If there is one entity that has a leg up on the competition when it comes to getting their debts repaid, it would be the government. Whether the debt is owed to a local, state or federal government entity, those who collect these debts on behalf of the government have some advantages over those debt collectors who are collecting on privatized debts. At the same time, depending upon the type of debt being collected on behalf of the government, the debt collector also has some disadvantages as well. What is certain is that government collections takes a specific type of debt collector to be able to pull in the largest returns. Also, with the vast majority of government debt they do not deal with a statute of limitation and are also not dischargeable in federal bankruptcies unlike their civil counterparts.
Depending upon which body of government and at which level (local, state or federal), the intensity as it relates to recovering bad debts varies greatly. For this article, I wanted to provide insight from someone considered to be a leader in the government collections vertical. Rick Bonitzer, president of Credit Collection Partners in Illinois was just the person.
When asked about government collections in general he stated, “The most interesting aspect of this (government collections) is how various entities operate. Some entities are substantially more aggressive in debt recovery than others.”
Understanding which of these are more aggressive in their recovery of debts is a critical component to understand in the client/collector relationship. For those that are aggressive in their pursuit of debts, it is going to require the debt collector to be aggressive as well in their overall approach. This doesn’t mean aggressive in the sense of crossing lines or breaking laws, it means aggressive in the work strategy and plan that goes into attempting to collect each debt. On the flip side, those who are less aggressive can still work the accounts in a manner that would still provide the highest returns. However, they also have flexibility to be meticulous in how they go about their business without the intense pressure.
I asked Bonitzer, in his opinion, what the easiest type of government collections to collect was. He responded, “Court fines because they have already been adjudicated.” Adjudicated means the court system has already made a formal judgment or decision about the problem or disputed matter. I can’t tell you how many times in my two decades of working in the ARM industry a consumer would tell a collector or I on a phone call to “just take me to court.” In the case of court fines and similar government debts that have been adjudicated and thus have already been through the court system, these types of debts in particular open up the consumer to several different types of consequences if they don’t pay. These include but are not limited to suspension of their driver’s license, warrants, levies and liens. Not paying back government debt tends to have much more severe consequences than those of private debts.
While government collections certainly has its advantages, in some cases it also has disadvantages over other types of debts. Such a disadvantage would be locating the right consumer. While there are some government debts such as student loans that provide adequate information on the consumer, other types such as court fines and traffic tickets do not. This puts the debt collector in a conundrum because they have limited to no contact information to reach the consumer. In the grand scheme of debt collections, contact rates with consumers are declining year over year and in cases where little to no contact information is provided it makes it that much more difficult. This is why it’s important when working government debts that there is a validated and surefire front-end match logic process that seeks, identifies and documents the most up-to-date consumer contact data to each account. It is also important to have an ongoing process that assists in locating new consumer contact data as it becomes available.
Another difficult aspect pertaining to government collections is finding the right members to fill out the team of collectors, support staff and, most importantly, business development. When I inquired about Bonitzer’s difficulties with government collections he stated, “Locating the right person on your team to lead your sales and client relations efforts. Government is definitely a niche’ market and a true experienced professional matters here more than other verticals.”
Bonitzer also went on to say a sure key to failure is, “not having active dialogue with your clients. Granted, that’s not government specific but it’s incredibly vital. Many businesses lose sight of the importance of client retention after the sale is made. Invest in client retention! Similarly, stay well connected in your client’s vendor network. Passing on fundraisers or networking events is a good way to lose valuable client rapport.”
Now that we have a much better understanding of government collections and how they differ from private debts especially, what is the key to ensure success when collecting these types of accounts?
“Timely placements,” said Bonitzer. “Continually work with your clients in expediting the account placement process. Perhaps a fresh look at your existing integration framework could reveal some opportunities for improvement. There are so many scams out there and consumers are more skeptical than ever. The shorter the time between offense/service date and contact with your staff, the more favorable your results will be.”
The first step to succeeding in government collections is to understand the nuances involved and how it differs from other debts. The next step is to assemble a team that has first-hand knowledge of government collections. The last step is to trust the people and the process in order to give you the best opportunity for sustained success in the vertical.
Nick Jarman is the owner of RightAway Consulting & Coaching. Jarman served the last three years on the Board of Directors for ACA International and is the past President of the Missouri Collectors Association.