Williams & Fudge Inc., the Rock Hill-based firm that collects college student debt, said it is waiting for details to determine how President Barack Obama’s new Student Aid Bill of Rights would affect its business.
Obama signed the executive memorandum last week in an effort to make it easier for people with student loans to understand and manage their college debt.
The action calls for a new website where people can access their debt information and gain more control over payments. The memorandum also requires that people receive “fair treatment” and quality customer service from companies that service or collect debt. In addition, the plan would make it easier for people to discharge their student debt through bankruptcy.
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“Anything that streamlines the process is a positive,” said Bob Perrin, chief executive officer for Williams & Fudge.
The company collects federal Perkins Loans in all 50 states and private loans made by banks and schools. It does not collect direct federal student loans. Perkins Loans are awarded by institutions to low-income students.
The company also collects other debt for universities and colleges, such as unpaid tuition or parking tickets.
Perrin said the average student debt Williams & Fudge tries to collect is between $1,800 and $2,100, which is the range of most Perkins Loans.
Assessing the changes
Most of the changes Obama is making focus on direct student loans. But the president was clear, saying, “We’re going to take a hard look at whether we need new laws to strengthen protections for all borrowers, wherever you get your loan.”
He has asked the Treasury and Education departments, as well as the Consumer Financial Protection Bureau, to report by Oct. 1 whether bankruptcy laws or other consumer protections extended to the credit or mortgage industry should apply to student loans.
Perrin said the student collection industry is already one of the most federally regulated businesses. The companies are covered by the Fair Debt Collection Practices Act, with oversight from the Consumer Financial Protection Bureau and the Federal Trade Commission. The Telephone Consumer Protection Act also applies, meaning Williams & Fudge can’t use automatic telephone dialers when making collection calls.
Perrin wants more information on provisions about the new website and potential changes to bankruptcy law.
As signed by Obama, the website for loan information would list only public debt. Perrin wants to know if it would be expanded to include private debt, which would give people a complete picture of their student debt. Students usually have a variety of public and private loans.
Perrin also wants to understand the full implications of allowing student loans to be discharged through bankruptcy. While loan holders would be absolved of paying the debt, the cost of the loan doesn’t go away. Perrin said it could result in increased interest rates, more eligibility restrictions when applying for loans, and maybe even an increase in tuition rates.
Consumer advocates say Obama’s order is a step in the right direction, helping the more than 40 million people manage their student debt. Seven out of 10 students who recently graduated or left school owe on average $28,400 in student loans. Overall, student debt totals $1.3 trillion.
South Carolina residents owe $18.3 million in direct federal student loans, and 13.7 percent of the more than 649,000 loan holders are in default, according to federal education statistics. The national default rate is 13.7 percent.
Mark Kantrowitz, senior vice president and publisher of Edvisors, said changes in the bankruptcy law would require congressional approval, something that’s unlikely with a Republican-controlled Congress. Edvisors helps students and families plan and pay for college, according to its website.
Kantrowitz has testified before Congress and federal agencies about student aid policy.
Obama’s actions “puts pressure on the industry to change its standards,” Kantrowitz said.
Where the industry could feel the most pressure is its collection tactics.
The Consumer Financial Protection Bureau reported it received 2,300 private student loan complaints and more than 1,300 debt collection complaints between Oct. 1, 2013, and March 31, 2014, the latest publicly available data.
Williams & Fudge received the fourth-highest number of complaints among companies serving private student loans.
The bureau’s website lists 131 complaints against Williams & Fudge. An analysis shows Williams & Fudge complaints nearly mirror national data. Thirty-two percent of the complaints were from people alleging the firm was trying to collect a debt they didn’t owe. The national average for this complaint is 27 percent.
Other kinds of complaints included collectors improperly disclosing loan information or improperly contacting people, collectors making false statements or collectors’ communication tactics.
Perrin, of Williams & Fudge, said the company’s complaint rate is below industry averages, but he did not provide any figures. He also said the Consumer Financial Protection Bureau’s website lists every entry as a complaint when it may just be a person wanting to know more information.
Perrin said a better filtering mechanism is needed regardless of whether the data is maintained by the Consumer Financial Protection Bureau or the federal Department of Education.
Abiding by rules
Perrin said Williams & Fudge follows the rules. When people dispute they owe money, the collection process is stopped until more information is gathered from the institution and forwarded to the customers. Perrin said that usually takes about seven days. All calls regarding loans are recorded, he said.
In all likelihood, the new Students Aid Bill of Rights shouldn’t change the way Williams & Fudge deals with is clients, Perrin said.
Kantrowitz said part of the problem is many people fail to remember all their student debt or understand that third-party companies are hired to collect debt by schools.
His advice: “When you graduate or leave school, make a list of your loans, the interest rates, who and where you pay. Never throw out any records. Keep them indefinitely. Loans have a way of coming back.”
Don Worthington • 803-329-4066