ACA International Responds to Criticism of IRS Contracting with Private Debt Collectors

ACA International today responded to criticism of a proposal that would allow the U.S. Treasury to contract with private debt collectors to recover unpaid taxes owed to the Internal Revenue Service.  The following is a statement from ACA International President Leslie Bender:

“It is a myth that responsible debt collectors act in disregard of consumer rights. Portraying the action of a few as efforts of an entire industry creates a woefully inaccurate picture of reality.

Private and public sector organizations rely on professional third-party debt collectors to recover tens of billions of dollars per year that sustain America’s credit-based economy. They are job creators, taxpayers and contribute to the communities in which they are located.  By law they are required to manage and oversee the activities of their debt collection agents and they maintain significant vendor management programs, oversight, and auditing.

Like many consumer advocacy groups, ACA and its members applaud efforts to assure that unpaid bills are collected responsibly, respectfully, and in a consumer centric way. Debt collection activities are focused on communicating with the right person in a timely manner about a rightfully-owed debt and are essential for consumers to clarify information, discuss relevant disputes, financial hardships, payment arrangements, or any other aspects of their account. Yet, despite its importance, most consumers are choosing not to communicate. We need to seize the opportunity to dispel inflammatory stereotypes about debt collectors and refocus on financial education with tools such as www.askdoctordebt.org so that consumers realize the many rights they have in this often very emotional transaction.

Consumer debt collection is among the heaviest regulated activities in America by federal, state and local laws and regulations. The industry is engaged with policymakers to modernize laws and rules for collecting rightfully owed debts. The Consumer Financial Protection Bureau (CFPB), poised to issue long-needed regulations under consumer financial protection laws, is charged with primary regulatory oversight of the industry and continues to emphasize a consumer-centric focus that can already be seen in the activities it has undertaken involving debt collection. Additionally, Congress; various federal regulators; state attorneys general, regulators and legislators; and local government, among others, provide rigorous oversight of private debt collection agencies.

Allegations that the use of private debt collectors in the public sector is a failed experiment are not founded in fact. A 2010 General Accountability Office report on tax collections clearly stated that an evaluation by the IRS of its private collector program had design and methodology deficiencies that were flawed, making it ineffective at supporting the IRS’ decision to discontinue the practice.

Per the 2006 IRS National Taxpayer Advocate Annual Report to Congress, service levels to taxpayers assigned to private collection agencies exceeded the standards set for IRS customer service and quality.  Private collection agency quality, measured the same way as IRS quality, ranged from 97 to 100 percent compared to 89.5 to 99.5 for the IRS’ collection system.

This report also indicated that of the nearly 19,000 cases assigned to private collectors, only 31 complaints were reported (0.001% of all contacts) and the majority of the complaints dealt with questions about IRS procedures for authenticating taxpayer identity intended to protect privacy. Further there were ‘no instances of fraud or misuse of taxpayer information.’ Importantly, Better Business Bureau data shows that in 2013 debt collectors in the United States resolved 84 percent of the consumer complaints they received, compared to 76 percent for all industries combined. In fact, U.S. debt collectors have maintained a consumer complaint resolution rate of over 80 percent over the past several years.

President Barack Obama’s FY2014 and FY2015 budgets highlighted the importance of debt collectors at the federal level by proposing that U.S. Treasury extend the use of debt collection resources in the recovery of debt owed to or granted by the United States. And, further, in its FY2012 Report to Congress, the U.S. Treasury described ‘private collection agencies’ as one of the tools it uses to collect delinquent Federal non-tax debt and detailed over $3 billion in collections made on behalf of the Departments of Health and Human Services, Treasury, and Education in FY2012, and has been an increasing trend since FY2008.

Additionally, state and local governments from coast to coast continue to engage private debt collector expertise to recover tens of billions in taxpayer owed revenue demonstrating the importance of these efforts to fund critical governmental functions such as courts, human services, public safety and education.

Our industry welcomes the opportunity to dispel the outdated and exaggerated myths about how collection agencies work and fail to appreciate the importance collection agencies place on respectful and meaningful communication with consumers.”

Founded in 1939, ACA International is the trade association for consumer debt collection. ACA brings together more than 300,000 men and women employed in the credit and collection industry in the United States and abroad, including third-party collection agencies, asset buyers, attorneys, creditors and vendor affiliates.