Litigation Filed (Again) in New Chapter of ED Private Collection Agency Contract

Three lawsuits were filed on February 9, 2018 in the case of the Department of Education (ED) Private Collection Agency (PCA) Unrestricted Contract Award. The latest chapter in the years-long battle over the award finally came to an end on January 11, 2018 when ED completed its corrective action. It seems a new chapter has begun this week.

Brief background

There were 17 collection agencies on the 2009 five-year unrestricted (large company) contract (there were 5 firms on the small business contract). In 2014, 11 firms won new small business contract awards. The unrestricted awards were delayed.

In February 2015, ED announced suddenly that it would “wind down” its relationship with five PCAs that were “providing inaccurate information to borrowers regarding rehabilitations.” The companies said they had no warning of this, and had received high performance marks until that time. Three large firms were suddenly terminated (two of them later won an appeal and received award term extensions in April 2017). Lawsuits were filed in March.

Also in February 2015, five firms received two-year ATOs; lawsuits were filed over these. 

In December 2016 – almost two years later – seven firms received new awards under the unrestricted contract. 22 firms protested those awards; four filed lawsuits.

In March of 2017 a TRO was issued which stopped implementation of the new awards. More lawsuits were filed. In May 2017 the court issued a preliminary injunction, stopping all placements to all firms (including the small companies) on the ED private collection contract.

Also in May 2017, ED says it will engage in a do-over of the unrestricted contract award, and invited all 47 firms who submitted offers to participate. The Department issued an initial schedule which said new awards would be made on August 25, 2017.

This infographic summarizes the activity through May 2017.

August 25th came and went. Lots of activity happened in court, but confusion and waiting continued. Finally, in November 2017, a new judge was assigned to the case. He held a hearing with all parties in December, and ordered ED to complete its corrective action within 30 days.

ED complied. On January 11, 2018 just two firms were awarded the unrestricted (large) contract: Windham Professionals, Inc. (which was one of the seven that originally won a contract in December 2016) and Performant Recovery, Inc. (which was not one of the seven that originally won a contract). The other six contracts were rescinded.

The new round of litigation

Here is what we know as of today:

Sources tell insideARM that ED has issued recall notices to the five ATO agencies, recalling 10% of the accounts per week for the next 10 weeks.

Three companies filed suits in the U.S. Court of Federal Claims on February 9, 2018: Account Control Technology, Inc. (ACT), Transworld Systems, Inc. (TSI), and GC Services Limited Partnership (GC). All complaints are currently sealed, so the details are not available for review.

ACT filed Motions for Temporary Restraining Order (TRO), for Preliminary Injunction, and for Protective Order.

TSI filed Motions for Protective Order and for Leave to File Under Seal.

GC filed Motions Protective Order and for Leave to File Under Seal, as well as Motions for TRO and for Preliminary Injunction.

The cases were assigned to Judge Thomas C. Wheeler – the same judge who took over the longstanding case last fall, and set the final deadline for ED to close its corrective action. On February 12 Judge Wheeler granted all three Motions to Seal and set a scheduling conference for today at 2pm.

insideARM Perspective

Sources tell insideARM that more lawsuits are expected in this case – perhaps as many as 8-10. Meanwhile, the two large firms that received awards last month are in the process of ramping up to to begin receiving accounts.

insideARM will continue to follow and report on this unfolding new chapter of the Department of Education PCA story.

For those interested in all of the twists and turns in this case, click here for all insideARM Department of Education coverage.