Senators Ask FTC to Review IRS Private Debt Collectors

Chris Gaetano
Published Date:
Jul 13, 2017

Four U.S. Senators have requested that the Federal Trade Commission review whether the four private debt collection firms hired by the IRS to contact holders of delinquent tax liabilities are in compliance with the Fair Debt Collection Practices Act (FDCPA), according to a letter sent to the acting chairman and the commissioner a few days ago. The senators, Elizabeth Warren (D - Massachusetts), Corey Booker (D - New Jersey), Sherrod Brown (D - Ohio) and Benjamin Cardin (D - Maryland), expressed concern that the scripts the firms use may include "implied threats to taxpayers, violations of taxpayer privacy protections due to information shared with third parties, and inadequate responses to taxpayer cease and desist requests." To this end, it is asking the FTC to review these scripts to determine whether they are in compliance with federal law.

The four senators had previously written a letter to one of the firms, Pioneer Credit Recovery, saying that their scripts violated the FDCPA, which bans false or misleading statements or threats that constitute harassment and abuse. The letter said that the script for the debt collector contains implied threats by suggesting that the collector can seize the payment involuntarily if the debtor cannot resolve the issue. 

"Implying the ability to involuntarily seize assets is prohibited under the FDCPA as a 'threat to take any action that cannot legally be taken or that is not intended to be taken' since Pioneer does not in fact have the authority to involuntarily collect this debt. Intimidating language about "notat[ing] the account ... that they do not want to voluntarily satisfy their obligation" should not be included in the call script," said the earlier letter. 

The earlier letter also says Pioneer is in violation of IRS Code, which states private collection agencies must offer installment agreements that allow full payment for a period not to exceed five years, but the scripts ask for payment agreements up to seven years, and furthermore allows "extra payments or higher payments," which is also prohibited by the IRS Code. 

The senators were also concerned about some of the advice the scripts offered delinquent taxpayers, such as taking out a second mortgage, borrowing against their 401K or applying for a credit card, all of which could "dramatically increase expenses, or cause them to lose their homes or give up their retirement security." 

These concerns echo those raised by National Taxpayer Advocate Nina Olson, who titled a section in her most recent report to Congress "The Design of the IRS’s Private Debt Collection (PDC) Program Will Disproportionately Burden Taxpayers in Economic Hardship and Impose Unnecessary Costs on the Public." It noted that, of the 5,947 taxpayers referred to private debt agencies, said that only 45 have incomes equal to or more than 250 times the federal poverty level. Meanwhile, 1,041 has incomes less than $10,000. While the IRS ultimately agreed with the National Taxpayer Advocate that it is inappropriate to assign to private agencies the liabilities of taxpayers who receive Social Security Disability Income, those agencies have not yet modified their scripts to compensate for this change. 

"The design of the PDC program will disproportionately affect taxpayers who appear to be experiencing economic hardship. The IRS plans to assign new liabilities to PCAs without first attempting to collect them through the usual notice stream, thereby unnecessarily paying significant amounts of commissions to PCAs. The IRS has not taken the necessary steps to ensure that PCAs adequately protect taxpayers, train their employees, and operate transparently," said Olson in her report. 

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