JPMorgan Chase's Debt Collection Agency's Sleazy Tactics to Squeeze Student Loans Debtors of Their Last Cash
Continued from previous page
And combined with increased supervision by the Consumer Financial Protection Bureau, the brainchild of Elizabeth Warren (who said in 2005, “Student-loan debt collectors have power that would make a mobster envious”), there's more regulation of the lending end of the student debt machine. CFPB's moves to investigate and regulate private student lenders seem to be part of what's scaring JPMorgan and others (US Bank recently decided to quit student lending as well). "What we are likely to see over the next few months is a lot of private education lenders rethinking the product, particularly if it appears that the CFPB is going to become more activist," lawyer Kevin Petrasic told American Banker.
But the problem with the appearance of private lenders exiting the system is that they turn up in other places, that the banks' tentacles are laced throughout any process that includes lending and borrowing and collecting. And as tuition shows no sign of going down and the economy remains sluggish, with many of the new jobs created in recent years low-wage jobs that make it hard for grads to pay off their loans, more and more people will feel the pinch of the debt collectors—as of February, one in seven Americans was being chased by a collector. As Matt Stoller noted, it's a growth industry.
So what can be done about it? “The government has the power to shape collection activity through incentives in the collection contracts,” the National Consumer Law Center report stated. “Given the Department’s power to incentivize collection agency behavior, an emphasis on rewarding agencies with few complaints or penalizing those with high numbers of complaints could be a significant step to assisting borrowers.”
That would mean NCO, with one of the highest rates of complaints, might be in trouble. But the others are waiting to scoop up the contracts if one is driven out. To really get Wall Street out of the student debt game, it's going to require getting them out of every level of the process—not just making loans, but packaging and reselling them, and collecting on them when they default.