University Accounting Services (UAS) not following CFR rules for servicing perkins loan

[joejoecor]

In late February 2023 an automatic payment was not made due to insufficent funds. The automated withdrawals were interupted and not restarted. UAS called me in June (found out in September 2023 after getting calls from collection agency) but never left a message I was told during a Sept. 1, 2023 conversation asking why UAS did not reach out to me about the problem of receiving payments. The manager told me that sometimes it is against policy to leave messages about sensitive information about a loan. This explanation flies in the face of Code of Federal Regulation (CFR) requirements. In the CFR Section 643.43 (f) If the borrower does not respond to the final demand letter within 30 days from the date it was sent, the institution shall attempt to contact the borrower by telephone before beginning collection procedures.

Neither the school nor UAS made any attempt to call me about the lack of payments from l;ate February 2023 until late August 2023 when I started receiving calls from the collection agency, Reliance Capital. I did receive emails, before and after the issue telling me a statement was ready for viewing, but nothing alerting me of a payment issue. I graduated law school so I know how to perform legal research. I am still in the process of finding legal cases related to a similar situation. However, legally, I am not sure which direction to go. Is this breach of contract? But when the contract is formed through CFR guideance can you still apply contract law? Is this a tort, their negligence led to injury, my credit score drop? Exactly how is UAS and schools policed when they fail to follow CFR regulations? I appreciate any help from fellow forum readers. 

[JoeRockhead]

Welcome to the forum. Sorry for your troubles in regards to this issue. I believe you meant to quote § 674.43(f). In regards to phone calls and debt collection, that would also be subject to the FDCPA in which it states that it is a violation for a debt collector to leave a message containing any detailed information about the debt without being certain that the phone message is only accessible to the applicable party. There are additional potential violations for contacting via cell phones, ie: certain times, if the debtor may be at work, etc...

There's also section § 674.43 (d) Notwithstanding paragraphs (b) and (c) of this section, an institution may send a borrower a final demand letter if the institution has not within 15 days after the due date received a payment, or a request for deferment. postponement, or cancellation, and if—

(1) The borrower's repayment history has been unsatisfactory, e.g., the borrower has previously failed to make payment(s) when due or to request deferment, postponement, or cancellation in a timely manner, or has previously received a final demand letter; or

(2) The institution reasonably concludes that the borrower neither intends to repay the loan nor intends to seek deferment, postponement, or cancellation of the loan.

I don't know that they are obligated or required to inform you of a payment issue. As per your promissory note, you are responsible for ensuring the payments are made on time, or you must request deferment or postponement within a specified time frame. I don't know the particulars of your payment history but it sounds as though they feel they met the requirements to refer the account to collections. I would continue to do your research, or perhaps speak with a qualified attorney with experience in this area. I wish you all the best, and hope you get it worked out to your satisfaction.