Ohio Beefs Up Collection Outsourcing, Collects Record in 2007

The Ohio Attorney General’s office announced Friday that it had collected some $329 million in debt in 2007, a new record and the result of a renewed effort from new AG Marc Dann to contract with outside vendors for debt collection and to beef up internal collections operations. The 2007 total breaks the record set in 2006 when $325 million was collected.

The Ohio AG’s office oversees debt collection of debt from all agencies in the state. Of the $329 million collected in 2007, the top four categories accounted for more than 70 percent of the debt: $73.1 million was personal income tax debt, $58.1 million was workers’ compensation insurance arrears, $55.8 million was sales tax debt, and student loan debt accounted for $45.3 million.

Private collection agencies brought in $51 million — or 15.5 percent — of the total debt, while 27 percent was brought in by outside counsel, and the remaining was collected in-house.

The reforms involved “redistribution of accounts to outside counsel,” Ted Hart, spokesman for the AG’s office, told insideARM. The office instituted the reforms to combat what Dann referred to as “the perception of a pay-to-play system that cast a cloud over the awarding of outside counsel contracts for years.” Dann was sworn in as attorney general in January 2007.

Under the new system, the number of external attorneys working collection cases rose from 80 in 2006 to 132 in 2007. The reform also paved the way for more debt collection vendors. Dann’s office didn’t release the list of law firms working for the state.

“We’re expecting similar, even better, results for 2008,” said Bill Miller, director of operations for the AG’s Collection Enforcement and Revenue Recovery unit. Miller cautioned, however, that the current economy could impact how much they can collect. Miller noted that more vendors had been added over the course of 2007.

Last summer, Dann’s office issued two separate requests for proposal for collection contracts (“Ohio Issues RFP for Collection of Old Debt,” Aug. 16, 2007). The first RFP was a renewal of Ohio’s standing collection contract. The second was a new RFP issued by Dann to find collectors willing to go after old state debt.

On the first contract, ten collection agencies were chosen in December for a two-year contract. Four of the agencies – General Revenue, NCO Group, United Collection Bureau, and National Enterprise Systems – were holdovers from the previous contract, while six new agencies joined their ranks.

The RFP for the very old debt, or what the AG’s office refers to as distressed debt, was awarded to three firms ­­– Creditors Interchange, Value Recovery Group, and Credit Bureau of Columbus. They were selected to work debts that were classified as “previously worked, highly distressed, and near uncollectible,” according to Miller.