Agencies Fail to Collect $50B

Recent federal efforts to collect $50 billion in debts from individuals and businesses have met with minimal success and do not meet with the requirements of the Debt Collection Improvement Act of 1996, Rep. Carolyn Maloney, D-NY, said Wednesday.

But federal officials testifying at a hearing of the House Government Reform and Oversight Subcommittee on Government Management, Information and Technology said their efforts were starting to make a difference.

A report issued by Maloney, which was based on surveys sent to all departments, indicates that five agencies are responsible for the majority of non-tax debt owed to the federal government: the departments of Housing and Urban Development, Agriculture, Veterans Affairs, and Education; and the Small Business Administration.

The Debt Collection Improvement Act, written by Maloney in 1996, calls for debts more than 180 days old to be turned over to the Treasury Department for collection. Maloney's report gave Treasury an "F" for failing to provide the necessary leadership so agencies would comply with the law. In the year and a half since the law has been in place, only $2.5 million in delinquent debt has been collected.

"What I find most disturbing is the fact that the debt has increased from about $25 billion in 1985 to more than $50 billion in 1997," Maloney said. "We've handed the government departments the tools to clamp down on people who owe them money, yet they continue to let the debt pile up."

John D. Hawke, Treasury Department under secretary for domestic finance, said the department is "not satisfied with the extent or pace" of progress on debt collection. But he said Treasury's Financial Management Service has taken steps to address the situation. FMS has signed 24 letters of agreement with agencies to collect delinquent debts through cross-servicing arrangements, and has awarded contracts to 10 private collection agencies for collection of federal debts.

"Our goals for the future are to complete implementation of the DCIA at the earliest possible time and establish definitive targets for agencies to achieve compliance with these requirements," said assistant Treasury secretary Gerald Murphy.

Assistant Secretary of Education David Longanecker testified at the hearing that the challenge of collecting on defaulted student loans "is considerable because student loans are inherently risky . . . . Credit worthiness is not a prerequisite." Education has referred more accounts to Treasury than any other agency.

HUD has proposed that it join Treasury in a pilot project under which one of the department's debt management facilities would operate jointly as a Treasury debt collection center. "This potential transfer matches the skills in debt collection of current HUD staff with the need for Treasury to establish debt collection centers as required by DCIA," said HUD chief financial officer Richard Keezey.

Dale Sopper, acting deputy commissioner for finance, assessment and management at the Social Security Administration, said SSA for many years lacked the statutory authority to use various collection tools. SSA was excluded from legislation in 1982 allowing aggressive debt collection efforts. "SSA is now attempting to get on an equal footing with other government agencies," he said.

Rep. Maloney's Debt Collection Report Card