City officials in Trenton, N.J. have hired collection agency Pioneer Credit Recovery to pursue more than $2.9 million in outstanding municipal court fines. The one-year contract with the agency will begin Oct. 1 and can be extended twice.

New Jersey municipalities are allowed under state law to contract with private firms to collect outstanding debt from municipal courts. The firms can add an administrative fee of up to 22% on each collected debt to cover the costs of collection.

The city is asking people who owe money to report to Trenton Municipal Court before Oct. 1 to avoid having their account placed in collections as well as the 22% additional charge. Debtors would be required to pay an initial down payment of 30% of their debt while also entering a monthly installment plan.

"Having a professional service undertake this work increases efficiency and enables the city to collect a great deal more of the fines in arrears than we would with our existing personnel," city business administrator Terry McEwen said.

Pioneer Credit is one of four collection agencies that in April had a lawsuit filed against the U.S. Department of Education dismissed by a federal judge. Pioneer Credit, Coast Professional, National Recoveries and Enterprise Recovery Systems were part of a consolidated lawsuit.

The collection agencies had argued the Education Department arbitrarily cut ties with them in February and had asked a judge to order, among other things, that the Education Department stop providing new student accounts to competitors that had their contracts extended.

The Education Department terminated contracts with five collection agencies after a review of 22 private collection agency contracts. The department¬ís review found that some collectors made inaccurate representations to borrowers about a loan rehabilitation program, an option that can create benefits to defaulted borrowers after they have made nine on-time payments in a period of 10 months. 
The collection agencies were found to have given inaccurate information at unacceptably high rates. In particular, the agencies gave misleading information about the benefits to the borrowers' credit report and about the waiver of certain collection fees. Pioneer Credit, Coast Professional, National Recoveries and Enterprise Recovery Systems had argued that the decision to cut ties with them amounted to the government purchasing new services from their competitors without offering them a fair shot in the bidding process.  

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