The ongoing narrative regarding the Department of Education (ED) unrestricted debt collection contract procurement process drags into its fourth year in an excruciatingly long and drawn-out process. Just last fall, ED announced its selections of seven private collection agencies (PCAs) – down from 17 from the previous iteration in 2009 – and everyone thought the procurement process was over. After numerous protests, the battle persists with no end in sight.
Mike Ginsberg, President & CEO of Kaulkin Ginsberg, and Randy Kamm, Principal of Collection Quotient Consulting, recorded a critical and timely podcast to address the current status of the procurement. The industry experts discussed how the lack of leadership at ED led us to where we are today, how they see the latest round playing out, the impact that ED will have on the ARM industry, and who the ultimate winners and losers will be.
In the beginning of the podcast, Mike and Randy discussed the role of the 11 smaller PCAs which were awarded the restricted ED contracts back in 2014, and the impacts of the current injunction:
“The small collections agencies who are not receiving accounts are still able to service those accounts but they are not receiving any new volume and that has some issues specific to the lack of placements. Any of the incumbents [PCAs who were awarded the larger, unrestricted contract] though who have accounts, I understand that they have been essentially prohibited from processing, making new calls, accepting payments. The injunction essentially freezes activities and so any of the large unrestricted firms who have accounts in-house, whether they were awardees…they have been prohibited by the judge from servicing those accounts. So I think the Department has even said that in the last two months while this temporary restraining order and injunction has been in place, some 234,000 borrowers equaling about two-and-a-half billion dollars in loans have been essentially frozen from servicing them.”
Later on, the two experts addressed how prime contractors’ subcontractors have been impacted:
“The restricted contractors, who are all small businesses, and to a large extent their subcontractors…the Department requires upward of 31 percent, I believe, of all of the business to be subcontracted to small firms. Also, whether you’re a restricted or an unrestricted prime contractor, 31 percent of the business is to go to small business subcontractors for core collection functions…so the lack of placements to the small businesses is really impacting negatively the restricted small businesses as well as their subcontractor networks.”
The full podcast is exclusively available for free to KG Prime members, Kaulkin Ginsberg’s market intelligence service. For information about how your company can access the full podcast and other important and timely ARM market research to help you make informed decisions, please visit kgprime.com or contact us at firstname.lastname@example.org.