Debt Collectors Find Lucrative Loophole, Avoiding Regulation by Working for Governments
Private debt collection agencies are now making big profits going after those who owe money to government agencies, sometimes collecting far more than the amount of the debt.
A CNN investigation found local, state and federal agencies have contracted out collection of unpaid taxes, tolls and parking fines. The debt collectors make their profits by charging debtors huge fees. And since they’re not bound by consumer protection laws, collectors can use more aggressive tactics than usual.
Companies working in Florida are permitted by the state to tack on fees as high as 40% of the debt owed. In Texas, the fees can be as much as 30%.
“And in cases of unpaid toll violations, flat fees can effectively amount to more than 100%,” CNN’s Blake Ellis and Melanie Hicken reported. “As a result, small unpaid tolls can easily balloon into hundreds of dollars, once government penalties and collection fees are tacked on.” One man in Texas saw a $1.25 toll charge turn into nearly $300 he owed to a collection agency.
Tai Vokins, a Kansas attorney and former assistant attorney general, told CNN that the government-hired collectors are “preying on the absolute poorest people” who can’t pay their bills, let alone old debts.
Consequently, some have been jailed for not paying overdue speeding tickets, while others have had entire paychecks garnished to cover back taxes.
Others targeted by the debt collectors never owed the debt, and had documentation to prove it, but still have been harassed by collection agencies. A New York woman was dunned by the collection firm Linebarger for $170—purportedly for damage to the police car that killed her son. The city of New York later said the letter was sent in error. “I could hardly breathe—I couldn’t believe they were sending me a letter [like this],” said Laverne Dobbinson. “My whole family was outraged.”
-Noel Brinkerhoff, Steve Straehley
To Learn More:
The Secret World of Government Debt Collection (by Blake Ellis and Melanie Hicken, CNN)
Debt Collection Nightmares (by Blake Ellis and Melanie Hicken, CNN)
Education Department Cuts Ties with Five of Its Debt Collectors (by Danielle Douglas-Gabriel, Washington Post)
District Attorneys Sell Letterheads and Seals to Debt Collectors (by Ken Broder, AllGov California)
Debt Collection Complaints by Military Members and Veterans Skyrocket(by Noel Brinkerhoff, AllGov)
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