Debt Collection:

First Year Efforts Under the GSA Contracts

AFMD-87-23: Published: May 15, 1987. Publicly Released: Jun 2, 1987.

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In response to a congressional request, GAO evaluated the performance of four private debt collection firms under contract to the General Services Administration (GSA).

GAO found that agencies: (1) were initially slow in referring their delinquent accounts to the GSA contractors; (2) sometimes included inappropriate accounts in their referrals, such as those owed by deceased debtors, discharged through bankruptcy, or already paid in full; (3) referred accounts that did not contain essential debtor information; and (4) did not always add the contractor's contingent fee to the debtor's account. GAO also found that the contractors: (1) had, by the end of the first year, collected $2.7 million in delinquent debts and obtained about $3.2 million in promises from debtors to pay in the future; (2) generally initiated collection actions in accordance with their contracts; and (3) did not experience any major difficulties in handling the volume of referred accounts.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Action was completed on February 3, 1988, with the distribution of guidelines for referring delinquent accounts to private collection firms. Guidelines were distributed with invitations to attend a debt collection conference on January 14, 1988, and were attached for the Federal Supply Schedule.

    Recommendation: To improve the quality of delinquent accounts referred to the GSA contractors by federal agencies, the Secretary of the Treasury should direct the Financial Management Service, in consultation with the Department of Justice and GAO, to develop guidelines and formats for referring delinquent accounts to private collection firms prior to the issuance of the next GSA Federal Supply Schedule for debt collection services.

    Agency Affected: Department of the Treasury

  2. Status: Closed - Implemented

    Comments: The upcoming GSA solicitation for professional debt collection services requires the contractor's contingent fees be added to the amount of the debt by either the ordering agency or the contractor unless the ordering agency can show that it is prohibited by law from doing so.

    Recommendation: The Secretary of the Treasury, in conjunction with the Administrator of General Services, should instruct the federal agencies and GSA debt collection contractors, except where the agencies can justify to the Treasury reasons for not doing so and can reach appropriate agreements with the contractors, to add the contractors' contingent fees to the amount of the debt.

    Agency Affected: General Services Administration

  3. Status: Closed - Implemented

    Comments: The upcoming GSA solicitation for professional debt collection services requires the contractor's contingent fees to be added to the amount of the debt by either the ordering agency or the contractor, unless the ordering agency can show that it is prohibited by law from doing so.

    Recommendation: The Secretary of the Treasury, in conjunction with the Administrator of General Services, should instruct the federal agencies and GSA debt collection contractors, except where the agencies can justify to the Treasury reasons for not doing so and can reach appropriate agreements with the contractors, to add the contractors' contingent fees to the amount of the debt.

    Agency Affected: Department of the Treasury

  4. Status: Closed - Implemented

    Comments: Treasury worked with agencies GAO reported as not collecting contractor fees. Based on congressional intent, FCIC and FmHA are not currently using collection contractors because of the farm crisis. Amending loan agreements to collect these fees is now a moot point for these agencies. SBA will make necessary changes to legal documents regarding collection contractors' fees.

    Recommendation: The Secretary of the Treasury should request agencies with loan agreements that are silent about the borrower's liability for collection costs to amend their future loan agreements, if legally permissible, to include such a provision.

    Agency Affected: Department of the Treasury

 

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