A paper scheduled to be published in the University of Pennsylvania Law Review argues that state governments are increasingly acting as debt collectors for private companies, often using powers that private creditors themselves could never access directly.
The paper, Offsetting Justice: Using Government Power to Collect Private Debts, examines how government agencies help private hospitals, colleges, lenders, and collection firms recover money from consumers through tax refund offsets, administrative collection systems, and even criminal justice mechanisms. The paper is notable because it reframes a number of existing collection tools through a due process and policy lens that could eventually attract more legislative scrutiny.
The authors divide these practices into two categories: “no process” and “faux process.”
The “no process” category focuses on situations where the state bypasses traditional collection litigation entirely. One of the clearest examples involves state tax refund offsets tied to private medical debt. In South Carolina and Minnesota, private hospitals have been able to intercept state tax refunds from consumers who owe unpaid medical bills. The paper argues that these systems often provide far fewer procedural protections than a normal civil lawsuit, while also shifting the burden onto consumers to challenge the debt after collection activity has already begun.
The paper also highlights how some private colleges have reportedly used state offset programs to collect debts ranging from federally backed student loans to parking tickets and library fines. In California, the authors cite examples where millions of dollars were collected through state tax intercept systems on behalf of private educational institutions.
The “faux process” category may resonate even more strongly with collection agencies and law firms because it centers on allegations that overloaded court systems effectively allow creditors to dominate the process. The paper points to debt collection courts with extremely high default judgment rates and discusses arrangements where district attorney offices permit private collectors to use prosecutor seals and signatures on repayment letters.
The broader argument is not simply that collection activity exists, but that governments are lending the credibility and coercive power of the state to private creditors without the same safeguards that ordinarily accompany judicial debt enforcement.
The paper also arrives at a time when medical debt collection, state offsets, and the role of government in consumer finance enforcement are already under heightened political and regulatory attention. Collection professionals should note that the authors are not calling for a complete end to these programs. Instead, they propose guardrails that would require explicit legislative authorization, meaningful hearing rights for consumers, and limits on what kinds of government collection tools can be used for private debts.
