NCO Financial began as small Philadelphia-based family owned business in 1926. After moving into the student loan collection business, it expanded into a prominent and powerful debt collection company. In 1996, the United States Department of Education contracted with NCO Financial and became an official debt collector for the agency. In the same year, the company went public and acquired several other debt collection companies. In 2004, the private equity arm of JPMorgan Chase, One Equity Partners, privatized NCO Financial. In 2014, the owner, One Equity Partners, sold a half interest in the company to two private equity companies and its entire collections business to a private equity company in Beverly Hills, California
NCO Financial’s debt collection tactics were both admired by analysts on Wall Street and despised by consumers. The company had a reputation for technological excellence in tracking debtors and successfully collecting debts. However, it also had a notorious reputation for abusive debt collection tactics and instilling fear in borrowers. In many cases, if the borrower fell behind on a student loan or other debt, he or she would hear from NCO several time a day. In 2013, the FTC sued NCO for its abusive debt collection tactics.
A common problem faced by borrowers who owe money to NCO Financial or other debt collection companies is the complexity of the debt collection industry itself. For example, loan documents may list the name of a bank but the loan might actually be insured by the government. In another instance, the loan might carry a bank’s name but be owned by a third party to which the bank conveyed the loan. The confusing complexity of the industry frustrates borrowers and helped fuel the home mortgage crisis of 2008.
The confusing nature of the debt collection industry and borrowers’ inability to identify who owns a loan at issue have contributed to several law suits brought against NCO and its affiliates. NCO specifically handled thousands of collection cases for National Collegiate Trust, a common private student loan lender. NCO and its affiliates have paid approximately $6.9 million in penalties and settlements after being accused of improper debt-collection practices. One notable example include a $3.2 million fine levied by the FTC against NCO in 2013. The FTC charged the company with repeatedly employing “false and deceptive tactics” to try and collect on loans. After the fine was levied, the company issued a statement in which it said it had cooperated with the FTC and “implemented systems and procedures to help address their arenas of concern.”