State May Have to Defend its Debt Collection Practices After Settlement

A former employee of the state of Florida revealed Monday that the Sunshine State’s economic development office referred thousands of cases to debt collectors that were not eligible for such actions. She went public with the allegations after winning a $250,000 settlement with the state in April over wrongful termination in a whistleblower case.

Dianne Parcell, until recently a manager in the state Department of Economic Opportunity, discovered in 2012 that the agency had been errantly referring unemployment overpayment cases to private debt collection agencies. Many of the cases involved debt that was beyond the statute of limitations or targeted taxpayers that were deceased or had filed for bankruptcy protection.

She shared her findings with a supervisor who told her to ignore the matter. When she sought whistleblower status in August 2012, the agency placed her on administrative leave and terminated her in October. She sued the state the following year.

In April of this year, a jury found that Parcell had been fired in retaliation for raising questions, and awarded her more than $50,000 in damages. In a separate settlement, the state agreed to pay her another $200,000 for attorneys’ fees.

Parcell said Monday that she is coming forward with the details of her case because the problem has not been fixed. She said that as many as 19,000 Florida residents have been wrongfully reported to collection agencies, a move that could impact their credit scores, among other things. Purcell also noted that she’s not just trying to protect consumers; the debt collection program is exposing the state to a potentially huge liability.

One Floridian has already sued the state over the matter, demanding $100,000 from the state. That case was settled. An attorney for Purcell noted that if the other cases followed a similar pattern, the state could be on the hook for as much as $2 billion if the collection practices aren’t changed. She also accused the state of engaging in a “cover-up” to hide the practice.

Complicating the matter is timing. Florida is locked in a highly competitive gubernatorial campaign. Current Republican governor Rick Scott, being opposed by occasional Democrat Charlie Crist, didn’t take kindly to Purcell’s allegations Monday.

Calling the claims “meritless,” a spokesman for Scott said, “In typical trial lawyer fashion, Charlie Crist and his campaign are doing what they’re good at – using lawsuits for partisan political purposes.”

Purcell insists that she is a life-long Republican and that she is coming forward to ensure the practices are amended. But her Monday press conference was organized by a political consultant attached to the Crist campaign.

Regardless of the political ramifications, the state of Florida could find itself under scrutiny for improperly referring certain cases for collection.