IRS Private Debt Collectors are Allegedly Playing Dirty. Are You Surprised?

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Four private companies can now collect federal tax debt for the IRS. But that doesn’t mean they’re all doing it in accordance with the law.

A group of Democratic senators — Elizabeth Warren, Sherrod Brown, Benjamin Cardin and Jeff Merkley — shared a letter with the New York Times last month in which it accused Pioneer Credit Recovery of violating fair debt collection practices.

After reviewing call scripts obtained through the Freedom of Information Act, the investigating group made four claims against Pioneer.

4 Complaints About Pioneer’s Tax Collection Tactics

Want to know what the letter says — in plain English? Here are the major complaints the Senate group made against Pioneer Credit Recovery.

1. “Pioneer fails to adequately protect taxpayers from criminals posing as IRS agents.”

The company allegedly did not provide people enough time to verify the legitimacy of Pioneer employees before engaging in conversation about their unpaid balances.

The IRS sends unique identifying codes to taxpayers with unpaid balances that a private debt collector can use to show their legitimacy when they contact that taxpayer. The taxpayer can request a new copy of their identification number by mail, which puts their account on hold for 60 days. Pioneer was found to hold accounts for only five days before calling taxpayers again.

Faking urgency is a tactic IRS impersonators commonly take, the complaint letter explains.

2. “Pioneer pushes taxpayers into products that could risk their home and retirement security.”

According to scripts the Senate group obtained, Pioneer suggested credit cards, a second mortgage or borrowing against your 401(k) as ways to find money to pay your tax bill. “No other debt collector makes these demands,” the letter says.

3. “Pioneer’s call scripts may violate the Fair Debt Collection Practices Act and provisions of the Internal Revenue Code.”

Pioneer scripts allegedly advised agents to offer payment plans of longer than five years and instructed agents to tell people they could make extra or greater payments at any time. But the Internal Revenue Code only permits payment in full or installment payments that cover the full amount over no more than five years.

The New York Times found that all four tax collection contractors — the other three are CBE Group, ConServe, Performant Recovery — told people they could set up a seven-year installment plan to pay their tax debt.

Pioneer’s call script also allegedly implied the company had the power to involuntarily seize payment from someone who hadn’t paid their tax bill. This violates the Fair Debt Collection Practices Act, since these contractors don’t have that power.

4. “Apparent violations of Pioneer’s IRS contract and IRS policies.”

The IRS’ contract with Pioneer specified that Pioneer must refer cases back to the IRS for negotiation if the case involves “significant hardship” for the taxpayer. But Pioneer’s scripts didn’t indicate this option, nor did it inform payers about the Taxpayer Advocate Service.

“When Congress required the IRS to hire private debt collectors to collect certain tax debts, it did so under strict provisions to ensure that taxpayers were not put at risk during the collection process,” the letter from Senators Warren, Merkley, Brown and Cardin states. “But it appears that Pioneer is not adhering to these protections.”

The group requested that Pioneer modify its scripts to reflect IRS law and policies, and address problems that have arisen from “faulty scripts.”

Pioneer Credit Recovery Responds

Jack Remondi, president and CEO of Pioneer’s parent company, Navient, responded in a letter to the editor of the New York Times on June 30. He insisted that the company is compliant with federal collection requirements, calling the claims in the letter “unsubstantiated.”

Pioneer Credit Recovery was removed from its duties of collecting overdue student loan debt in 2015 for misleading borrowers. Navient, however, continues to work with the Department of Education — the DOE renewed its loan-servicing contract in August 2016.

The Consumer Financial Protection Bureau is suing Navient for failing to inform student loan borrowers about income-based repayment plans.

Lisa Rowan is a writer and producer at The Penny Hoarder.