Emergency Extension of TRO Preserves Status Quo in Dept. of ED Collection Contract

Chief Judge Susan G. Braden of the United States Court of Federal Claims has been kept very busy the last two weeks. There have been multiple filings from all sides in the litigation concerning the multiple protests regarding the Department of Education (ED) Private Collection Agency RFP (Solicitation No. the ED-FSA-16-R-0009).

insideARM last wrote about this matter on April 20^th. In that article we wrote about the restraining order Judge Braden had issued to “maintain the status quo while the parties attempt to reach a global solution.”

Editor’s Note: The original Temporary Restraining Order (TRO) was issued on March 29^th. On April 10, 2017, the court extended the March 29 TRO for fourteen days, i.e., until April 24, 2017. The court again extended the TRO on April 24^th. This extension is to last until May 8, 2017.

However, since the original TRO was issued the parties have filed enough paper with the court to empty a small forest of trees. There is not a day that goes by without another filing, whether it is another motion to intervene or a motion to request access to protected material.

On April 18, 2017, ED filed a “Notice Of Recalling Accounts”, advising the court that ED would recall accounts placed with thirteen private collection agencies. The 13 agencies were companies whose 2009 contracts expired in 2015, and did not receive 2-year award term extensions (ATE Awards). However, those companies were allowed to wind down existing inventory for a 2-year period (from April 2015 through April 21, 2017.) ED’s position was that since the task orders under those contracts would expire on April 21, 2017, ED had no alternative but to recall the accounts.

The 13 companies impacted by the Notice of Recall were:

Allied Interstate (Iqor)
The CBE Group
Collection Technology, Inc. (CTI)
Collector d/b/a EOS CCA
Delta Management Associates
ERS (now Alltran Education)
Financial Asset Management Systems, Inc.
Performant Recovery, Inc.
Premier Credit of North America, LLC
Progressive Financial Services, Inc.
Transworld Systems, Inc.
Van Ru Credit Corp.
Global Receivables Solutions, Inc.

On April 21^st, The CBE Group, Inc. (“CBE”) and Premiere Credit of North America, LLC (“Premiere”) filed an “Emergency Motion For Enforcement Of The March 29, 2017 TRO,” arguing that the recall of accounts that were placed with CBE and Premiere would alter the status quo. That same day, the court convened a Status Conference to address the issues raised in the Emergency Motion. At the court’s request, the parties agreed to reconvene on April 24, 2017 for another Status Conference, and ED informed the court that ED would not recall the disputed accounts until after the April 24, 2017 Status Conference.

On April 24, 2017, the court convened another Status Conference and heard argument from all the parties in this case, as well as the parties in Account Control Technology v. United States, No. 17-493, Alltran Education v. United States, No. 17-517 and Coast Professional v. United States, No. 15-207.

After that Status Conference Judge Braden issued an Extension and Modification of the TRO. In that order the court ruled:

For the reasons set forth in the April 21, 2017 Emergency Motion and, pursuant to the April 24, 2017 Status Conference, it is hereby ordered that the United States of America, the United States Department of Education, and their officers, agents, servants, employees, and representatives are Temporarily Restrained, pursuant to RCFC 65(d), from:

authorizing the purported awardees to perform on the contract award under Solicitation No. ED-FSA-16-R-0009 for a period of fourteen days, e., until May 8, 2017, except as specifically provided for below; and
transferring work to be performed under the contract at issue in this case to other contracting vehicles to circumvent or moot this bid protest for a period of fourteen days, e., until May 8, 2017.
This Order, however, does not prohibit The CBE Group, Inc., Premiere Credit of North America, LLC, and Transworld Systems, Inc. from continuing to service only “inrepayment” accounts, e., those accounts where the contractor and borrower have a mutually agreed upon repayment schedule (see Task Order No. ED-FSA-09-0-0008 at 48), pursuant to Contract Nos. ED-FSA-17-D-0006, ED-FSA-17-D-0007 and EDFSA-17-D-0009, awarded on December 9, 2016, for a period of sixty days, and without further consent of the court.

The purpose of this extension and modification is to preserve the status quo to protect the interest of all parties and to afford the Government an opportunity to reach a global solution of the aforementioned cases.

On May 2, 2017 at 10:00 A.M. (E.S.T.), the court will convene a Preliminary Injunction Hearing, pursuant to RCFC 65(b)(3). At the May 2, 2017 Hearing, the protestors in the aforementioned cases must move forward with, and present evidence to support, their motions for preliminary injunction.

insideARM Perspective

So, what does this all mean?

The protests that we wrote about on April 20 are all still pending.
As noted above, the court will hear arguments tomorrow morning on the motion for a preliminary injunction.
Instead of recalling accounts from the 13 agencies listed above, it appears that ED will be recalling accounts from all but CBE, Premiere and Transworld Systems since they were awarded contracts on December 9, 2016.
In April of 2015, five firms received 2-year ATE’s. Those ATE’s have now expired. The firms will not receive new placements. However, those firms can continue to service accounts in repayment status, but ED will recall all accounts not in repayment. insideARM industry experts estimate that over 2 million accounts are expected to be recalled by ED.
ED has already placed large volumes of accounts with the 11 small business vendors. insideARM industry experts have questioned whether the 11 small businesses can effectively handle the current volume of accounts placed at those firms.
Unless there is some immediate resolution of the various protests and litigation over the 2016 RFP decisions, ED may need to place the recently recalled accounts with the 11 small businesses.

The recent activity and uncertainty cannot be good for the consumers who have these loans. Likewise, this recent activity cannot be good for liquidation of the portfolio. Consumers are likely to be confused as to who to call and where to send payments. Accounts cannot be simply recalled and not re-placed in a timely and efficient manner. The entire situation can be compared with complaints about accounts that are sold to debt buyers. It is likely that the Consumer Financial Protection Bureau (CFPB) is going to see a spike in complaints from consumers that will be directly attributable to this ongoing ED RFP situation.

The litigation continues with no end in sight. The challenge: How to reach a global settlement with so many competing interests.

Like the old Abbot & Costello comedy routine: “Who’s on First?”