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Private Collection Agencies, the SBA, Treasury Department or Bureau of Fiscal Service & What SBA Personal Guarantors, Debtors Should Know

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The video incorporated hereto touches upon certain topics concerning the secret world of state and federal government collection and what can happen to your state or federal debt once it is referred to a private collection agency or law firm under contract with the government, and thereafter blessed with the power to engage in aggressive collection liquidation or litigation.

We have quoted the entire CNN article and related media for your review.

“Government agencies across the country are hiring private debt collectors to go after millions of Americans over unpaid taxes, ancient parking tickets and even $1 tolls.

It’s a good deal for cash-strapped states, cities and other local governments. By outsourcing this dirty work and letting private companies charge debtors sky-high fees, government agencies can get these collection services free of charge.

And it’s a great deal for debt collectors. In an industry already known for bad behavior, debt collectors that work for government agencies usually don’t have to work within the confines of consumer protection laws – opening the door for higher fees and even more aggressive tactics.

Their government bosses can give them the power to threaten debtors with the suspension of their driver’s license, garnishment of their wages, foreclosure and arrest to get them to pay up.

State lawmakers have even passed laws allowing private collectors to charge debtors steep fees. In Florida, for example, 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%. And in cases of unpaid toll violations, flat fees can effectively amount to more than 100%. As a result, small unpaid tolls can easily balloon into hundreds of dollars, once government penalties and collection fees are tacked on.

Check out the link and click on the video found here:

http://money.cnn.com/interactive/pf/debt-collector/government-agencies/?iid=EL

“They keep figuring out ways to stack these fees up,” said Tai Vokins, a Kansas-based attorney and former assistant attorney general. “They’re preying on the absolute poorest people.”

And this is all legal.

One of the biggest players in this industry is law firm Linebarger Goggan Blair & Sampson. It has worked for small-town school districts, the city of New York and at one point, the largest tax collector in the country: the Internal Revenue Service.

Based in Texas, Linebarger works for 2,300 clients nationwide and collects $1 billion for its clients each year.

The firm, which would only respond to interview questions in written statements, told CNNMoney that government agencies need the money it collects to fund vital services, such as teacher salaries and police budgets.

But the collection system is far from perfect. Government agencies sometimes hire Linebarger to hunt down decades-old debts that people can’t even remember incurring. Some turn over unpaid bills to collections just months after consumers have received them. And others provide the firm with inaccurate information, leading it to pursue the wrong person entirely. These agencies also issue the arrest warrants, foreclosure lawsuits and other harsh threats that Linebarger cites in its letters to debtors.

All of this can lead to some nightmare scenarios.

One Kansas man ended up behind bars three times because he couldn’t afford the growing bill for his unpaid speeding ticket, while another Kansas woman says she had her entire paycheck garnished for back taxes. A Texas woman was threatened with arrest for not mowing the grass on a property she didn’t even own. And an Oklahoma business owner is still bitter about the $112,000 bill he received for taxes he had already paid.

These consumers and many others have gone public with their frustrations. Some have filed complaints with state attorneys general, while others have even sued the firm. Yet, the outsourcing by government agencies continues and Linebarger’s business is thriving.

Despite decades of scandals over the way the firm gets business — and even jail time for one of its top executives — Linebarger still lands lucrative government contracts.

Many attribute this success to the millions of dollars the firm has spent wooing politicians, from local mayors to powerful players like former Texas Governor Rick Perry. Its political pull has even helped it get certain state and federal laws changed in its favor – including Texas legislation that allows it to charge debtors such high fees.

For one out-of-town driver who mistakenly failed to pay $7.50 in tolls on a Texas highway, these fees became a $157.50 bill in a matter of months. The toll road was due the original toll amount, plus $66 in administrative fees. Linebarger added $84 for itself.

The Harris County Toll Road Authority told CNNMoney that it uses the funds collected by Linebarger to help keep Houston’s toll roads drivable and safe. More than a dozen of Linebarger’s other current and former government clients were also contacted for this report, but the toll authority was the only one to provide comment.

Linebarger maintains that its fees are reasonable and depend on the kind of debt and how hard it is to collect.

By collecting these fees, Linebarger says it doesn’t have to charge the majority of the state and local governments that hire it, thereby keeping taxpayers from subsidizing its collection costs.

This is different from a consumer creditor like a bank, which typically has to pay for its collection costs out of the money recovered from debtors.

In a months-long investigation into the government debt collection industry and Linebarger, CNNMoney analyzed hundreds of consumer complaints obtained from six state attorneys general and the Federal Trade Commission, among other organizations. We interviewed more than 60 consumers, former Linebarger employees, attorneys and other experts. We also reviewed more than 100 lawsuits against the firm — alleging everything from unfair fees to harassment.

CNNMoney found that with the power of government agencies behind them, debt collectors like Linebarger are able to play by their own rules, in essence acting above the law.

Thanks to legal exemptions, government collectors usually don’t have to follow the main federal law that regulates the debt collection industry. State consumer protection laws often don’t apply either. And when debtors have challenged Linebarger’s government collections work in court based on other laws, the firm has gone so far as to argue it has immunity because it is an extension of the government.

Because the law so often lands on Linebarger’s side, consumers often end up in a black hole with little recourse.

They keep figuring out ways to stack these fees up. They’re preying on the absolute poorest people.”

“I had no defense whatsoever,” said Houston Army veteran Harry Memnon, who says his unpaid $1.25 toll charges became a nearly $300 bill.

Protections go ‘out the window’

While Linebarger isn’t the only government debt collector out there, it is one of the largest. And as it continues to grow — with clients in 21 states — so does the controversy surrounding its methods.

Linebarger says that consumers should typically receive at least one notice (and sometimes multiple notices) from the government before a debt ends up in collections.

Yet many people say the government never notified them, and Linebarger’s threatening letters and phone calls were the first they had heard of their debt. Angry, frustrated and suspicious consumers have posted complaints on sites like Ripoff Report, Yelp and the Better Business Bureau.

Some were so confused that they became convinced Linebarger’s collection claim was a scam and refused to pay. Others say that no matter how much proof they had provided that a debt wasn’t theirs, Linebarger kept calling and sending them threatening letters.

And for those who just couldn’t afford to pay what they initially owed, the firm’s fees left them trapped in debt and fearful that they may lose their driver’s license, their home or end up in jail. After a class-action lawsuit challenged the fees Linebarger charged under a contract with the city of New Orleans, the Louisiana Supreme Court even ruled that the firm’s 30% fees were unconstitutional.

Yet Linebarger still has the Better Business Bureau’s A-plus rating, which the organization stands by. The BBB says Linebarger, which is a paying member, does a good job responding to complaints — a requirement for the firm to stay in good standing. It also noted Linebarger’s complaint volume was in line with the size of the firm and that it had waived fees in a few cases where consumers hadn’t been notified of the original debt.

Linebarger says it tries to negotiate payment plans or reduce the debt whenever possible.

But Oklahoma tax attorney Paul Tom, who has represented dozens of people battling the firm, said while he has sometimes been able to negotiate the taxes owed, Linebarger’s fees are always set in stone.”

If you are facing an SBA loan default or a Treasury/Bureau of Fiscal Service debt problem that has been referred to a Private Collection Agency, contact us today for a FREE initial consultation with an experienced SBA Attorney or Federal Agency Attorney Practitioner at 888-756-9969.

 

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