Decision Expected Any Day in Case of Collectors v. Federal Student Aid on NextGen Procurement

You may not realize that while the debt collection community has focused on the CFPB’s rulemaking, robocall blocking, data breaches and impending data privacy laws, the war between private collection agencies (PCAs) and the Department of Education’s (ED) Department of Federal Student Aid (FSA) continues to be waged in the Court of Federal Claims (COFC). The last few weeks have produced a lot of activity, with some kind of ruling expected in the coming days.

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What’s the context?

There are actually two intersecting matters in play.

First is the suit regarding ED’s May 2018 cancellation of its Solicitation for large PCA services; In September 2018, the court ruled in favor of the PCAs and permanently enjoined ED from canceling the Solicitation. The PCAs argue, however, that ED has essentially ignored this order and proceeded with the cancellation. If you need a full recap, this story is a great place to start.

Second is the protest of ED’s (separate) Solicitation for services under its NextGen plan that would put all federal student loan servicers on a common technology platform with a single database. The PCAs’ complaint in this case is that ED has improperly bundled pre-and post-default servicing in the same procurement, which is a) illegal and b) makes it impossible for debt collectors to compete for work unless they can either a) provide all services required by the full student loan cycle (which, it’s argued, no company is capable of) or b) establish a viable teaming arrangement as a subcontractor (which, it’s argued, is both challenging and would cause a conflict of interest). The case is FMS Investment Corp., et al., v. United States; ConServe filed a complaint on the same day in October 2018 as FMS and their cases were consolidated. This article provides a great background on the twists and turns to date.

So, what’s happened recently?

On April 16, 2019, Judge Wheeler denied the PCAs' motion to prevent a recall of the accounts held by large collection agencies that held now-expired Award Term Extensions (ATEs). Some co-plaintiffs felt this meant the end of the road; reluctantly, they said "uncle". On May 20, 2019 Account Control Technology (ACT) filed a Notice of Voluntary Dismissal and on May 23, 2019 Windham Professionals did the same.

Others charged ahead; FMS, GC Services, and ConServe filed (sealed) motions for judgment on the administrative record (MJAR) on June 3, 2019.

Additional sealed motions, as well as some scheduling delays, were filed between June 19 and July 12, 2019.

On Tuesday, July 16, Continental Service Group (ConServe) filed a redacted but unsealed response to the Department of Education’s (ED) cross-motion for judgment on the administrative record. 

In the redacted document, ConServe offers a scathing recap of ED’s actions over the last several years and requests that the court 1) forces ED to issue a separate solicitation for default collection services under NextGen and 2) again enjoins ED from cancelling the Default Collection Procurement until ED procures default recovery services separately from other services (under NextGen or otherwise). The following excerpt from the 31-page response is representative of its full content:

While most of the original Private Collection Agencies protesters seemingly have abandoned hope and their protests, ConServe is committed to restoring integrity to the procurement process, exposing ED’s egregious behavior, and to ensuring that it is afforded a fair opportunity to compete. ConServe requests that the Court enjoin this procurement from proceeding on this illegal course.

ED’s most recent display of disingenuous and misleading behavior is documented in its latest filing. Rather than recognize the procurement violations and take corrective actions, ED approaches the danger presented by ConServe’s arguments much like an ostrich, wholly ignoring the matter hoping they will go away, or alternatively, advancing disingenuous positions.

What's next?

There was a hearing at the COFC yesterday to hear arguments. Sources tell me that a decision on the NextGen bundling matter is expected in the coming days. It’s unclear what will happen in the matter of the cancellation of the original Solicitation for large PCA services. Stay tuned.