awwwwwwww boo hoo !

Collection agencies may soon call on Chicago's debtors
Unpaid bills adding up as city faces $300 million shortfall
By Dan Mihalopoulos | Tribune Reporter
July 8, 2009

In the wake of unpopular parking meter rate increases, Chicago officials now are considering hiring one or more collection agencies to go after those who owe money -- be it from unpaid parking tickets to water bills -- to the city. (Tribune photo by Michael Tercha / June 4, 2009)



The same bill collectors who pester debtors on behalf of credit-card companies are being recruited by Chicago City Hall to go after anybody who owes money to the cash-strapped city.

Just months after pushing through highly unpopular parking meter rate hikes as part of a lease -- and in the midst of a recession -- Mayor Richard Daley's administration is looking for private collection agencies to track down people with unpaid parking tickets, delinquent water bills and other debts.

Last year alone, past-due fines and taxes amounted to tens of millions of dollars, including almost $95 million in unpaid water bills alone. The debts are piling up as Daley faces a budget shortfall his aides peg at about $300 million.

"Whether it's municipal governments like the city of Chicago, or state or federal agencies, they are having trouble making ends meet," said Thomas Penaluna, president of CBE Group, a Waterloo, Iowa-based collection agency among 13 companies expressing interest in doing business with the city. "They need to find any way possible to increase revenues. Because people are having a difficult time, they have not been able to pay on time."



The city sends letters to debtors and sometimes hires law firms to try to collect. Now the Daley administration plans to hire one or more companies to assist in recovering the debts, city documents show. City Hall then would pay the collection agencies a percentage of what they are able to get debtors to fork over.

Collection agencies long have been a target for consumer rights advocates, who said Tuesday that Daley might not find it cost-effective or popular to privatize efforts to cash in the city's chits.

"A lot of the private companies that are in line for collecting government debt have long histories of hiring people who are abusive toward debtors," said Joe Ridout, spokesman for Consumer Action in San Francisco. "They impugn the reputation of the government agencies that they are supposed to be helping out."

Ridout said some collection agencies call people at work to try to embarrass them into paying. In other cases, he alleged, bill collectors have told debtors with Hispanic surnames that they could arrange for them to be deported unless they pay up.

Ed Walsh, spokesman for the city's Revenue Department, shrugged off a question Tuesday about public perception of collection agencies. "We have to review each company on their individual merits," Walsh said. "There are plenty of reputable collection agencies."

A couple of firms bidding for Chicago's contract collected taxes owed to the Internal Revenue Service until President Barack Obama's administration canceled that three-year program in March.

The city is looking for five-year deals with collection agencies. According to bid documents, debts that could be sent for collection range widely, from bills for ambulances to bottled water taxes, building permit fees and taxes on real estate sales.

The Chicago contract could be a "giant deal," said Sean Keegan, national marketing director of United Recovery Systems in Houston. He estimated a private company would need about 200 collectors and could keep 18 percent to 30 percent of what it rakes in for the city.

The collection agencies also could be asked to engage in "skip tracing services" -- industry jargon for locating debtors who moved.

Asked if the gaping budget hole is the primary motivation for seeking help from collection agencies, Walsh said: "It's just to see what services are offered out there. I think we would be exploring this anyway."

dmihalopoulos@tribune.com