Media Taking Note of Need for Government Debt Collection

Patrick Lunsford

It might sounds like a tired cliché to ARM professionals, but the debt collection industry can be a big help to governments looking for increased revenue. But now that all governments in the U.S. are facing dire straits, the media is starting to get it.

On July 4th, The New York Times ran an article in its print edition titled “Debt Collections Elude Uncle Sam.” The piece opens simply: “Uncle Sam could use better debt collectors.”

The article notes that some $65 billion is owed to the U.S. government’s agencies for various fines, fees and other charges incurred by businesses and wealthy Americans. The total does not include taxes owed by individuals to the IRS.

It notes that often, large fines levied against companies are intended as deterrents rather than actual penalties. Many of the companies that receive fines immediately file for bankruptcy protection, or go out of business altogether. The article suggests that private companies that purchase bankruptcy debt could be used to fill the gaps.

Another piece that also ran over the holiday weekend took a state to task for lax debt collection procedures.

An editorial in the Aberdeen News (“In Our Opinion: State’s debt-collection blind spot is unacceptable”) noted that the state of South Dakota is owed some $127 million. Fortunately, the state has contracted with a private debt collection agency to chip away at the total.

But the paper’s editorial board took issue with the debt collection contract itself, noting that no state agency was overseeing the performance of the firm. There is also some slight moaning that an in-state collection agency was not chosen as the vendor. But the underlying conceit of the piece is clear: the state desperately needs help from the private sector debt collection industry to help manage its unpaid debts.

As Kaulkin Ginsberg President Mike Ginsberg recently noted in a blog, “Local governments across the country continue to feel the financial impact of the most severe economic downtown since the Great Depression.” It seems that many people in positions of influence are waking up to the fact that there is a mature, professional industry that can help with that.