Collection agency Pioneer Credit Recovery on Thursday began a one-year contract to pursue nearly $3 million in unpaid Trenton (N.J.) Municipal Court fines from people who lost their traffic, drug or other court cases.
When Trenton officials announced in mid-August that Pioneer Credit would start collecting unpaid fines, they offered a grace period through Oct. 1 to allow debtors to register for a program called New Beginnings that would allow them to put down 30% of their debt and make installments. Nobody stepped forward.
With the Oct. 1 deadline passed, Pioneer Credit’s contract officially started. Under state law, cities are allowed to use private firms to collect court debts and the firms can add an administrative fee of up to 22% - which Pioneer is doing - on each collected debt to cover the collection costs.
The one-year contract with Pioneer Credit can be extended twice.
Some of the cases date to the 1980s. Some of the people who lost in municipal court owe the city more than $12,000, according to local media reports.Trenton Business Administrator Terry McEwen said the $3 million is a fraction of Trenton’s $188 million annual budget but the city still didn’t want to write the funds off as a loss. The message by hiring a third-party collection agency is that the city is working to do what’s in the “best interest of our taxpayers” and attempt to collect any delinquency, McEwen added. 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’s 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.