We have reported on a number of low-down debt collectors, including some that we have encountered personally. But we might have a new leading candidate for our Lowest of the Low Award in the debt-collection industry.
Commercial Acceptance Co. of Shiremanstown, Pennsylvania, has made a proposal to collect delinquent lunch-money accounts for the Hazelton Area School District. The plan is so slimy that even an industry blog is squirming about it.
All is not dark, however, on the debt-collection front. Another debt-collection firm made a proposal that might actually assist low-income families in the Hazelton district. And on the national scene, a number of recent news items indicate the public might be getting fed up with rapacious debt collectors.
What is going on with one Pennsylvania school board and delinquent lunch-money accounts? Here is how the Hazelton Standard Speaker reported it:
The board entertained a proposal last month from Commercial Acceptance Co. of Shiremanstown, which would pursue collections from the top 35 accounts with the highest unpaid amounts. District food service director Barbara Farley said lunch money delinquencies total more than $3,000. The collection agency would keep 30 percent of any amount collected and return 70 percent to the district food service department.
The board postponed action on the proposal in favor of scheduling a question-and-answer session with a representative of the company.
Even the folks at industry blog insideARM.com seemed almost appalled by the proposal. ARM, by the way, stands for accounts receivable management--a polite term for "we're coming after your money, whether we can prove you owe it or not." The lunch-money proposal in Pennsylvania called for an "introspective moment," says insideARM. Gee, even these clod heads can see a public-relations train wreck in the making:
The Hazelton, Pa.-area school district currently has about $3,000 in unpaid lunch fees. To recoup this money, the Hazelton school board is testing the waters with several collection agencies.
This is one of those situations where reality – there are few school districts that can afford not to pursue three grand – brushes up uncomfortably against perceived reality: collection agencies are going after kids for their lunch money. Regardless of how much we may want to shift the conversation, this one is ripe for shifting back by those who only have negative things to say about the accounts receivable management industry.
What does it take to turn the debt-collection industry's stomach? A plan to go after kids' lunch money apparently will do it. Writes insideARM:
Most of the agencies chomping at the bit for this account are suggesting a 70/30 profit split, with the school district taking the bulk of the collected monies home. The current debt of $3,000 seems like a small amount – and any agency’s cut will only run somewhere in the $900 range. However, it’s likely that this is a slow-and-steady sort of arrangement, where a firm that successfully wins this collections bid would have a guaranteed account.
Adding a different spin to this program is what amounts to a bit of case management required by any collection agency selected for this proposal. Hazelton’s school board is hoping that the collection agency will be able to identify those families who should be receiving free or reduced-price lunches, and funneling those accounts to the appropriate authority.
It’s a tightrope walk, though; collection agencies and kids can be a PR nightmare if things aren’t handled entirely appropriately. However this could also be another example of the ARM industry working with communities to strengthen them.
In fact, it appears at least one agency has developed a conscience in all of this. Reports the Hazelton newspaper:
Efforts to collect on delinquent lunch money accounts may lead Hazleton Area School District officials to a kinder, gentler way to get free and reduced-price meals to the students who qualify.
School board discussions last month on hiring a collection agency to recoup the unpaid lunch money prompted a proposal from an alternate agency that could bypass the parental application process and get free or low-cost meals to eligible students on administrative approval. . . .
In the meantime, Farley said at this month's board committee meeting, the district received a proposal from another collection agency that would evaluate the top 35 delinquent accounts and determine whether the household qualifies for free or reduced-price meals. If the household qualifies, Farley said the agency would refer the account to district administrators, who can "sign off" on the parental application process and authorize free or low-cost lunch and breakfast for the eligible student.
Looks like the Pennsylvania story could have a happy ending. A few other recent debt-collection stories have had happy endings--at least for consumers:
* Appellate Court Upholds Large Jury Verdict in Debt-Collection Case--A federal appeals court has upheld a $311,000 jury verdict in favor of a Montana man who sued a North Dakota-based firm over its debt-collections practices. We reported on the Timothy McCollough case back in August 2009, and we are pleased to report that the jury award has held up.
* Debt-Collector Faces Charges Over "Robo-Signed" Affidavits--Lori Swanson, attorney general of Minnesota, already was a champion for a consumers. Now she is accusing a large debt-buying firm of using "false and deceptive robo-signed affidavits" to help collect debts. San Diego-based Encore Capital Group, Inc. is the debt buyer in the cross hairs.
* Courthouse Debt Collector Gets Nailed--A company that collects debts for district attorney's offices must pay a $741,000 judgment for violations of the Fair Debt Collection Practices Act (FDCPA). What charming techniques has District Attorney Technical Services been using? Reports Courthouse News Service:
District Attorney Technical Services contracted with prosecutors that established "bad check restitution and prosecution programs" to collect debts on behalf of merchants that received bad checks.
In 2005, lead plaintiff Kristy Schwarm filed a class action against the company and its founder, Henry Craighead, for violations of the Fair Debt Collection Practices Act. The defendants' demand letters to debtors claimed that the district attorney was investigating a criminal complaint, and the consumer might be arrested if he did not pay various fees, according to Schwarm's complaint.
Ah yes, threatening an alleged debtor with arrest is a classic chestnut from the debt-collection game. Another is threatening to sell your "house on the courthouse steps," a technique we experienced in our dealings with NCO and Ingram and Associates.
Even if the Hazelton, Pennsylvania, case has a happy ending, it looks like we will have no shortage of contestants for our Lowest of the Low Award.