Magazine article Business Credit

Law League Supports Bill Speeding Collections of Billions Owed U.S

Magazine article Business Credit

Law League Supports Bill Speeding Collections of Billions Owed U.S

Article excerpt

The Commercial Law League of American is urging expansion of a program designed to collect billions of non-tax debt owed to the federal government. We urged the creation of a Registry of Approved Private Debt Collectors that all federal agencies could tap for professional collection services and the extension of a "pilot program" designed pursuant to the Federal Debt Recovery Act of 1986 in testimoney before a House subcommittee. The Government Reform and Oversight Committee Subcommittee on Government Management, Information, and Technology is considering legislation to expand the program nationwide by allowing private counsel to be designated in all judicial districts and remove the designation as a pilot program by eliminating the expiration date for the program.

A Registry of approved outside debt collectors would be developed by the federal government. It would be made available to every agency within the federal government. The Registry would include both attorneys and collection agencies. To become listed on the Registry, the debt collector must meet certain criteria to assure competency and integrity. Information would be required to provide a gauge of capabilities and pricing. This Registry or data base of eligible debt collectors would be the single source for all agencies when placing debt for outside collection. If the claim or package of claims would best be served by the services of a collection agency, the federal agency would be able to select one or more collection agencies from the Registry.

If after 120 days, the collection agency has not been successful in collecting or arranging for collection, the claim could be referred directly by the collection agency to an attorney on the Registry.

If the claim needs services provided by an attorney from the outset or at any time as determined by the federal agency itself, the matter need only be referred to an attorney who is listed on the Registry. The Registry could be searched by price, location, or capabilities, thereby affording federal agencies with the ability to pinpoint and select the debt collector best suited to handle the types of claims in question.

Expansion of the pilot program coupled with a Registry of debt collectors furthers the various goals outlined in Section 4 of the proposed draft legislation.

Section 4(1) states in part that one of the purposes is to maximize collections "by ensuring quick action to enforce recovery of debts. The Registry would eliminate the months and years it sometimes takes for the process to draft and publicize requests for proposals and evaluate them. In addition, it would eliminate the time currently required to refer a claim.

Another purpose stated in subsection (2) of Section 4 is "To minimize the costs of debt collection ..." This is a valid and worthwhile goal. An understanding of what constitutes the "costs of debt collection" are imperative. Contingent fees are the norm in the collection industry. The government must recognize, as does the private sector, that cost is not necessarily measured simply by the rate to be charged. The cost can be greater for some debt collectors if they do not possess the same competence and capabilities as another. Therefore, the credit grantor must have available to it information about the capabilities of the debt collector as well so that the credit grantor may make an informed decision on how to minimize overall costs to collect the claim. …

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