The Internal Revenue Service has been using private debt collectors to improperly collect funds from hurricane victims and the poorest of people in the United States — turning a profit far below industry standards as a result.
Since spring of 2017, four private debt collectors– Pioneer Credit Recovery, ConServe Debt Recovery, Performant Recovery, and CBE Group — have been assigned nearly half a million delinquent taxpayers to contact in order to recover debts, according to Quartz.
Most of those taxpayers are considered low-income, and many of those low-income taxpayers are delinquent due to having survived destructive hurricanes, like Harvey and Irma. As Quartz reported, the IRS is prohibited by law to collect taxes beyond what a taxpayer needs to survive on, suggesting that the collectors’ propensity to target hurricane survivors is illegal.
The effort to outsource those tax debt collections is a bipartisan effort by two leading members of the United States Senate — head of the Senate Judiciary Committee Chuck Grassley (R-Iowa) and Senate Minority Leader Chuck Schumer (D-New York).
Schumer’s explanation for supporting this effort is due to the amount of jobs those private firms would create in one of poorest parts of the Minority Leader’s home state. Three of the four private debt-collecting companies are based out of Iowa — Grassley’s home state — and in New York State. Neither Grassley or Schumer have commented on the issue.
As Grit Post reported in January, the IRS was previously criticized for spending more than $20 million to collect $6.7 million in debt according to the Independent Taxpayer Advocate Service — which works out to approximately one percent of tax debt the private debt collection companies were charged with collecting.
One of the primary reasons the IRS uses private debt collectors is because the agency does not have the resources to collect the debts themselves — thanks to a nearly $122 million overhaul on collection practices in the 2016 IRS budget. The practice of outsourcing was supposed to offset the costs of collections by recovering unpaid tax debts. The U.S. Treasury shows, however, that the recovery of those debts sits at just over one percent of the 4.1 billion dollars of outstanding tax debts, which is far below the industry standard of 10 percent.
Brandon Howard is a contributor for GritPost and former public radio reporter based out of Lexington, Kentucky. Follow him on Twitter @mrpowerhoward.