The United States Department of Education administers and coordinates most federal assistance to education including directly providing student loans to secondary education students through a program called the William D. Ford Federal Direct Loan Program (sometimes referred to as “Direct Loan” or “FDL”). Before July 1, 2010, federal student loans were originated by private banks who gave out loans that were guaranteed by the federal government under the Federal Family Education Loan Program (“FFEL”).
The Department of Education hires companies called “loan services” to administer the federal student loans in good standing. Federal student loans that are in default, are transferred from the loan servers to collection agencies. These collection agencies contact borrowers through written letters and phone calls to collect defaulted federal student loans. Collection agencies also verify borrower employment for administrative wage garnishments. Collection agencies will work with borrowers to rehabilitate their loans and get out of default.
Collection agencies are private debt collectors who are subject to debt collection laws and regulations. The federal Fair Debt Collection Practices Act (FDCPA for short) regulates the behavior of third-party debt collectors. Congress enacted the FDCPA to eliminate abusive debt collection practices by debt collectors.
The FDCPA is a comprehensive statute that prohibits a catalog of activities in connection with the collection of debts by third parties. The FDCPA imposes civil liability on any person or entity that violates its provisions and establishes general standards of debt collector conduct, defines abuse, and provides for specific consumer rights.
The FDCPA includes a private right of action under which a consumer may sue a debt collector for FDCPA violations. If a debt collector is found to have violated the FDCPA, the consumer may recover up to $1,000.00 in statutory damages, plus actual damages (for example pain and suffering) and most importantly, your reasonable attorneys’ fees. Like many other consumer protection laws, the FDCPA is what is called “fee shifting” – meaning that the obligation to pay the consumers attorneys’ fees shifts to the debt collector.