Consumer Group Sues Dept. of Education for Debt Collection Program Details

The National Consumer Law Center filed a lawsuit this week against the U.S. Department of Education under the Freedom of Information Act (FOIA). The lawsuit seeks disclosure of documents related to financial incentives and oversight that ED provides to private collection agencies on its debt collection contract.

The group said that in March 2013, as part of its efforts to protect student loan borrowers, attorneys with NCLC’s Student Loan Borrower Assistance Project requested that ED turn over public information about the incentives it provides to its private debt collector contractors.

According to NCLC’s lawsuit, ED effectively denied NCLC’s requests. The little information that NCLC has obtained is heavily redacted. After giving ED more than a year to turn over all of this public information, NCLC filed suit to obtain copies of the documents it seeks to review.

“Collection agencies routinely violate consumer protection laws and prioritize profits over borrower rights,” said NCLC attorney Persis Yu. “Taxpayers and student loan borrowers have a right to information about the impact of ED’s policy of paying outside debt collectors on the rights of borrowers. The Education Department should not insulate itself from public scrutiny.”

In a May 13, 2014 letter to Secretary of Education Arne Duncan, Deanne Loonin — director of NCLC’s Student Loan Borrower Assistance Project — noted, “We are very concerned that the Department of Education is moving toward a model in which it justifies withholding basic information because of supposed proprietary contract arrangements. This may work well for Department employees seeking to avoid accountability, but it does not work best for borrowers and taxpayers.”

It’s not the first time the federal government has been sued under FOIA for unwillingness to release records related to contracting with debt collection agencies.

In 2012, MyGovWatch.com – a site that helps ARM companies bid on government contracts – sued the Treasury Department to obtain bidder information that the agency refused to release on a recently-awarded collection contract. The site won its FOIA suit in late 2013 and it was upheld on appeal in January.

The case was prompted by the refusal of Treasury’s Financial Management Service (FMS) to release, at request, the names and bids of companies that were unsuccessful in winning a spot on the contract. After spending a year and a half defending the decision, and the corresponding legal fees required to do so, FMS was ultimately compelled to release the information to MyGovWatch.com.