Date: Tue Nov 13 2007 - 14:49:58 EST
Colleagues:
I must say I'm a bit surprised by the lack of response to my last posting, especially considering all the comments submitted during the NPRM process. I assume everyone understands the new regulations and/or does not yet have an action plan on dealing with the new limit on collection costs and mandatory assignment requirement.
At any rate, I did receive two responses; one from Dennis at Ball State (below) and the other from Brian Smith at ED (attached). Since Brian's response provides additional guidance and answers Dennis' questions, I am attaching it for your information in addition to additional guidance from ED on my questions.
Patrick Piper
Administrative Services Coordinator
University of Florida
University Financial Services
S-113 Criser Hall, PO Box 114050, Gainesville, FL 32611
Voice: (352) 392-0766 Fax: (352) 392-3448
ppiper@ufl.edu <blocked::mailto:ppiper@ufl.edu>
http://fa.ufl.edu/ufs/ <blocked::http://fa.ufl.edu/ufs/>
Correspondent, Florida Association of Bursars and Student Accounting Administrators (FABSAA)
http://www.fabsaa.fsu.edu <http://www.fabsaa.fsu.edu/>
The information transmitted is intended solely for the person(s) or entity to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon this information by persons or entities other than the intended recipient is prohibited. If you received this email in error, please contact the sender and delete the material from your computer.
________________________________
From: bounce-18709992-350589@listserv.unc.edu [mailto:bounce-18709992-350589@listserv.unc.edu] On Behalf Of Swartz, Dennis L.
Sent: Friday, November 02, 2007 9:18 AM
To: LMS Mailing List
Subject: RE: [lms] Restriction on Collection Costs
Pat,
No takers yet! Someone has to start this so here goes.
Question 1 - No impact.
Question 2 - It must be exclusive since the terms "contingency fees" and "additional expenses" do not appear in CFR 674. This is based on a search of the eCFR online.
If so, a school could contractually authorize a collection agency to assess and recover the debtor (borrower) "additional expenses" outside the realm of the "contingency fee" portion of the contract so long as the school is never billed for the "additional expenses".
This poses more questions:
Could schools have been doing this all along?
What qualifies as "additional fees?" Skip tracing? Credit bureau? Any external costs incurred by the collection agency?
Dennis
Ball State
Click here for the Office of Account Services <http://www.bsu.edu/bursar/accountservices>
Dennis L. Swartz, CTC
Fed Regs Analyst/Acct Specialist
Ball State University
Account Services
LU B7
Muncie, IN 47306 <http://maps.yahoo.com/py/maps.py?Pyt=Tmap&addr=LU+B7&csz=Muncie%2C+IN++47306&country=us>
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-----Original Message-----
From: bounce-18697981-115589@listserv.unc.edu [mailto:bounce-18697981-115589@listserv.unc.edu] On Behalf Of Piper,Patrick G
Sent: Thursday, November 01, 2007 4:56 PM
To: LMS Mailing List
Subject: [lms] Restriction on Collection Costs
Dear Colleagues:
The new regulations and comments are out and it seems our comments did not do a lot of good as not a whole lot of changes were made.
Although I haven't had the chance to review the entire document, one of our biggest concerns is the restriction on collection costs:
Sec. 674.45 Collection procedures.
* * * * *
(e) * * *
(3) For loans placed with a collection firm on or after July 1,
2008, reasonable collection costs charged to the borrower may not
exceed--
(i) For first collection efforts, 30 percent of the amount of
principal, interest, and late charges collected;
(ii) For second and subsequent collection efforts, 40 percent of
the amount of principal, interest, and late charges collected; and
(iii) For collection efforts resulting from litigation, 40 percent
of the amount of principal, interest, and late charges collected plus
court costs.
The current regulation does not define "reasonable" costs:
(e)(1) Subject to §674.47(d), the institution shall assess against the borrower all reasonable costs incurred by the institution with regard to a loan obligation.
The new regulation defines "reasonable" and restricts the amount that can be assessed against the borrower. Unless your contract with your collection agencies fits under the new restrictions, this will result in charging the difference to the Perkins loan fund, thus reducing the funds that could have been lent to students. Not good.
My questions to schools that have contracts with fees that do not fit under the new restrictions:
1. What is your plan of action? Will you be seeking new contracts with lower fees that will assure that your loan fund is "made whole"? Will your current agencies adjust their fees to keep your business? Will this result in increased assignments for your school?
2. What is your interpretation of the following comment posted today with the final regulations:
With regard to contingency fees, the Department is not abandoning
the make whole rate for Perkins Loan collections. The Department does
not regulate the establishment of fees in a contract between a Perkins
Loan Program school and a collection agency. However, institutional
contracts must provide for the recovery to the Perkins Loan Fund of the
outstanding balance of the loan. Since a collection agency incurs
additional expenses associated with collecting these amounts, the
school may authorize the collection agency to also recover these
expenses from the borrower.
