Lawmakers Suspect Illegality in Privatized Tax Collection ProgramTweet
June 27, 2017
File this under “We Told You So.”
Barely two months into the IRS’s latest attempt to outsource federal tax debt collection to private companies, one of the companies—Pioneer Credit Recovery—has been singled out by lawmakers for possibly engaging in illegal collection practices. The IRS’s private debt collection program was mandated by Congress through a provision inserted into a highway funding bill President Obama signed into law in 2015.
Last week, a group of Democratic Senators led by Elizabeth Warren (D-MA) sent a letter to Pioneer and its parent company, Navient, expressing concern that Pioneer’s employees may be using illegal and abusive collection tactics in the IRS program. The Senators obtained the call scripts Pioneer is using when it contacts delinquent taxpayers and found “several instances of troubling language” that may violate the law, IRS policies, or the terms of Pioneer’s contract. For example, the scripts show Pioneer is not adequately protecting taxpayers from telephone scammers and is pushing taxpayers into financially risky repayment options.
This development is not surprising. Last year, when the IRS announced a plan to hire Pioneer and three other companies to help collect unpaid federal income taxes, we expressed our skepticism. We pointed out that two previous attempts to use private debt collectors ended in failure: both times, program costs offset the amount of revenue collected, and taxpayers complained of abusive and underhanded collection tactics.
We also noted that Pioneer, which took part in one of the ill-fated debt collection programs, has a history of questionable conduct. A 2012 Bloomberg exposé of the student loan collection industry highlighted Pioneer for its particularly coercive and deceptive techniques. In February 2015, the Department of Education terminated Pioneer's contract after finding the company had made “materially inaccurate representations” to federal student loan borrowers. One year later, Pioneer and another debt collection company paid $575,000 to settle alleged violations of the Fair Debt Collection Practices Act and the Electronic Fund Transfer Act. Presently, the Consumer Financial Protection Bureau is suing Pioneer and Navient “for systematically and illegally failing borrowers at every stage of repayment” by using “shortcuts and deception.” (For what it’s worth, Pioneer’s website pledges “fair treatment and quality service,” assuring federal tax debtors “we comply with debt collection rules and consumer protections.”)
The Senators are concerned that abuses in the program go beyond Pioneer, implying in their letter that the other collection companies may also be pushing the legal boundaries. Earlier this month, Treasury Secretary Steven Mnuchin testified at a Congressional hearingthat he supports using private collection firms “after all other means have been used,” but he seemed genuinely disturbed by Pioneer’s track record and promised to have the IRS report back to him later this year with an evaluation of the program.
Neil Gordon is an investigator for the Project On Government Oversight. Neil investigates and maintains POGO's Federal Contractor Misconduct Database.
Topics: Contract Oversight
Authors: Neil Gordon
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