Will IRS be able to rein in private tax debt collectors?
The collection industry's latest sneaky tactic: using courts to stop debtor lawsuits
Wednesday, December 23, 2015
Just when you think you've heard it all, you haven't. Take, for example, a story in today's New York Times recounting how debt collection agencies are using the court system to keep people from getting relief from collectors via, you guessed it, the courts.
The story caught my eye because I've had family, friends and neighbors who've been harassed by debt collectors. It's also another example of the questionable, at least ethically if not legally, tactics many in bill collection industry use.
And it's a particularly disconcerting story just as the private collection agency folks are about to be forced upon taxpayers thanks to a new law.
Bad bill collection techniques: Let's make one thing clear from the get-go. If you run up a bill, you should pay it.
But I also know that there are many reasons, and many of them are good ones, why people get in debt over their heads.
Try as they might, sometimes efforts to pay such huge bills are darn near impossible. You can only pay so much if you want to keep a roof over your head or food in your refrigerator.
It's even more appalling when the debtor wants to pay and seeks revised terms that would make such payment more feasible, and the original lender decides it's easier and more profitable to simply sell off the debt rather than work out a new payment plan with the person who owes.
Once those debts are in the hands of a private debt collection agency, then the real horrors too often begin.
Phone calls, often incredibly rude and frequently threatening, are made to the debtor. Or, in violation of federal law, collectors call the debtor's friends and family, using similarly aggressive language.
Or, in the case of one of my neighbors, they call relative strangers.
Yes, I once got a call from a bill collector about a guy down the block. The collector proceeded to tell me about the alleged financial irresponsibility of my neighbor, a person I only knew to say hi to at occasional community gatherings. The bill collector actually wanted me to go to my neighbor and tell him to pay up.
Needless to say, I hung up on the collector. But I've never been able to look that neighbor in the eye since.
See you in court, or not: Such invasive and harassing calls are among the top complaints that the Federal Trade Commission receives each year about debt collectors.
The New York Times, however, looks at an even more extreme tactic.
Reporters Jessica Silver-Greenberg and Michael Corkery, writing for the paper's DealB%k column, examine how debt collectors sue for allegedly unpaid bills they bought -- and I keep saying allegedly because sometimes the debt/debtor information the collection agencies have is flat-out wrong -- and get courts' approval to garnish the presumed debtors' accounts.
Sill draw "on past efforts and ensures that lessons learned are applied going forward. We have crafted a plan that has the safeguards necessary to protect taxpayers, the infrastructure to make it work effectively, and the resources it needs to succeed."
That infrastructure is still being worked out. But folks who watched the other private debt collection programs fail miserably wonder why the resources are going to private collectors instead of simply being added to the IRS' collection budget?
Can you say politics?
New York is home to several private debt collection companies that will benefit from the Treasury Department contracts.
Those jobs for his constituents, says Schumer, is a key reason he pushed for the required hiring of private collection agencies. Both on the merits of the program itself and for jobs in New York, the Empire State's senior senator says "it makes eminent sense."
Not to be too cynical about it, but I suspect another "merit" is that that private companies like the collection agencies in upstate New York can contribute to political campaigns, whereas the IRS can't.
Third time, third strike? Chi Chi Wu, a consumer affairs attorney for the National Consumer Law Center in Boston, also remains skeptical about turning over tax collection to private agencies.
Whereas IRS officials have discretion to declare a tax debt uncollectible because of the taxpayer's financial condition, Wu notes that a private debt collector's mission "is to get blood out of stone."
Wu also points out that previous [failed] private tax collection efforts also contained consumer protection provisions. And we all know how those didn't work.
"Collecting taxes," Wu says, "is such an innately government action."
Maybe after this third time turns into a third strike, we can put this bad idea on the bench for good.
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