As government debt continues to grow, governmental bodies have an increased need for private collection agencies in order to recover lost revenue. Government debt includes unpaid income tax, property taxes, parking tickets, traffic tickets, tolls and student loans all of which are not considered a service or product that has been purchased. The aforementioned government debts are not regulated by the same standard as privatized debt. What does this mean for collection agencies looking to do business for the government?
Recently politicians identified the need for auto-dialers when attempting to contact federal student loan borrowers about repayment and options to help those who are in default on their loan. This approach contradicts the Federal Communications Commission’s interpretation of the Telephone Consumer Protection Act concerning unwanted robocalls to consumers’ cell phones, especially without prior consent. While this may seem like a win for the ARM industry some are asking, “How is it OK to call a cell phone using an automated telephone dialing system for government debt but not privatized debt?”
The IRS has recently been mandated to use private collection agencies to collect tax debt the IRS hasn’t collected in the past due to lack of time or resources. The IRS plans to notify the consumer in writing letting him or her know that it turned the account over to a private debt collector. The debt collection company will then send a separate letter to the taxpayer confirming this transfer. This too is a win for the ARM industry and consumers. The IRS last worked with private debt collection agencies to collect consumer tax debt in 2006. An independent study found collection agencies had a higher customer satisfaction rating than the IRS.
So the question collection agencies need to ask is, “Are we an extension of the government thus giving us immunity to certain laws?” Will we be held to the same federal or state consumer protection laws? Federal consumer protection rules and laws rarely apply to government debt. Often government debt collection costs are added to the debt as opposed to a consumer creditor who typically has to pay out of the money recovered by the collection agency. Are aggressive tactics such as excessive fees, threatening arrest warrants, garnishment, foreclosure, suspending drivers’ licenses OK so long as the government is able to back it up? Based on my research the answer is a firm no. Even if the government backs up what you say or do, you still could face the risk of complaints from regulators such as the Attorney General, Federal Trade Commission, or Consumer Financial Protection Bureau, not to mention an increased risk of receiving frivolous law suits. The aggressive approach could also end up affecting your agency’s brand and future opportunities to bring on new clients not to think of the man-hours taken to respond to the regulators.
It’s encouraging to see our government realizes the benefits private collection agencies have on our economy and our politicians trust that the majority of licensed and insured agencies are good players with an ultimate goal of helping consumers. I truly believe this could be the start of a revolution for our industry. As we continue to get noticed for all the good we do the bad publicity and negative perception will fade away. If you have interest in a government contract I’ve listed a few of the requirements I’ve come across below:
• The proposer must have at least five years experience in debt and credit collection services, with at least three of those with governmental experience. References will be requested.
• The proposer must provide evidence of license and bonds for collecting money in county, city or state; nationwide capability is preferred.
• The proposer must have coverage including professional and general liability insurance and must provide proof they are bonded against employee dishonesty and theft.
• The firm is required to be fully compliant with all HIPPA, HITECH and PCI/DSS regulations.
• The proposer is required to provide information regarding any citations or investigations by any regulatory body.
• The firm must have current memberships with the ACA, BBB, and local state collectors association.
Sam Eidson is the Director of Compliance for Delta Outsource Group, Inc. He also serves on the Board of Directors for the Missouri Collectors Association.