Officials with the Ohio attorney general’s collection-enforcement division report that approximately $34 billion in government debt owed by corporations and consumers is being pursued by 70 outside law firms and third-party agencies.

But the Legal Aid Society of Columbus believes many of the consumers it represents are being charged too much in fees intended to cover the debt collection costs of special counsel, according to a Toledo Blade report.

To handle internal costs, the attorney general’s office typically charges debtors a 10% fee - or half of that for medical debt. In cases involving special counsel, an additional charge of 20% to 33% is assessed on the first $25,000 of debt collected, depending on the type of debt. Third-party vendors typical are paid fees ranging from 14% to 21%.

Scott Torguson, a Columbus Legal Aid attorney who has represented several people owing government debt, questions the use of what he calls an inflated number to calculate the fees. He said the fees are calculated using the sum of not only the principal and interest that the debtor owes but collection costs too. That can tack on hundreds of dollars in fees to a debtor’s costs. Torguson said he represented an Ohio woman who owed Ohio State University’s Wexner Medical Center tuition in a lawsuit filed two years ago. The AG’s office calculated a fee of $995 for its own costs and special counsel costs of $2,143. Including the collection costs in the total used to calculate the fees raised the amount of the fees by more than 30%, he said. The Franklin County (Ohio) Municipal Court judge in the case ruled that the woman should pay $3,000 to settle the debt, a fraction of what was owed. But many other debtors who aren’t represented in court cases are subject to excessive fees, Torguson said.The AG’s office collected $97.6 million in fees in the fiscal year that ended June 30. Approximately $45.4 million of that money was for special counsel, $10.1 million for third-party vendors and $42.1 million for the AG's office. Special counsel fees have jumped by 27% over four years.

The AG’s office has used a “make-whole” formula since 1996, according to spokesman Dan Tierney. The penalty is fair, he said, because it helps ensure that taxpayer-funded institutions such as universities, hospitals and state agencies are fully compensated and don’t have to pass along those debts indirectly to other students, patients or citizens.

Wexner Medical Center stopped passing these fees on to debtors in 2010, when hospital officials took into account the nature of medical debt, which often is incurred involuntarily, said Debra Lowe, administrative director of revenue cycle for Wexner Medical Center.

But Ohio State University does pass along special counsel costs in cases not involving the medical center.  

"The university makes strong efforts to ensure that students know about their financial responsibilities,” spokesman Rob Messinger said in a prepared statement. “As part of signing up for courses each semester, students sign a statement of financial responsibility that details what happens if they do not pay their bills. That statement says clearly, ‘I understand that I will be responsible for all costs of collection incurred by The Ohio State University.’ ”

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.