My question regards that last sentence. I assume the "additional expenses" are still subject to the new limits, but the "also" suggests that these amounts are exclusive to amounts collected under the new limits.
Any thoughts? The final regulations with comments can be reviewed at http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/07-5332.htm
Patrick Piper
Administrative Services Coordinator
University of Florida
University Financial Services
S-113 Criser Hall, PO Box 114050, Gainesville, FL 32611
Voice: (352) 392-0766 Fax: (352) 392-3448
ppiper@ufl.edu
Correspondent, Florida Association of Bursars and Student Accounting Administrators (FABSAA)
The information transmitted is intended solely for the person(s) or entity to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon this information by persons or entities other than the intended recipient is prohibited. If you received this email in error, please contact the sender and delete the material from your computer.
-----Original Message-----
From: bounce-18568896-350589@listserv.unc.edu [mailto:bounce-18568896-350589@listserv.unc.edu] On Behalf Of Terry Kell
Sent: Friday, October 26, 2007 2:24 PM
To: LMS Mailing List
Subject: RE: [lms] Response to NPRM (August 13 2007)
Penny,
We will not see the compiled comments and response to same until the final rules are published. That could be next week.
If you want to see the 402 comments that the department cataloged:
Go to http://www.regulations.gov/fdmspublic/component/main
1-select ALL DOCUMENTS
2-drop down DEPT of EDUCATION
3-drop down PROPOSED RULES
SUBMIT
(Click on) ED-2007-OPE-0133 (far left column)
Terry Kell
University of Wisconsin-Madison
608-263-7100
-----Original Message-----
From: bounce-18567242-310293@listserv.unc.edu
[mailto:bounce-18567242-310293@listserv.unc.edu] On Behalf Of Penny Becker
Sent: Friday, October 26, 2007 11:59 AM
To: LMS Mailing List
Subject: [lms] Response to NPRM
Does anyone know in which Federal Register the comments and answers to the August 2007 NPRM can be found? I know I should be able to find it on IFAP but I'm not having any luck. Thanks.
-- Penny Becker Univ of Northern Iowa Office of Business Operations 1148 Campbell Hall Cedar Falls, IA 50614-0008 Phone: (319)273-3539 Fax: (319)273-3009 CONFIDENTIAL: The information contained in this email communication is confidential information intended only for the use of the addressee. Unauthorized use, disclosure, or copying of this communication is strictly prohibited and may be unlawful. If you have received this communication in error, please notify us immediately by return email and destroy all copies of this communication, including all attachments. ============================================================ To post to the LMS List, send email to: lms@listserv.unc.edu ============================================================ Access the LMS List from the web at http://listserv.unc.edu You are currently subscribed to lms as: terry.kell@finaid.wisc.edu. To unsubscribe send a blank email to leave-18567242-310293.ef7cfcaaea6ea310337ec28d0b2494f8@listserv.unc.edu ============================================================ To post to the LMS List, send email to: lms@listserv.unc.edu ============================================================ Access the LMS List from the web at http://listserv.unc.edu You are currently subscribed to lms as: dswartz@bsu.edu. To unsubscribe send a blank email to leave-18697981-115589.458fe73e73a357182f9948119939d87c@listserv.unc.edu ============================================================ To post to the LMS List, send email to: lms@listserv.unc.edu ============================================================ Access the LMS List from the web at http://listserv.unc.edu <http://listserv.unc.edu/> You are currently subscribed to lms as: ppiper@ufl.edu. To unsubscribe send a blank email to leave-18709992-350589.37f82f1a38eeb42e72ef321b00ca5e98@listserv.unc.edu
attached mail follows:
Hi Pat,
Yes, you can go ahead and post my response to the listserv. I'm sorry I'm a bit late in getting back to you, but I was out of the office most of last week, and am just now getting caught up on my e-mails. My responses to your additional questions are embedded in your e-mail below.
Brian
-----Original Message-----
From: Piper,Patrick G [mailto:ppiper@UFL.EDU <mailto:ppiper@UFL.EDU> ]
Sent: Monday, November 05, 2007 9:15 AM
To: Smith, Brian
Cc: McLarnon, Gail; Moran, Pamela; Utz, Jon; Watson, Donald
Subject: RE: [lms] Restriction on Collection Costs
Hi Brian,
Thanks for your prompt response to my posting. If you don't mind, I'd
like to share your response with the listserv; is that ok? I must admit
that I'm a little surprised at the non-response from other schools;
especially considering all the comments submitted in response to the
NPRM. So far I have received only one other response from a school.
