Cranston Schools Hire Controversial Collection Agency for Outstanding Lunch Bills
Thursday, December 06, 2018
The company hired was recently fined by a federal agency for its activities.
“In an effort to reduce our unpaid balance, the District has retained the services of a collection agency. The company is Transworld Systems and they will begin their collection efforts effective January 2, 2019,” according to the Cranston School Department.
In an email to parents, Cranston officials wrote, “In the past, the school district has attempted to collect unpaid lunch balances without much success. Starting in September 1, 2016 through June 30, 2018, the school district has written off $95,508. This current year (2018-2019) the unpaid balance is $45,589. The district lunch program cannot continue to lose revenue.”
Cranston Mayor Allan Fung reached by phone on Wednesday night said that he was unaware of the Cranston School Department's decision to hire a collection agency.
"Over this period of time the district has been sending past due notices to our parents\guardians with very little success. The School Committee asked us to put out an RFP (Request for Proposals) to assist with the collection of the unpaid balances," said Cranston School Department Chief Operating Officer Raymond Votto, Jr. in an email on Wednesday evening to GoLocal.
Votto added, "The School Committee asked us to put out an RFP (Request for Proposals) to assist with the collection of the unpaid balances. I am not in my office so I do not have the exact date, but the School Committee awarded the bid to a company a few months ago which called for the implementation of a professional collection program that is to begin on January 2nd."
The collection agency selected by Cranston officials has recently been fined by Federal officials for illegal activities tied to the companies debt collecting activities.
“The federal Consumer Financial Protection Bureau on Monday fined the National Collegiate Student Loan Trusts and their debt collector, Transworld Systems of Fort Washington, a combined $21.6 million in connection with illegal student-loan debt-collection lawsuits,” according to the Philadelphia Inquirer.
And, under a separate federal consent order, Transworld Systems was ordered to pay an additional $2.5 million civil penalty.
According to the New York Times, Transworld’s collection activities are sometimes heavy-handed.
“A woman in a suburb of Columbus, Ohio, was sued twice, by two different creditors, over the same overdue student loan. Another person, in Illinois, was taken to court over a loan that had already been paid off. And hundreds of borrowers faced lawsuits over debts so old that they were no longer legally collectible.
The cases all involved the same debt collector: Transworld Systems,” reported the NY Times.
In the 2017 report by the paper, “Student loans have soared over the last decade, becoming the largest source of household debt outside of mortgages. The tide of rising defaults has also turned into a lucrative business, with companies collecting tens of millions of dollars through settlements, wage garnishments and other compelled payments.
Transworld Systems has been one of most prolific debt collectors, filing more than 38,000 lawsuits in the last three years on behalf of a single client, the National Collegiate Student Loan Trusts. But many of the cases were flawed, as the debt collector churned out mass-produced documentation based on scant verification, according to legal filings by a federal regulator and a New York Times analysis of court records from hundreds of cases.”
The national collection agency claims that it is “the leading provider of outsourced accounts receivable management and loan servicing solutions. Their data-driven services have injected more than $6 billion in cash flow back into our client's businesses over the past decade. Its clients include both B2B & B2C Fortune 100 corporations, national healthcare systems, financial institutions, large-scale governmental organizations, and small businesses.”
News reports of Transworld’s lunch money collections made national news in the past.
ABC News reported in 2010 that a low-income school district in Georgia tapped Transworld to track down parent to collect overdue lunch bills.
“A low-income county school district in Georgia that is faced with shrinking resources has hired a collection agency to get parents to pay their children's school lunch debt.
Officials of the cash-strapped Brantley County School District insist the new policy is the best way to recoup losses and prove to auditors that the debt would not simply be foisted on taxpayers.
'We got to try all ways of trying to recover the debt,' said Van Herrin, vice chairman of the Brantley County Board of Education."
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