Civil Debt Collection

Under its private counsel debt collection program, the Justice Department has contracted with private counsel firms in a number of judicial districts to litigate and collect nontax delinquent civil debts. The purpose of the pilot program is to see whether private counsels can reduce civil case backlogs in U.S. Attorney offices and can cost-effectively collect such delinquent debts. GAO found that the program has generally been successful. Through September 1992, private counsel firms and U.S. Attorney offices participating in the pilot program in seven federal judicial districts collected $122.5 million in debt, at a total estimated cost of $5.3 million. GAO concludes that private counsel firms were cost effective in collecting nontax civil debt. Although U.S. Attorney offices collected more money than private counsel firms, the latter closed more cases at a lower unit cost. Private counsel firms helped work through the existing debt caseload, addressing both large numbers of the debt collection cases that were backlogged at the program's inception and later handling most of the newly referred cases. Most importantly, private counsel firms worked cases and collected debt that U.S. Attorney offices might not have otherwise addressed because of their workloads. In GAO's view, allowing Justice the option of contracting with private counsel firms to help with debt collection when necessary is a generally positive approach to addressing the civil debt collection problem.

GAO found that: (1) the DOJ pilot program has generally been successful; (2) private counsel firms and U.S. Attorneys Offices (USAO) participating in the pilot program have collected $122.5 million in debt, at a total estimated cost of $5.3 million; (3) private counsel firms have collected $9.2 million in nontax civil debt at a cost of $2.4 million; (4) although USAO have collected substantially more unpaid civil debt at nearly the same cost as private counsel firms, the cost-effectiveness of using USAO and private counsel firms to collect civil debt could not be fully determined; (5) private counsel firms have addressed much of the backlogged debt caseload and a majority of the total debt cases referred to them for collection; (6) Department of Education officials believed that they could not have handled the volume of delinquent student loan cases without the assistance of private counsels; (7) six of the seven participating USAO believe that continued private counsel assistance is required to manage their overall civil and criminal debt caseload; (8) between 1985 and 1992, the number of criminal debt collection cases handled solely by USAO grew by 23 percent and the number of civil debt cases declined by 76 percent; (9) DOJ overall ability to obtain assistance from private counsel firms is threatened by the decreasing number of referred nontax civil debt cases and legislative requirements that require that at least four private counsel firms participate in the pilot program in each designated judicial district; and (10) DOJ cannot refer an adequate number of collection cases to private firms to meet program requirements because Education has virtually stopped sending delinquent student loan cases for collection.

Recommendations

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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