The New York World reports this morning:
Tire irons like this one are just one weapon in the city’s arsenal against unpaid parking fines. (AP Photo)
The boots clamped on the wheels of some parked cars in Brooklyn this summer are just one weapon in the city’s war on unpaid parking tickets and other fines. The city’s quest to collect hundreds of millions of dollars owed by scofflaws has led its Department of Finance to bring out the big guns: tough-talking collection agencies from Texas.
The Austin-based collections company Gila LLC, doing business under the name Municipal Services Bureau, is under consideration for a new $17.8 million, five-year contract with the city’s finance agency. The city is also negotiating an $18.1 million contract with a second Texas collection firm, Linebarger Goggan Blair and Sampson. Sallie Mae, the student loan agency, and IQOR, doing business as Allied Interstate, are also in line for new contracts.
The companies responded to a city request for proposals seeking firms to collect money owed on parking tickets, red light and bus lane driving violations, business taxes and fines for environmental violations.
The move comes as New York City parking ticket revenues fall far short of projections. In fiscal year 2011, the city budgeted for $625 million in parking fine collections. By the end of the year, it had obtained only $568 million, a 6 percent drop from the previous year’s take. Meanwhile, the city issued $904 million in new summonses, and by the end of each fiscal year, more than $250 million in summonses remain unpaid.
The Department of Finance has used private debt collectors since at least 2003, but the proposed new contracts would significantly expand its use of outside firms to collect fines once they are under judgments or warrants. They come in the wake of a 2010 report from the mayor’s Office of Operations recommending greater use of outside collection agencies to help close the gap between summonses the city issues and the money it collects. The Department of Finance also commissioned a study from the management consulting group McKinsey and Company as part of its effort to improve revenue collections, though it has not released the results publicly.
The collections companies track down debtors and then call and mail them repeatedly; the firms then typically get to keep a portion of any proceeds. Under the city’s previous contract with Allied Interstate, the company kept 7.8 percent of the proceeds, and earned $2.7 million in commissions in fiscal year 2011. It was able to track down just 17 cents out of every dollar owed to the city.
Gila LLC promises local governments “higher recovery rates than our competitors.” Its pitch materials to other cities vow to attempt contact with debtors a minimum of 16 times in the first 60 days, followed by a “progressive letter series in which each letter will carry stronger language.”
The letter that Austin driver Brent DeVere got from the company in 2007 was downright scary. “A Warrant is Pending for Your Arrest – Act Now to Avoid Going to Jail,” read the notice, which included an image of an Austin marshal’s badge.
DeVere, who happens to be an attorney, had accumulated three tickets for parking at expired meters. He knew that in Austin these are a civil matter, not a criminal one, and therefore can’t result in arrests. This notice alleged — incorrectly so, DeVere insisted — that he had four delinquent tickets totaling $156 owed to the city. Gila subsequently sent more notices threatening to tow DeVere’s car if he did not pay.
He decided to bring the matter to Travis County Court. DeVere wasn’t the only one who got the notice threatening arrest, which Gila was quick to call “a clerical error on our part.” The company admitted to having improperly sent this warrant notice to some 18,000 people who had outstanding parking tickets in Austin.
“They basically got the wrong version of a collection letter from us,” then-Gila Chief Executive Officer Patrick Swanick told the Austin American-Statesman. In a deposition in DeVere’s lawsuit, Swanick acknowledged that the letter was approved by the city of Austin for its annual warrant round-up program.
Gila asked a federal court to pick up the case. U.S. District Judge Sam Sparks of the Western District of Texas determined that the federal Fair Debt Collection Practices Act, which governs the actions of collections agencies hunting consumer debt, does not apply to parking tickets.
Jerry Jarzombek, an attorney in Texas specializing in claims against abusive debt collectors, had his own run-in with the company about five years ago after he ran a red light. A Gila collector had called him to demand $150, incluing a $75 late fee, on a ticket Jarzombek says he never received. The caller also threatened, Jarzombek said, to put negative information on his credit report, something the company does not have the power to do. Jarzombek called on his city of Ridgeland Hills to end its contract with Gila, but no action was taken by authorities.
To read the full article at City & State click here.
Trackback from your site.