Thursday, February 7, 2008

Aldermen leery of water pollution control agency’s debt collection practices

By Maria Garriga
Register Staff
— The Greater New Haven Water Pollution Control Authority has raised the eyebrows of the Board of Aldermen by filing more than 100 foreclosure proceedings since September in an effort to force laggards to pay bills years overdue.
The agency said its new policy calls for foreclosures on overdue bills greater than $1,000.
Alderwoman Ina Silverman, D-25, had asked for a public hearing to explore alternatives to foreclosure in collections, a request co-sponsored by board President Carl Goldfield, D-29.
However, at a full board meeting this week, the board requested briefings on the subject by WPCA officials before voting on a public hearing.
“This just slows down the process,” Silverman said, adding that the authority would have to make its case twice, first at the briefing then at the hearing.
But aldermen Jacqueline James, D-3, and Michael Smart, D-8, both said they want to learn about the issue to prepare for a public hearing.
“Let’s get the facts together first,” Smart said. “What are the collection methods and what are the long term plans?”
“We are not clear on what the issues are,” James said. We can’t be blindsided. Give us some information first. It doesn’t have to be a briefing, even a memo will do. We are the legislative branch of the city. WPCA is a pseudo-city agency and we should know what’s going on. Give us something.”
Goldfield, for his part, said a private briefing would be unusual prior to a public hearing but that he would be happy to hold one. “The more information we have, the better.”
So far, the agency has not carried out full foreclosures, but initiated proceedings for more than 100 customers. Further, up to 400 accounts could be subject to foreclosure proceedings under the collections policy the authority adopted in September.
Authority officials said initiating foreclosure may be the only way to collect from customers who have ignored mounting bills and repeated reminders for years. The agency said its attorneys assured it its action are legal. Aldermen worry foreclosure filings result in additional legal charges beyond the original bill and may violate the Fair Debt Collection Act. The WPCA had once been under the city Public Works Department as the Water Pollution Control Authority until 2005. The city turned the authority into an independent regional entity that allowed the city to write substantial debt off its books, for the agency to focus exclusively on the sewer system, and gain participation from surrounding towns.
Goldfield has said a public would help clarify the problem.
“Are there alternate routes to foreclosures? Who are the people who aren’t paying their bills? Are there reasons for delinquencies such as health problems or layoffs?”
The agency said its attorneys assured it its action are legal.
Other aldermen say the GNHWPCA needs to fine-tune its collection policy.
“We already know people aren’t paying their bills because they can’t afford it. What we need is a better collection policy,” said Alderman Jorge Perez, D-5. The board’s representative on the authority, Alderman Al Paolillo Jr., D-17, defended the agency’s practice.
“Most reasonable people would feel that, after seven to 10 years, a bill should be paid,” he said, adding, “We are open to different ways of collecting.”
Dominick Digangi, the agency’s executive director, said foreclosure initiations have been a last ditch attempt to gain attention of customers who have neglected bills for years despite receiving numerous notices and liens.
The agency added an 18 percent annual interest rate, the maximum permitted by state law, for overdue bills. Officials hoped the interest rate would encourage customers to pay by credit card, which typically offer lower rates, rather than leave bills unpaid. But delinquent customers continued to ignore agency bills and reminders.
So the authority implemented a new billing and collections policy in September that required the agency to send overdue accounts to collection agencies when more than $90 is owed or a bill is more than 90 days overdue. The agency files liens twice a year on property with outstanding bills. Foreclosures can be initiated for any amount due over $1,000.
Digangi said foreclosures initiated over amounts lower than $1,000 are on properties of customers who owe on multiple accounts.
Seeing foreclosure papers often prompts customers to try to pay, Digangi said. More than 50 customers have a payment plan for overdue bills.
The authority revamped its approach to collections after a consultant informed it the collection rate had been 90 percent, when the agency had estimated 94 percent.
That meant the agency had leaned on rate payers to subsidize four percent of delinquents. Further, the 90 percent of customers who paid on time had to cover 100 percent of the authority’s annual expenses, he said.
The authority must make sure its revenue balances expenses so authority officials opted to use foreclosures to force payment. Rather than taking properties, authority’s attorneys would ask the court to put property up for auction. The winning bidder would have to pay outstanding sewer bills.
There are several drawbacks to this approach, he acknowledged. The bills could trigger foreclosure for as little as $1,000. The attorneys fees for foreclosure would be higher than some of the outstanding, in some cases more than doubling the total owed. This increased the stress on cash-strapped customers who had fallen behind on their bills. However, the authority sought foreclosures only after delinquent customers had ignored numerous reminders and attempts to contact them by the authority and so far the authority has not completed any foreclosures.”
“Over 90 percent of the time the mortgage holder pays when they find out. Why would they put $100,000 at risk.” (The mortgage holder is usually the bank, he added). Digangi argues the agency had no other option to make deadbeat customers pay . Unlike most utilities, the sewer company cannot terminate service when customers fail to pay.

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