The debt man only rings thrice in student-loan robocall plan

WASHINGTON – A little-noticed measure passed by Congress last year allows student-loan debt collectors to auto-dial borrowers on their mobile phones — but a feared robocall deluge may turn out to be more of a trickle.

The U.S. Federal Communications Commission, acting against advice from bankers and even the Obama administration’s Education Department, has proposed limiting calls to three a month.

“As I’ve said from the beginning, this exemption never should have become law,” said Sen. Claire McCaskill, a Missouri Democrat. “Since that’s unfortunately what’s happened, the FCC now has a responsibility to put clear, enforceable limits in place to spare consumers as much harassment from robocalls as possible.”

Loan servicers Nelnet Inc. and Navient Corp. are lobbying to be able to call 10 or more times a month and have gotten the support of the Education Department.

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“We can only help borrowers avoid default -– and the harm it can do their finances -– if we can reach them,” Kelly Leon, Education Department assistant press secretary, said in an e-mail.

Robocall complaints

The issue pits consumer advocates, who note that more than two million annual complaints are lodged each year with federal agencies about robocalls, against servicers trying to collect on $121 billion in delinquent student loans. At stake is the treatment of $1.25 trillion in student debt held by 42 million people, an issue that has worked its way into the presidential campaign. Democratic candidate Hillary Clinton has called for a three-month moratorium on federal student loan payments.

Democrats in Congress back the FCC in the current debate over student loan calls, sparked when the Obama administration last year, in a budget measure, opened mobile phones to robocalls about debt owed to the federal government or guaranteed by it. Congress asked the FCC to write a rule by August to implement the change.

“Consumers shouldn’t receive any robocalls on their mobile phones without consent, and certainly should not receive more than three in one month,” Senator Ed Markey, a Massachusetts Democrat, said in an e-mail. He called for “strong safeguards” to limit “intrusive and annoying robocalls that will result from the Budget Act’s misguided section.”

‘Limit harm’

Student loan borrowers, some mortgage holders, veterans and farmers are all exposed to calls under the budget provision, 29 Democratic members of Congress said in a June 8 letter to the FCC Chairman Tom Wheeler, a Democrat. The lawmakers, including 10 senators, said the budget provision they opposed gives the FCC authority “to limit some of the potential harm.”

The FCC appears set to impose limits, said Margot Saunders, an attorney with the National Consumer Law Center, a non-profit group that works on behalf of poor people and that asked the agency to restrict calls.

“The FCC has, quite refreshingly, proposed very consumer-friendly regulations that will provide good protection to consumers from unwanted robocalls” to collect debt owed to the U.S. government, Saunders said in an interview.

Three per month

The agency in a notice in May proposed the three-a-month limit, as did its Consumer Advisory Committee in June. Wheeler last week sent his formal proposal for a vote by the five-member agency, where he leads the Democratic majority. It awaits final action.

The FCC said in a statement Wheeler’s proposal abides by the budget act “while helping consumers avoid unwanted debt collection robocalls.”

Wheeler’s proposal includes the right of consumers to stop unwanted calls, limits on who can be called, and limits to the number of calls per month, according to the statement that didn’t provide details. The FCC last year responded to a surge in robocalls with guidelines intended to curb them.

Defaults could go up if companies can’t call more frequently than proposed, according to the Education Department and loan servicers.

Lenders are “deeply concerned” the FCC is supplanting Congress’s judgment that it’s important to let banks communicate with borrowers over mobile phones, the American Bankers Association and Consumers Banking Association said in a filing. Nearly half of U.S. households are wireless only, the trade groups said.

Billions in default

About $121 billion in federal student loans is in default, Navient said in a filing. It said it can help more than 90 percent of student loan borrowers avoid default when it has a phone conversation with the borrower.

Navient calls itself the leading U.S. loan management company, servicing more than $300 billion in education loans for more than 12 million customers.

The FCC should consider adopting a limit of three calls per week, Newark, Del.-based Navient said. It said it takes 40 or more attempts to reach some student loan holders.

Nelnet in a filing said 10 calls a month is “appropriate.” The company based in Lincoln, Neb. services $147 billion of student loans for 5.8 million borrowers for the Education Department, according to an annual filing.

Ben Kiser, a spokesman for Nelnet, didn’t supply a comment. Patricia Christel, a Navient spokeswoman, in an e-mail said, “The only borrower we can’t help is one we don’t reach. Default is avoidable but contact is key.”

Payment plans

People in default can have wages and tax refunds confiscated, a cost to be weighed against “a potentially unwanted phone call” that could lead to a payment plan offering lowered payments, the Education Department said in a letter received by the FCC on July 11.

“The FCC’s proposal strikes a common sense balance of allowing loan servicers to reach borrowers –- who increasingly rely on mobile phones –- to help them manage their debt while shielding them from abuse or harassment,” the Education Department’s Leon said, without addressing the specific number of calls that should be allowed. In the department’s July 11 letter, Undersecretary Ted Mitchell said three calls aren’t enough to advise debtors of repayment options and he didn’t propose a different number.

On Wednesday the Education Department released what it called “enhanced protections and customer service standards” for loan-servicing companies intended to make it easier for borrowers to manage and repay loans.

Among other things, people will be able to log into a web portal to find information and make payments, the department said.

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