s order can be found here. 

In our September 18, 2017 article, we reported on the status report filed by ED on September 14, 2017. In that report ED wrote:

Status of Corrective Action 

In a notice filed on August 24, 2017, we informed the Court that ED’s evaluation teams have completed their review of all proposals, and that evaluation reports were being prepared and should be finalized within the next few weeks. ECF No. 184 (Defendant’s Notice of the Status of Corrective Action dated August 24, 2017). Evaluation reports are now being finalized, with an expected completion date of September 18, 2017. Once the reports are finalized, ED’s Source Selection Authority will perform an integrated assessment to identify the proposal(s) deemed to be most advantageous to the Government, followed by a responsibility determination of each apparently successful offeror. Once a new source selection determination has been made, ED will announce any new award or awards, and/or the termination of previously-awarded contracts, as appropriate. 

As stated in our August 4, 2017 and August 24, 2017 status reports, this corrective action is a top priority of Federal Student Aid, and ED is working diligently to complete the corrective action. Defendant respectfully requests that it be allowed to file a status report on October 5, 2017, informing the Court of the status of the corrective action. (Emphasis added by insideARM) 

October 5, 2017 came and went without another filing by ED. No explanation was given for the missed deadline. The ARM industry waited for a new report. Judge Braden waited for a new report. A week passed – still no status report. Judge Braden’s order directs ED to act. We will now wait until the October 20, 2017 deadline unless ED acts sooner. 

While there has been no activity since the last status report in the lawsuit before Judge Braden, there has been some activity in the appeal to the United States Court of Appeals for the Federal Circuit involving Judge Braden’s preliminary injunction. In addition to the dispute regarding the preliminary injunction, the appeal pits PCAs against each other on certain specific issues. 

On September 25, 2017 Continental Service Group, Inc. (ConServe) filed a brief regarding a request by another ARM company to intervene in the appeal. A copy of that brief can be found here. It is mentioned here, if for no other reason, because the brief contains an excellent summary (Pages 4-9) of the student loan debt recovery program from 2009 to the present. 

insideARM Perspective 

The entire situation borders on the absurd. The preliminary injunction issued by Judge Braden on May 31, 2017 has completely halted ED’s ability to place defaulted student loans to ANY PCA. The injunction has caused harm to consumers and to companies and individuals in ARM space who have worked in this area. 

In our August 24, 2017 article about the Consumer Financial Protection Bureau (CFPB) filing an Amicus Curiae Brief in support of the Department of Education (ED), we discussed the harm to consumers. We quoted a passage from the CFPB brief that discussed the 2016 Annual Report of the CFPB Student Loan Ombudsman: 

“To be sure, as the trial court observed, the 2016 Ombudsman Report recommended reforms to the process for collecting and restructuring federal student loan debt. But as that process is currently structured, debt collectors are the primary contact for borrowers seeking information about how to rehabilitate, consolidate, or otherwise manage their federal student-loan debt. Debt collectors are also the primary contact for borrowers seeking to make any payment toward defaulted federal student loan debt — debt which continues to accrue interest daily when in default. By preventing Education from assigning debt collectors to loans in default, and thus impeding or preventing borrowers from managing their federal student loan debt, the preliminary injunction leaves some borrowers worse off — potentially interfering with access to important consumer protections and preventing some borrowers from making payments toward accruing interest charges — while doing nothing to advance the reforms proposed by the Ombudsman.” 

We have not spent much time discussing the harm being caused to ARM companies and their employees. insideARM believes that the injunction and corresponding lack of placements has caused layoffs of hundreds of individuals who had previously worked for companies that had been working student loan accounts from ED. Without new placements companies cannot afford to retain staff.  Indeed, it is possible that one or more companies that previously handled this work may not be able to survive much longer. 

Additionally, when and if placements resume, ARM companies will need to recruit, hire and train new employees to handle an influx of new placements. In light of the backlog of accounts since May 31, 2017, placements are likely be larger than normal. That will put an additional strain on PCA resources. Companies may be able to re-hire former employees. But many will have found new jobs and/or new careers. It will take time for new employees to be completely trained; there is a myriad of intricate rules regarding student loan collections. 

Editor’s Note: See here for a link to an insideARM page that provides a history of our ED-related articles. The page is automatically updated as new stories are written.