It's bad enough to have the IRS or another government agency after you. But when Uncle Sam or even a state or local government hires a collection agency to chase after you, things can go downhill fast.

Ordinary debt collectors must abide by consumer protection laws that forbid them from using strong-arm tactics. For instance, they can't threaten to have you arrested or suspend your driver's license. But when the government hires an agency to collect a debt from you, the gloves come off. Even an unpaid toll of $1 can quickly balloon into a debt of hundreds of dollars.

David Jackson is a poster child for this strategy, which has gained immense popularity in this age of "privatization." A $100 speeding ticket in 2010 quickly mushroomed into a $2,200 liability once the city of Overland Park, Kansas, turned the matter over to a collection agency, Linebarger Goggan Blair & Sampson. Homeless and broke, Jackson couldn't afford to pay all the penalties, interest, court costs, and fees Linebarger tried to collect. When he failed to pay, Linebarger followed through on its threat to have him arrested. He wound up in jail numerous times and was billed $35 per night for jail fees.

The mostly poor and middle-class victims of privatized debt collectors often have no recourse against anyone, least of all the collection agency, which may be shielded from lawsuit or prosecution under the doctrine of "sovereign immunity."

In many cases, the debts collected by agencies like Linebarger are for bills from years or even decades ago. And the government agencies that refer the cases often issue arrest warrants, garnishment orders, driver's license suspensions, etc. all cited in the collection letters.

Like the civil forfeiture racket I've written about in previous essays, outsourcing debt collection is a sweet deal for state and local governments, since the debtors, not the governments, must pay the collection fees. These fees are much higher than in collection efforts for ordinary creditors.

Some states permit regular collection fees of 40%; effective fees in toll collection cases start at 100% and can go much, much higher. And while most states limit garnishment orders to 20% or less of a person's income, when it comes to debts owed the government, some states permit a court to garnish 100% of your after-tax earnings.

Some of the cases pursued by collection agencies come as a result of misconduct by police or government officials. That's why New York City resident Laverne Dobbinson received a $710 bill from Linebarger in the summer of 2012. A few months earlier, Laverne's 27-year-old son, Tamon Robinson, was mowed down by a New York City police car. The official accident report said that Robinson "ran into" the car and then fell backwards onto the pavement. He later died of a head injury. But the autopsy report released by the city medical examiner found that Tamon had died due to being "struck by police vehicle during pursuit."

Several months later, apparently based on the accident report, Laverne opened a letter from Linebarger addressed to her son. The letter sought reimbursement of $710 for "property damage to a vehicle owned by the New York Police Department." It threatened a lawsuit if the bill wasn't paid immediately.

Laverne, who was already pursuing a wrongful death lawsuit against the city, turned the letter over to her attorney. Linebarger acknowledged that the city had referred to it numerous collection cases, including that of Tamon Robinson. Linebarger stopped its collection efforts only when it received proof of Tamon's death. And in 2014, the city settled Laverne's wrongful death lawsuit for a hefty $2 million payout.

Of course, privatization isn't just a US phenomenon. In response to sluggish economic growth and growing deficits, governments worldwide have privatized airports, energy monopolies, and many other types of facilities formerly operated as public services. This trend is to be applauded; time after time, for-profit businesses have proven they can provide superior services for lower costs than governments can. Japan is a great example; after the government privatized inter-city routes beginning in the 1980s, service improved dramatically and ticket prices fell. But neither Japan, nor any other country outside the US that I'm aware of, has privatized collection of debts owed to the government.

Ordinarily, I would be the last person to complain about privatization and other efforts to reduce the power of Big Brother. But private debt collectors acting on behalf of government agencies should abide by the same rules as they do to collect any other debt. Anything else opens the door for manifest abuse along with so many other abuses that are all-pervasive in the US.

Offshore, anyone?

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