- Author: George Haines
- Published
Most of the time when we hear about debt collectors’ bad behavior, it’s usually over credit card debt. This should make sense as it’s a very common type of debt, making it equally common for people to fall behind on it. The federal law in place to protect against abusive debt collector behaviors is the Fair Debt Collection Practices Act (FDCPA). This law applies to collectors of all kinds of debt, and although student loans are difficult to discharge in bankruptcy, that doesn’t mean collectors of defaulted loans are exempt from the FDCPA. Here are some common ways that debt collectors violate the FDCPA when collecting on student loans:
- Stating that student loans are totally nondischargeable in bankruptcy: Student loans are dischargeable with a showing that payment on them would be impossible do to an “undue hardship.” In Nevada, that requires passing the Brunner test.
- Declining to discuss (or lying about) alternative options available for student loan debtors, e.g. hardship discharges (which is administrative and not bankruptcy-related), or school-closing discharges.
- Lying about debtors’ option to consolidate a defaulted federal loan to cure a default, or lying about the process by which debtors can rehabilitate a federal student loan.
- Threatening to garnish debtors’ wages without following the procedure allowing them to do so
- Threatening to take federal benefits such as tax refunds or Social Security benefits without following the appropriate procedures
- Contacting family members, neighbors, or employers about defaulted debts
The theme running through these six points that might not apply to credit card debts is that that student loan debt collectors do not have much of an incentive to offer debtors the repayment options that federal loans can give them. Obviously, if they did, then student debtors would choose those options (like consolidation) and the debt collectors would get nothing. One of the embarrassing truths about the federal student loan system in particular is that defaulted student loans can be easier to deal with than tax liabilities, which is something the Department of Education claims it’s working on improving.
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