Collection Agencies Choose Sides in Busy Week for ED Contract Protest Case

This week saw a flurry of activity in the Court of Federal Claims case against the Department of Education over its decision to end student loan debt collection contracts with five collection agencies. The end result is a consolidated case that pits four collection agencies — with two others supporting as amici — against the United States and five other collection agencies on the contract.

Going back a week, the Government Accountability Office (GAO) last Friday dismissed a formal protest from Pioneer Credit Recovery over ED’s decision. There were no details given for the dismissal, which occurred uncommonly quickly compared to the typical GAO protest timeline. The claim was most likely expedited so that Pioneer could join the consolidated Federal Claims lawsuit.

Pioneer took advantage of the dismissal and filed a motion Monday that was consolidated into the existing case. That brings to four the number of collection agencies seeking relief from ED in the lawsuit. The fifth company impacted by ED’s decision, West Asset Management (WAM), filed a motion mid-week to be added as amicus curiae in the case. WAM has a deadline of April 1 to file its amicus brief supporting the four other plaintiffs.

Another ED contractor, CBE Group, was also added to the case as amicus curiae for the plaintiffs. CBE was not one of the five contractors terminated by ED. CBE’s deadline for filing a brief is also April 1.

ED announced in late February that a review of all 22 of its private debt collection contractors had revealed “unacceptably high rates” of misinformation regarding rehabilitations among five collection vendors. The agency said that as a result, it was ending contracts with those five companies. One of the collection agencies protesting the action provided a statement this week to insideARM addressing those concerns.

“We look forward to a full, fair and open adjudication of our complaint, something we expect from an Administration committed to transparency,” said Brian Davis, CEO of Coast Professional, Inc. “Coast has been a top performing Private Collection Agency receiving the highest scores and has at all times complied with applicable law and regulation, including the FDCPA.  As evidence of our good work, we have never had any violations — major or minor — that would help us understand this latest action. Specifically in helping students rehabilitate their loans, Coast has followed the Education operations manual regarding offers to remove the delinquency of repayment from credit reports and the waiving of collection fees, both which are specifically allowed by the Department of Education.”

ED got some support this week on its side of the case, as five other collection agencies were named as Defendant-Intervenors.

In conjunction with ED’s notice that it would be ending contracts with some collectors, the agency also sent letters to five other contractors informing them that they would receive term extensions when the current contract ends. The extensions were made based on performance scoring criteria. But four of the five dismissed contractors noted that they also qualified for term extensions under the contract and that they would have received additional accounts if ED had not decided to end its relationship with them.

That is now the central focus of the protest case before the Court of Federal Claims. The four plaintiffs are seeking an injunction that would – while the protest is being adjudicated — prevent ED from forwarding the additional accounts to the other five collectors: Account Control Technology, Continental Service Group, Financial Management Systems, GC Services, and Windham Professionals.

Alternatively, the suit asks that the Court award the term extension, or bridge contract, to the four plaintiffs that qualified under the terms of the contract.

The five collection agencies that received term extensions have been added to the case as Defendant-Intervenors to support the defendant, the United States.

As of Friday, according to an order from the judge granting access to sealed filings to WAM and CBE as amici, the case is formally named Coast Professional, National Recoveries, Enterprise Recovery Systems, and Pioneer Credit Recovery (Plaintiffs) v. The United States (Defendant) and Account Control Technology, Continental Service Group, Financial Management Systems, GC Services, and Windham Professionals (Defendant-Intervenors). WAM and CBE are amici for the plaintiffs.