Debt Collection

Improved Reporting Needed on Billions of Dollars in Delinquent Debt and Agency Collection Performance Gao ID: AIMD-97-48 June 2, 1997

This report reviews debt collection issues for nontax debts. It deals with outstanding lending program debt that is being directly managed by federal agencies and discusses programs under which agencies disbursed the loans as well as defaulted guaranteed loans for which agencies reimbursed private lenders and are now trying to collect themselves. GAO focuses on (1) reported governmentwide data on credit receivables and delinquencies for federally managed loans, (2) the status of efforts at four major credit agencies to resolve delinquencies, (3) the dollars collected using various legislatively established collection tools, and (4) ways that debt collection reporting can be enhanced to evaluate progress in collecting debt and thereby assess agency efforts to meet the requirements of the Debt Collection Improvement Act of 1996.

GAO noted that: (1) governmentwide reporting to the Congress indicates that the amount of debt federal agencies are directly managing has remained at about $200 billion for the 5 years ended September 30, 1996; (2) during that time, reported delinquencies for these federal credit receivables varied between $31 billion to $38 billion; (3) at September 30, 1995, the most recent data available on program-level collection performance at the time of GAO's field work, the housing agencies were dealing with more than half of their delinquent debt through various involuntary collection tools and, for almost a third of their delinquent debt, were attempting to contact borrowers to get them to resume payments on the original or revised terms; (4) the Department of Education and its agents were attempting to locate and confirm or revise repayment agreements associated with about 70 percent of Education's delinquent debt; (5) contacting borrowers with delinquent student loans is an especially difficult task since they tend to be younger and thus more transient; (6) collection on such unsecured loans tends to be more difficult because there is no collateral to be seized if borrowers do not pay; (7) delinquent student loans accounted for 40 cents of every dollar of delinquent nontax debt directly managed by the government and over half of the delinquent federal credit receivable debt; (8) GAO identified several enhancements that would facilitate valid assessments of agency collection efforts; (9) better data and key analyses are crucial aspects of federal efforts to measure success in accomplishing the charter for a more business-like credit management environment as set out by the Debt Collection Improvement Act of 1996; (10) progress in this area will be especially critical to the success of FMS as it assumes new debt collection management and reporting responsibilities under the act; (11) such data is central to effective day-to-day management in terms of selecting collection strategies and deploying available staff and contract resources; and (12) among the enhancements are: (a) developing a reporting framework to identify and assess the status of agency efforts to collect delinquent balances; (b) providing more information on how actively, successfully, and cost-effectively agencies are using individual collection tools; (c) reporting actual delinquent amounts that agencies are trying to collect and showing how those figures relate to amounts reported on agency financial statements; and (d) improving the reliability and consistency of reporting on delinquencies and credit receivables.


Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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