Debt collection defenses

An Austin law firm looking to track tax deadbeats for government agencies has been smacked down a second time, this time in its own backyard.

Travis County executives this week tabled a proposal by Linebarger Goggan Blair & Sampson to collect delinquent tax bills from county residents even after a representative of the firm essentially offered a money-back guarantee on the service.

According to the Austin American-Statesman, Linebarger spokesman Ken Oden said his firm would forfeit "every nickel we make" if it couldn't collect as well as the county has.

Ah, yes. Money. That's the driving force behind outsourcing the collection of delinquent tax bills. Many state and local tax departments nationwide farm out this unsavory task. Uncle Sam wants to follow suit.

In fact, Linebarger was one of three firms that in March was awarded an IRS contract to collect federal tax debts. You can read about that announcement, and my misgivings about the process, here.

But things have not gone well for the IRS's outsourcing plan since then.

Just weeks after awarding the potentially lucrative federal tax contracts (the collection agencies will get to keep up to 24 percent of the amounts they collect), the IRS told the companies to stop (details here). Some of the firms that didn't get in on this initial phase of private tax debt collecting said they were passed over because of contracting irregularities and the goverment has put the plan on hold pending further investigation.

Apparently, the IRS inquiry is not the first time that the Linebarger group has been involved in an official investigation.

USAToday reported here that the Austin firm previously "has been tangled in legal controversy, including a bribery scheme involving a collection contract in Texas and a federal investigation of another collection deal in Louisiana."

Those allegations didn't come up at this week's Travis County meeting. The commissioners, according to the American-Statesman story, were primarily concerned with whether Linebarger could collect as much in unpaid taxes as county employees already do. Travis reportedly is the only urban county in Texas that collects its own delinquent taxes and is reputed to be the best in the state at doing so.

Oden, however, argued that his firm could match the money collection. He also questioned whether Travis County's tax collection system unintentionally punishes low-income minority residents with too many collection lawsuits, a contention that local minority leaders and organizations have recently echoed.

Both sides point to stats they say support the fairness or unfairness of Travis's current collection methods. Regardless, countered the county's tax assessor-collector, switching to a private firm would not resolve any concerns.

And such concern about ethical and equitable collection, folks, is the biggest problem facing private collection of tax debt at any level of government.

Dastardly debt collectors: Let's face it, debt collectors have an awful reputation. You can argue that they have to play hardball because deadbeats have been jobbing the credit system for too long. The money these losers refuse to pay costs us all in increased fees, higher interest rates and, when it comes to upaid government levies, more taxes.

Yes, greed also is a factor behind increased consumer costs. And yes, credit card and other loan companies use these unpaid accounts as an excuse to do what they really want to do, which is charge us more. But it does have to cost them something. Plus, delinquent accounts provide them easy cover.

But there's just as much evidence that collection agencies abuse both the system and those who, in many cases, face legitimate financial struggles. Have you ever been out of a job, out of savings and had to make hard choices about which bills to pay and which ones to let slide? If it's between the electic bill or the Visa card, I know which one I'd pay.

Many years ago, I had a run-in with a collection agency. Thankfully, it was all by correspondence rather than harassing phone calls or visits, and it was a mistake.

It seems that the billing manager at my doctor's office turned over all accounts that were two months overdue. That included mine, still unpaid because my insurance company was inordinately slow in processing my claim. (Medical insurance hassles are a whole 'nother pain-in-the-butt financial issue I'll look at later.)

Anyway, I freaked out when I opened that letter. I pay my bills. I've always paid my bills. Thankfully, I've always been able to pay my bills.

Then I got mad.

I called the collection agency and ranted at a couple of folks there (turn about is fair play). They sicced me on the doctor's office, and I did the same there.

Apparently many of the doctor's patients were in the same situation as I and had already done the same. By the time I called, the office manager had the apology/explanation speech down pat. The collection process was stopped, my health insurer eventually paid up and all was again right in the world.

Complaints continue: But that, it seems, is not the usual way this process goes. Despite federal legislation to protect consumers against abusive debt collectors (more on this in a couple of paragraphs), the Federal Trade Commission regularly receives tens of thousands complaints about overzealous and unscrupulous collection agents.

According to the FTC's 2006 report on debt collection practices, consumer complaints about third-party bill collectors increased last year "both in absolute terms and as a percentage of all complaints that consumers filed with the Commission."

The numbers are mind-boggling. In 2005, the FTC got 66,627 grievances against debt collectors, more than any filed against any other specific industry. These consumer concerns accounted for 19.1 percent of all complaints the agency received last year.

For the most part, people alerted the FTC that the collection agents had violated the Fair Debt Collection Practices Act (FDCPA). This law was enacted in 1977 in response to, and I quote the legislative language itself, "abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy."

Specifically, the FDCPA details what a collection agent can and can't do when trying to obtain a client's unpaid bill. It also details what your individual rights are and how you can deal with violations of them.

Under the law, for example, a third-party debt collector cannot:

• Call you at all hours of the day and night.
• Call you at work.
• Use obscene or abusive language.
• Threaten you with jail time or other actions the collector can't legally take.
• Reveal your alleged debt to others, including employers, parents, children, friends and neighbors.
• Claim to be an attorney or send you documents that look like legal papers when they are not.
• Expressly say or imply that you will be arrested if you do not pay your debt.
• Threaten to seize, garnish, attach, or sell your property or wages unless the collection agency or creditor is legally able to do so and actually intends to follow through on the process.

And that's just a small portion of the FDCPA rules and regulations. The Privacy Rights Clearinghouse provides comprehensive information on the ins and outs of what is and isn't allowed when it comes to debt collection. The Clearinghouse also has links to other resources, as well as form letters you can use to dispute a collection action.

Here's hoping you never have to utilize these federal protections. But, as I found out, sometimes mistakes do happen.

So if you do ever find yourself facing a debt collector, make sure you know all your rights.

Cinematically collecting: OK, this 2004 British film isn't about an actual bill collector, but with the title I just had to add it here. Plus, based on the synopsis, it sounds like one of the characters is as relentless as a collection agent!

According to Screen*Select, the UK's version of Netflix, "The Debt Collector" stars Billy Connolly as ex-con Nickie Dryden, a man who's done his time, 18 years, in one of the toughest prisons in Britain. Now Dryden's married and has made a new life for himself as an acclaimed artist.

However, Gary Keltie (Kenny Stott), the policeman responsible for his conviction, cannot accept Dryden's rehabilitation and embarks on a campaign to ensure his violent crimes are not forgotten or forgiven. Connolly and Stott both give outstanding performances in this gripping drama.

Sounds pretty good. I'll have to see if I can track down a DVD domestically.

Comments

[Julieana Smith]

Hi
I really liked your blog and want to know more from you.
can you please tell me something more about tax returns ?

Regards
Julie

[Debt Settlement Advice]

If you are represented by an attorney the debt collectors are no longer able to attempt to collect the debt from you and must deal only with your attorney. The reason for this is the FDCPA. If they continue to harrass you then that gives you grounds to sue.