ED Collection Contractors May Have Finally Hit a Brick Wall

The plaintiffs trying to get the Department of Education (ED) to reconsider its cancellation of the solicitation for unrestricted private collection agencies were dealt another blow today. As we reported on Monday, ED notified the Court of Federal Claims that it would commence the recall of accounts from five collection agencies that have been operating under 2015 award term extensions (ATEs). This recall had been announced previously, then put on hold without explanation -- although the hold closely followed a letter from a Senate committee directing ED not to go through with the recall. 

Buoyed in part by the Senators’ statement, the five companies filed a Motion for an emergency temporary restraining order (TRO) to prevent the recall. Briefings were filed. A hearing took place today. The upshot? Judge Wheeler, ever efficient in moving this matter along, denied the Motion.

Why? Well, here’s the gist of the court’s argument: Unfortunately, you guys have a difficult client. They shouldn’t have put you through this. But that’s part of the business, and I’m not going to micromanage ED’s procurement process. Sorry.

So, what’s next?

Also in court today, Judge Wheeler granted several motions to supplement the administrative record in the case.

And, I suspect those five companies will be receiving a notice of recall again, if they haven’t already. ED has said it plans to redistribute those defaulted accounts to the two more recent ATE holders and small business contractors (several of whom are likely no longer technically small).

Meanwhile, in spite of the failed TRO argument, the larger case continues. Remember, in FMS v. The United States the plaintiffs are protesting ED's cancellation of its Solicitation for unrestricted PCA services. ED's justification for this was that they changed their strategy and no longer need the services of the large collectors. Read here for more background on that. 

Unfortunately it becomes tougher to make the case for readiness once you've lost the accounts, are no longer actively working the contract, and have possibly laid people off. You'd have to re-hire, re-train, re-certify, etc. This is a lengthy process.

In support of the emergency TRO, the plaintiffs argued, in part, that stripping the ATE PCAs of their non in-repayment accounts now will "mortally wound each and every PCA."

I guess we will now see whether that proves to be accurate. I suspect that if any of them are able to hang on, either the small business contractors -- or further down the road, the pre-default servicers, may come looking for sub-contractors.