ACA International Urges Congress to Lift IRS Private Collection Roadblock

ACA International, the Association of Credit and Collections Professionals (ACA), today called on Congress to reject a last-ditch attempt by Representative Steve Rothman (D-N.J.) to tie the hands of the Internal Revenue Service as it seeks to collect against a $290 billion backlog of unpaid taxes.

By passing the American Jobs Creation Act of 2004 with strong bipartisan support, Congress granted the Internal Revenue Service (IRS) authority to work with private companies to more efficiently recover past due taxes. The IRS is already moving ahead with these contracts, with implementation expected later this year.

“Representative Rothman’s ill-advised amendment is based on unfounded fear and blatant misinformation. While $290 billion in taxes sits uncollected, his amendment penalizes millions of Americans who pay their taxes voluntarily and on time,” said ACA General Counsel Rozanne Andersen. “If you consider that the money owed to the IRS could fund the Department of Education for 5 years, or NASA for 18 years, or the National Cancer Institute for 63 years, you can see how far a simple, cost-effective effort to collect unpaid taxes could get us.”

Private collections agencies (PCAs) are already safely and effectively collecting unpaid accounts for the federal government. Since 1981, the Department of Education has employed PCAs to resolve debts owed the Department. In 2004 alone, PCAs under contract with the Dept. of Education, Dept. of Health and Human Services and the Treasury had referrals of $18.3 billion.

The IRS contracts are expected to be cost effective for taxpayers. According to the U.S. Government Accountability Office (GAO), the IRS estimates that PCAs would generate $4.60 in revenue for every dollar in cost (net after fees paid to PCAs). The use of PCAs reflects greater cost efficiency not only on the selected accounts referred, but also improves the efficiency of the IRS on the accounts it retains by allowing the agency to focus resources where they are needed most. (Source: GAO, Tax Debt Collection, GAO-04-492, May 2004, p. 16-17.)

As well, the IRS expects this initiative will increase taxpayer satisfaction by 12.5 percent. (Source: GAO, Tax Debt Collection, GAO-04-492, May 2004, p. 25.)

“Private debt collectors are committed to the highest standards of consumer protection and professional conduct because the U.S. government and Fortune 500 companies already rely on us to contact their customers and because we are committed to following the Fair Debt Collection Practices Act, Fair Credit Reporting Act and all other applicable federal and state collection and privacy regulations. Private collection agencies are subject to consumer privacy and protection standards as stringent, if not more stringent, than those placed upon federal employees,” said Andersen. “Taxpayers will be dealt with in a straightforward and courteous manner and will retain all the rights established by the Internal Revenue Code, and their data will be protected with the strictest safeguards.”

Key consumer protections in the IRS contracts include the following:

• The privacy of taxpayers’ returns will be protected, with only a taxpayer’s name, phone number, addresses, the tax year and the amount of taxes due provided to the private collection agencies. (Source: Department of the Treasury report: “General Explanations of the Administration’s Fiscal Year 2004 Revenue Proposals,” p. 98-99, February 2003.)

• All contractor employees who have access to the IRS taxpayer information shall be required to undergo a federal government-conducted background investigation prior to beginning work on the project. (Source: IRS Request for Quotation No. TIRNO-05-Q-00187, p. I-17.)

• The IRS will conduct a competitive biding process in the selection of private collection agencies. Each contractor’s work will be evaluated not only on the amount of debt recovered, but also on their sensitivity and responsiveness to taxpayers. (Source: IRS Request for Quotation No. TIRNO-05-Q-00187, Attachment 1.)

• All work under the private collection initiative will be performed within the United States. (Source: IRS Request for Quotation No. TIRNO-05-Q-00187, p. I-2.)