Archive Debt Pilot Program for the Ohio Attorney General

 

 

In 2003/2004, it was discovered that the Ohio Attorney General (the “OAG”) had in its inventory over $7 billion worth of uncollected debt owed to various state agencies. Much of this debt was extremely aged due to the fact that the state kept it on the books for at least forty years (at the time, the State of Ohio had no statute of limitations for tax and certain other debts owed to state agencies). Jim Petro, Attorney General from 2002-2006, determined that it was time to once and for all resolve the huge backlog of files that was taking up not only an abundance of physical space, but also a great deal of virtual space on the OAG’s collection system.  Some key characteristics of the accounts that comprised this portfolio included:

  • Debts to over 130 state agencies ranging from nominal fines for failure to register dogs and pay for library books, to huge corporate franchise tax, workers compensation premium and unemployment contribution liability.
  • All debts had been in the hands of at least four collectors, including the original agency, the OAG’s Revenue Recovery Section, at least one third party collection vendor and at least one Special Counsel.
  • The OAG had a great deal of concern about the collection approach taken on the entire portfolio of debts, since the age of the accounts increased the likelihood of taxpayers taking offense over being contacted.

Most of the accounts were closed out of the OAG system due to their extreme age; however, the OAG sought out a solution to the remaining obligations that would return revenues to the state’s coffers, but would not expose the state to bad public relations or liability for aggressive collection techniques. VRH submitted its proposal and was the firm chosen. Early in the process, Attorney General Petro’s advice was to begin slowly and incur as little ramp-up expense as possible, as he felt that the extremely distressed nature of the portfolio made collectability unlikely and he did not want to see a contractor lose money on the work.

Quite to the contrary, however, VRH’s distinctive collection methodologies, successful training techniques, and understanding and appreciation of the unique characteristics of the OAG’s debt portfolio, have enabled us to collect over $31 million on behalf of various state agencies. We have achieved these results on a pool of debts that were deemed dead by our predecessors. Just as importantly, we:

  • Developed training techniques that focus not only on effective collections of archive debt, but also customer service, FDCPA and state law compliance, and understanding the needs of the most vulnerable taxpayers (i.e. the elderly, the hard of hearing, the poor, those who speak English as a second language, etc.);
  • Established criteria, templates, and best practices for use in the collection of distressed, archive debt;
  • Educated taxpayers on how to file proper returns, resolve problems, and deal proactively with paperwork issues facing them and their businesses;
  • Closed out over $600 million in truly uncollectable accounts (i.e. corporate franchise taxes for which the companies have been liquidated and there is no officer liability; tax accounts that we have caused the OAG to “zero-out” after working with the taxpayers to get their returns filed; accounts that had been paid previously, but that were not properly documented and closed out; etc.);
  • Using the CUBS system, managed over 210,000 accounts with a cumulative book value of over $1.5 Billion;
  • Managed the collection of the OAG’s severely distressed debt for over eight years without a single formal taxpayer complaint.

For eight years, we remained one of the leading collection firms for the State of Ohio while dealing with the most difficult, and messiest, claims to collect. We performed the services throughout every subsequent administration until our contract ended in October 2012 under Attorney General Mike DeWine.  We are pleased and proud to have been instrumental in getting the OAG’s pilot program off the ground and running so well that they have added additional resources to address these debts that no one would touch before VRH came along. We proved that it could be done in Ohio, and we did so with the same proper blend of technology and human resources that we offer to all of our collection clients.