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Related Private debt collectors with contracts from Ed Dept. paid civil penalties in consumer cases Washington Post

It’s not unusual for a government agency to go after rogue debt collectors, but it’s rare that those collection firms are operating on behalf of another federal agency.

The FTC levied hefty fines against two debt collection firms that were contracted by the U.S. Department of Education to chase down delinquent student-loan borrowers. The two companies, West Asset Management and Allied Interstate, were fined a total of more than $4.5 million dollars for “using abusive language with consumers, making illegal threats and committing other violations of the law,” the Washington Post reports.

In addition, West Asset Management “also allegedly withdrew funds from consumers’ bank accounts or charged their credit cards without consent,” the FTC charged.

(MORE: Is That a Debt Collector Trying to Call Your Cell?)

“Debt collectors often have a well-earned reputation for being verbally abusive, for making threats and false claims, or even breaking the law,” says Ruth Susswein, deputy director for national priorities at watchdog group Consumer Action.

According to the FTC’s complaint against Allied Interstate, the company hassled not just debtors, but debtors’ families (including their children), neighbors, co-workers and even their bosses.

The FTC says collectors for West Asset “us[ed] obscene or profane language or language the natural consequence of which is to abuse the hearer.”

Elsewhere in the complaint, it says that agents also hounded the survivors of deceased debtors. In an article earlier this year, the Twin Cities’ Star Tribune newspaper interviewed grieving relatives who say they were aggressively pursued by West Asset debt collectors in the aftermath of a loved one’s death. Instances like this, Susswein says, underscore advocates’ contention that the laws regulating debt-collection firms should not be relaxed, as the industry is pressuring the government to do.

(MORE: The Good News If Debt Collectors Are After You)

All this takes place while debt collectors are pushing for — and are likely to get — permission to contact debtors via their cell phones. President Obama’s deficit-reduction plan proposes that collectors charged with chasing down unpaid debts to the government such as tax or student loan bills be allowed to contact delinquent borrowers using automatic phone-dialing technology, colloquially known as “robocalling.”

The administration says this is the only way to collect on debts owed by people who have given up land lines. Critics like Susswein say this will only place an added burden on people who are already suffering financial hardship. “The last thing consumers need is to be harassed by debt collectors on their cell phones too,” she says.

No one denies that the federal government needs to take extraordinary steps to rein in a burgeoning debt, but is employing debt collectors — who may not always stay within the bounds of the law — a good way to do it?