Report: Usorious Interest Rates Charged by Gov’t Sponsored Bill Collectors

The new NIS 200 bill (Bank of Israel)
The new NIS 200 bill. (Bank of Israel)

MKs from the left and right condemned the Execution Service (Hotza’a Lapo’al), the government-run sheriff’s office that is empowered to collect judgments. MK Merav Michaeli, chairperson of the Zionist Camp party, said that the excessive interest and goon-like collection tactics employed by the service “have destroyed lives in a shocking manner. It’s difficult enough for a debtor to deal with his situation, but to their troubles the system adds ridiculous amounts of interest, with a debt of NIS 40,000 turning into one of millions of shekels.”

A report by the State Comptroller released Tuesday, detailed how the service pumped up debts by imposing usurious rates of interest, in some cases as much as 10,000 percent a year. In one example cited in the report, a householder who owed NIS 40,000 saw her debt rise to NIS 2.3 million in just a few years, an interest rate of 10,000 percent per year. The ridiculous debt amount was due to a typo; the interest rate was supposed to be 10 percent, but apparently an office functionary typed the wrong amount in.

While that was exceptional, a number of other issues in the report are more common, the Comptroller said. The service on a regular basis executes judgments without informing debtors that they have done so, so the debtor has no opportunity to follow execution or pay back the debt before interest and penalties mount up. In addition, collections often take place at inconvenient times, and sheriffs enter houses at will and grab anything they can get, even necessary household appliances, computers used by debtors for their jobs, and other essential items.

Most of the debts being executed by the service were initiated by banks and by local authorities for payment of mortgages or taxes. In 2015 alone, there were 156,000 judgments executed by the service on behalf of local authorities to collect for back taxes, parking tickets, and other debts, in which the debtor was required to pay interest rates over the top legal limit (currently 28 percent). The Comptroller earlier this year brought its preliminary findings to the service, but even with the specifics of its overstepping pointed out, the service has corrected only about half of the interest rates. Altogether, there are 750,000 open cases, many of which were problematic in some way.

In response to the report, the service said that many of the issues listed in the report had already been fixed, and those that had not been would soon be.

Commenting on the report, MK Yoav Ben-Tzur (Shas) said that the report illustrated an “economic black hole” that Israelis could fall into. “It is untenable that the state would be responsible for this. A new law must be passed immediately to prevent continued abuses.” Zionist Camp MK Itzik Shmueli said that “there is no law that is followed when it comes to dealing with the poor. Israelis who get caught up in the service’s debt servicing mechanism you will likely not forget.”