The government is supposed to crack down on debt collectors who use illegal tactics to make consumers pay up. But what happens when those debt collectors work for the government?
CNN reports that government agencies -federal, state and local-have increasingly turned to private companies to go after consumers with unpaid taxes, tickets, bills, and other debts. And when those private debt collectors work for government agencies, they usually don't have to work within the confines of consumer protection laws. That opens the door to higher fees and even more aggressive tactics than usual.
According to CNN, some states have even passed special laws allowing private debt collectors to charge debtors steep fees. In Florida, fees can be as high as 40% on top of the total bill, which includes not only what they already owe, but interest and government penalties as well. In Texas, they can reach 30%.
Much of CNN's report focuses on the country's largest private debt collector - a law firm named Linebarger Goggan Blair & Sampson out of Texas. CNN claims Linebarger can do things other private collectors aren't allowed to, like charge exceptionally high fees and use threats against debtors. In that way, small debts like an unpaid road toll go from just a few dollars to a few hundred dollars. A Houston Texas man told CNN that his $1.25 unpaid toll charge spiraled into a $287 bill from Linebarger. The firm has been hit with a number of lawsuits questioning its practices but continues to operate in more than 20 states.
One problem seems to be that laws designed to protect consumers such as the Fair Debt Collection Practices Act don't apply to the government debts the firm collects, since they aren't considered consumer debts like credit card bills, for example.
The entire CNN report, "The Secret World of Government Debt Collection" is worth reading.