Also, while I have your attention, I'd like to clarify the following:
1. Regarding the restriction on collection costs, does this restriction
apply only to loans being placed with a collection agency? Unlike your
response, the new regs state "collection efforts" rather than
"placements" (as in your response). At UF, like many other schools, we
perform the "first collection effort" in-house and then place the
account with a collection agency for "second and subsequent efforts" if
this effort is unsuccessful.
A literal interpretation of the new reg could provide for the 30%
restriction on the "first collection effort" to apply to the in-house
effort for schools performing the "first collection effort" in-house,
and the 40% restriction for the "second and subsequent collection
efforts" for accounts being placed with a collection agency when
in-house efforts are unsuccessful.
However, it appears that the intent of the new regulation is to place
these restrictions on accounts being placed with a collection agency.
Is this the case?
[The collection cost caps apply to both in-house collection efforts and to collection efforts for accounts that have been placed with a collection agency. We discussed this in the preamble to the final regs, in response to comments we received on this topic. We stated in response to the comments that "we do not see any justification for applying the caps only to collection costs incurred by collection agencies. From a borrower's perspective, collection costs are collection costs. It makes little difference whether the costs were incurred by a collection agency or by the school" [Federal Register, November 1, 2007, p. 61975].
2. I assume internal collection costs are included in the "late
charges" referenced in the following:
i) For first collection efforts, 30 percent of the amount of
principal, interest, and late charges collected;
Is my assumption correct?
[Late charges are charges that are assessed against the borrower as part of routine billing procedures. These are costs for steps taken to secure an overdue payment or a deferment/cancellation/discharge request [674.43(b)(2)]. When the more intensive collection procedures are used (whether carried out internally by the school, or externally by a collection agency) late charges are no longer assessed against the borrower. During this period, collection charges are assessed against the borrower, not late charges.]
3. When will schools be required to begin assigning defaulted loans to
the Department per the new regulations:
We agree with the recommendation by many commenters that we phase-
in mandatory assignment. The regulations establish the minimum criteria
for mandatory assignment. The regulations do not preclude the
Department from phasing-in mandatory assignment by starting the process
with loans that have been in default for more than the seven-year
minimum. Phasing-in mandatory assignment will ease disruption to both
the schools and the Department.
Changes: None.
[No earlier than July 1, 2008. We are working with the operational people in FSA to develop a timeline and procedures for implementing the new mandatory assignment process.]
How and when will schools be notified of the "phase-in" process?
[This has not been determined yet.]
Thanks again for your response; I appreciate your continued support.
Patrick Piper
Administrative Services Coordinator
University of Florida
University Financial Services
S-113 Criser Hall, PO Box 114050, Gainesville, FL 32611
Voice: (352) 392-0766 Fax: (352) 392-3448
ppiper@ufl.edu
http://fa.ufl.edu/ufs/ <http://fa.ufl.edu/ufs/>
Correspondent, Florida Association of Bursars and Student Accounting
Administrators (FABSAA)
http://www.fabsaa.fsu.edu <http://www.fabsaa.fsu.edu>
The information transmitted is intended solely for the person(s) or
entity to which it is addressed and may contain confidential and/or
privileged material. Any review, retransmission, dissemination or other
use of, or taking of any action in reliance upon this information by
persons or entities other than the intended recipient is prohibited. If
you received this email in error, please contact the sender and delete
the material from your computer.
-----Original Message-----
From: Smith, Brian [mailto:Brian.Smith@ed.gov <mailto:Brian.Smith@ed.gov> ]
Sent: Friday, November 02, 2007 11:17 AM
To: Piper,Patrick G
Cc: McLarnon, Gail; Moran, Pamela; Utz, Jon; Watson, Donald
Subject: FW: [lms] Restriction on Collection Costs
Pat,
I saw your message on the listserv, and thought that I'd respond to your
question directly.
You asked:
**************
What is your interpretation of the following comment posted today with
the final regulations:
With regard to contingency fees, the Department is not abandoning the
make whole rate for Perkins Loan collections. The Department does not
regulate the establishment of fees in a contract between a Perkins Loan
Program school and a collection agency. However, institutional contracts
must provide for the recovery to the Perkins Loan Fund of the
outstanding balance of the loan. Since a collection agency incurs
additional expenses associated with collecting these amounts, the school
may authorize the collection agency to also recover these expenses from
the borrower.
My question regards that last sentence. I assume the "additional
expenses" are still subject to the new limits, but the "also" suggests
that these amounts are exclusive to amounts collected under the new
limits.
***************
The "additional expenses" are collection costs and are included with the
other costs incurred in collecting on a borrower. Under the new regs,
the total collection costs charged to borrowers may not exceed 30% for
first placements, 40% for second placements, and 40% plus court costs in
cases of litigation.
I hope that this is helpful in clarifying the preamble discussion in the
Final Regulations.
Brian
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