Business Week posted an article bringing attention to the decision of some cities and states to enlist private debt collectors to track down and collect “fines”, such as speeding tickets and library fines. Jessica Silver-Greenberg and Peter Carbonara, authors of the article, say the idea behind this is to cut costs by having private collectors collecting these unpaid fees rather than government employees.
The idea is that private collectors would have more resources (and possibly time) to collect fines that a government employee wouldn’t be likely to pursue, like a library fine. However, private collectors are often less effective. In March the IRS ended a four year contract with private debt collectors and instead hired 1,000 employees at the agency.
Some agencies using private debt collectors haven’t been well received.
Not only are private debt collectors less effective than public ones, but a number of companies benefiting from the privatization trend have been slammed by regulators and prosecutors for overcharging municipalities, bribing public officials, and other predatory behavior. Some municipalities have stopped outsourcing their debt collection efforts altogether.
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