ACA Responds to Negative Student Loan Debt Collection Article

Two weeks ago, The New York Times ran a feature-length article in its Sunday, September 8 edition that was highly critical of the ARM industry and the work it does in the student loan sector.

We were caught a little off-guard by the article, since it used two blogs insideARM.com published in 2011 as much of the basis of the article. So we are happy ACA International has stepped up with some clarifications and objections to the piece.

Below is a letter from ACA CEO Pat Morris. The letter was submitted to The New York Times editorial board.

The New York Times’ recent article and editorial about student loans underscore a growing national problem in the rising default and delinquency of consumer debt.  Whether a student loan, credit card, cell phone bill, medical debt, mortgage or any other kind of rightfully owed debt, more people continue to have difficulty with repayment.  It’s ironic that while the Department of Education has been chastised in recent media reports for its approach in the lawful recovery, I suspect that these same outlets would be equally critical of the Department of Education for not doing enough to recover these debts.

While fundamentally disagreeing with the premise of your article to eliminate the Department of Education’s use of private debt collectors to recover rightfully owed taxpayer dollars, a central point of the New York Times’ article – the need for better communication of available options and to broaden the reach of personal financial literacy – is critically important.  That’s why third-party collectors created www.askdoctordebt.org to help consumers better know their rights if contacted.

Each year millions of consumers have or will face the prospect of being contacted by a debt collector in regard to a delinquent or defaulted debt. Most consumers have experienced something unfortunate or traumatic in their life that has led them into an adverse financial situation, further exacerbated by the worst recession in our history.   Enter a debt collector into a difficult situation with the challenging job of communicating with a consumer about resolving a rightfully owed debt on behalf of its client.  We are the messengers; the debt collector did not set tuition prices, grant credit or sell a good or service to consumers. Rather, we are tasked with working with consumers to resolve the obligation in a flexible, respectful and legal manner.

Beyond the large volume of consumer debt currently being collected, the Federal Reserve estimates that student loans – federal and private – now exceed $1 trillion surpassing both credit card and auto loans. Just last year, according to the Consumer Financial Protection Bureau, students borrowed $117 billion in new federal loans.  In all, household consumer debt now tops $13 trillion in the United States.

Perhaps unwelcome, debt recovery is fundamental to maintaining the health of America’s credit based system. Moreover, returning $55 billion in consumer debt to businesses, government and non-profit organizations are essential to the nation’s federal, state and local economies.  On the other end of credit granted or a service provided is an entity seeking to recover this rightfully owed debt to pay salaries, utilities, rent, and other business costs.  Debt recovery keeps affordable credit available and costs down, and helps the government reduce its requests for tax increases to cover shortfalls from uncollected obligations.

Legitimate third-party collectors who work to stay compliant, ensure that they are educated and approach collections in an ethical manner agree with the important need to protect consumers.  Those who break the law should be held accountable. As outlined in our Blueprint for reforming America’s debt collection system, there is an essential need for consumer protection that is balanced in allowing the recovery of rightfully owed debt and we are working with policymakers at the state and federal levels to modernize an outdated system.