Consumer groups are protesting a White House proposal that would give collection agencies more leeway to contact student loan borrowers on their cellphones.
The plan—one of a number of proposals in President Obama’s $3-trillion deficit-reduction plan that seek to enhance the government’s ability to collect on debts it is owed—would let collectors use automated dialing to call delinquent debtors’ cellphones, a method they already use to call land-line phones.
Under current law, federal agencies are allowed to contact cellphones by dialing manually, but not automatically. The White House says the change it is seeking simply reflects the fact that many people use cellphones only these days. In an e-mail, a spokeswoman for the Office of Management and Budget said the provision would help the government recover millions of dollars in overdue student-loan debt and help reduce defaults.
“This proposal seeks to restore fairness to the system of debt collection so that no one is free from their obligations just because of the kind of phone they have,” said the spokeswoman, Meg Reilly.
Contractors working for the Department of Education, the Department of Health and Human Services, and the Treasury currently collect less than 10 percent of the money they seek from borrowers who owe the federal government, Ms. Reilly said.
But consumer groups, citing past instances of abuse by collection agencies, say lifting the ban on automatic dialing for calls to cellphones would lead to greater harassment of borrowers.
Some in Congress, meanwhile, want to take the president’s plan a step further. Last month, Rep. Lee Terry, Republican of Nebraska, introduced a bill that would would allow organizations and companies to use automatic dialing for purposes other than collecting debts owed to the federal government.
Consumer groups say Mr. Terry’s bill would unravel protections Congress enacted in response to consumer outrage over unwanted calls.
“Giving one of the most abusive industries in the U.S. free rein to inundate people with robo-calls to their cellphones is a terrible idea,” Margot Saunders of the National Consumer Law Center said in a written statement. “No one will be safe from receiving abusive calls on their cellphones if this proposal goes through.”
Ms. Saunders said the proposal would not shrink the deficit because student-loan borrowers are already contacted on their cellphones, and many can’t pay off their debt because of their diminished job prospects in the sluggish economy.
Shaun Dakin, chief executive and founder of the National Political Do Not Contact Registry, said there is nothing to stop collection agencies from calling consumers’ cellphones. “What they want is the ability to harass people at computer speeds,” he said.
Ms. Reilly, of the Office of Management and Budget, said the administration would protect against abuse with new regulations limiting the number and duration of automated calls. She added that allowing the calls could reduce defaults by alerting delinquent borrowers to their repayment options.
According to an Associated Press report last week, the Education Department is the most active federal agency in the use of private collection firms, referring more than $28-billion in debt owed to the department to collection companies last year.
The Federal Trade Commission accused two of those companies of harassing borrowers, and the companies agreed to pay a total of more than $4-million in civil penalties, the AP reported. As part of those agreements, neither company acknowledged violating federal law. The Education Department said that it was aware of the enforcement actions against the two companies and that none of its borrowers were affected by those cases.
The trade commission received 140,000 complaints about debt collectors last year, according to the National Consumer Law Center.
Mark A. Schiffman, a spokesman for the Association of Credit and Collection Professionals International, said that more than 25 percent of loan consumers don’t use land-line telephones at all, and that many others rely heavily on cellphones. The automatic dialing suggested by the deficit-reduction proposal shouldn’t be confused with “robo-calling,” he said.
“There’s a huge personnel component behind this,” he said. “Sometimes they’ll call and there will be an automated call trying to verify someone, but then it gets transferred to a live operator to talk with that person. It’s a business efficiency, given the billions of contacts these folks are making every year.”