Panel criticizes Justice Department for failing to collect on defaulted loans

October 31, 1990|By Susan Hansen | Susan Hansen,Washington Bureau of The Sun

WASHINGTON -- A growing backlog of unpaid debts to the government has topped $7.5 billion and could be lost to the U.S. Treasury forever if the Justice Department does not step up its sluggish debt-collection efforts, a congressional committee warned yesterday.

Delinquency on unpaid federal debts -- ranging from defaulted home mortgages and student loans to unpaid criminal fines -- shot up from 14 percent to 33 percent in the past eight years, according to a report released by the House Committee on Government Operations.

The Justice Department has failed to give the issue the "attention required to solve deep-seated problems," despite a 1981 pledge by President Ronald Reagan to make debt collection a top priority, the report says.

"Debtors must understand that the government can and will sue to obtain recovery," it says.

The backlog includes about $6.6 billion in unpaid debts referred to the Justice Department by other federal agencies and an additional $986 million in uncollected criminal fines.

"If only one-third of that were recoverable, I estimate that it would save the taxpayers the equivalent of a 10-cent-a-pack tax on cigarettes or a 2-cent-a-gallon gas tax increase," said Representative Bob Wise, D-W.Va., who oversaw the report.

Much of the civil debt is the result of defaults on federally guaranteed loans to farmers, veterans, students and small businesses, but it also includes uncollected penalties for Medicare overpayment and government procurement fraud. A large portion of criminal debt reflects unpaid fines for drug offenses and white-collar crime.

The Justice Department, as the collector of last resort, is responsible for recovering just a small portion of the estimated $240 billion currently owed to the government.

But the committee report, which is based on research by the General Accounting Office, noted that other federal agencies' increasingly poor debt recovery record could force the Justice Department to handle an increasing number of hard-to-collect debts.

It also faulted the Justice Department for failing to adequately monitor the debt cases already referred to it.

"Justice does not know what is collectible, at what stage in the collection process the debt is, nor even whether a claim is collecting dust," said the report.

Justice Department spokesman John Smietanka disputed the committee's findings.

Although total outstanding debt under the department's purview is currently $6.6 billion, he said, the courts so far have cleared the way for collection on only $1.1 billion of that amount.

He did credit the committee report with providing "constructive criticism" and said the Justice Department was implementing a computerized network to centralize its debt-collection operations.

He said new federal crime legislation also would establish a nationwide debt-collection procedure that would make it easier for the Justice Department to garnishee the wages of individuals who were delinquent on federal debts.

The committee report also recommended that the Justice Department ask the courts not to approve travel by people who have failed to pay criminal fines. The report specifically referred to a trip last spring to the Bahamas taken by Michael K. Deaver, the former White House aide convicted of perjury and fined $100,000. At the time Mr. Deaver's travel was approved by the court, he had repaid only $2,350 of his fine, the report said.

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