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Pennsylvania House of Representatives
http://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=H&SPick=20130&cosponId=10288
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MEMORANDUM

Posted: December 20, 2012 04:08 PM
From: Representative P. Sturla
To: All House members
Subject: Private Collection Agency Contract Reform
 
In the near future I will be reintroducing two government reform initiatives to improve the Commonwealth’s process for collecting debt.
 
A whistle blower lawsuit (Kimmet v. Corbett) currently before the US District Court alleges mismanagement and waste within the Financial Enforcement Section of the Office of Attorney General which cost taxpayers large sums of money.  The Financial Enforcement Section of the Office of Attorney General acts as a collection agency for approximately 200 agencies, boards, commissions and universities of the Commonwealth of Pennsylvania.  The Financial Enforcement Section’s accounts receivable from month-to-month vary between $300 million and $500 million at any given time, with the primary source being the Department of Revenue.  My legislation aims at addressing the most egregious allegations made in this lawsuit.
 
I hope you will join me in sponsoring these important reforms.


Document #1

Introduced as HB67

Description: Bill 1:
HB 1655 of 2011 requires that contracts entered into by the Office of the Attorney General for debt collection include a provision that before reaching a compromise with a debtor to pay less than the full settlement owed, the Office of Attorney General must present the referring agency with documentation to justify the discount and receive approval from the referring agency to enter into an agreement for such payments.  The current lawsuit alleges that the Financial Enforcement Section of the Office of Attorney General worked sometimes too well with the private collection agencies.  The lawsuit alleges that private collection agencies entered into compromise agreements with debtors to pay less than the full settlement owed without obtaining documentation that would justify such a significant discount.  This amendment requires that such compromises cannot be entered into without the sign off of the referring agency.  This will allow the Department of Revenue, or any referring agency, to ensure that they are given the final decision when it comes to financial decisions affecting their bottom line. 
 
The following members co-sponsored HB 1655 in the 2011-12 Session:
V. BROWN, COHEN, DeLUCA, FABRIZIO, FREEMAN, GEIST, GOODMAN, HARKINS, HORNAMAN, JOSEPHS, KORTZ, MATZIE, MUNDY, MYERS, WAGNER AND YOUNGBLOOD
 

Document #2

Introduced as HB68

Description: Bill 2:
HB 1656 of 2011 prohibits no bid contracts with private collection agencies.  The current lawsuit alleges that contracts with private collection agencies were entered into without soliciting requests for proposals.  Seeing as private collection agencies are entitled to keep a percentage of the amount collected from the debtor, it seems that we would want contracts with these private entities to be competitively bid to ensure that the Commonwealth is getting collections at competitive commission rates.  The commissions paid to the private collection agencies are taxpayer dollars and those commissions cut into possible state revenue.  Competitively bidding these contracts should ensure we are getting a good deal.

The following members co-sponsored HB 1656 in the 2011-12 Session:
V. BROWN, COHEN, DeLUCA, FABRIZIO, FREEMAN, GEIST, GOODMAN, GROVE,
HARKINS, HORNAMAN, JOSEPHS, KORTZ, MATZIE, MUNDY, MURT, MYERS,
WAGNER AND YOUNGBLOOD