Union continues campaign against outsourcing tax debt collections

A federal employee union on Wednesday stepped up its sharp criticism of an Internal Revenue Service initiative to outsource some tax debt collection, by announcing the launch of a new Web site about the effort and raising questions about taxpayer rights under the setup.

During a press call, The National Treasury Employees Union unveiled a Web site designed to inform the public about developments under the outsourcing initiative, in which three companies were selected last month to collect certain federal tax debts.

The site provides updates on the initiative, which has recently been stalled by protests lodged by companies that unsuccessfully bid to perform the work. The site includes information about this and other IRS issues in which the union is involved, tools to contact members of Congress and materials for public outreach.

NTEU president Colleen Kelley criticized the IRS for not informing taxpayers that their cases might be handled by contractors. "If the IRS is not going to be upfront with taxpayers, then NTEU is going to fill this void," she said.

The union supports legislation before the House Ways and Means Committee (H.R. 1621) that would prevent the agency from entering into contracts with private sector collection agencies. Kelley said the bill would only affect future collection contracts -- not the three that have been awarded to date. The IRS has announced a plan to expand the outsourcing initiative to up to 10 companies by 2008.

As evidence that the plan should not go forward, Kelley cited testimony by IRS Commissioner Mark Everson at a House Ways and Means Committee hearing on April 6, when he reportedly acknowledged in response to a question that agency employees could perform the collections work at a lower cost than contractors.

The three contracts awarded last month give the companies between 21 and 24 percent of the fees collected, depending on the size of the tax debt; Kelley has said agency employees could perform the work at one tenth of that cost.

The privatization initiative "provides greater flexibility to reduce program cost in the face of changing budgets, inventories and administration priorities," an IRS official, who asked to remain anonymous, said Wednesday. "Given the positive compliance and revenue return on investment, private debt collection is not an either/or proposition. Even with more federal workers, the collection program should still be undertaken," the official said.

Maureen Gilman, NTEU's director of legislation, also raised concerns that taxpayers who wish to deal directly with IRS employees will not be aware of their rights to do so. Under the Fair Debt Collection Practices Act, individuals can submit a written request that their case be handled directly by the originator of the debt, she said, but people may not be aware of this right.

Although the IRS has listed strict regulations that will govern contractors' data security practices, Gilman said some people are wary of private sector data handling practices. Without advance notice by IRS that private collection agencies may be used, taxpayers would not know until it was too late that their personal information had been shared.

Gilman also warned that the legislation authorizing the initiative absolved the federal government of any liability related to individual companies' work on the contracts, so taxpayers would have to file suit directly against the corporations.

Chi Chi Wu, a staff attorney with the National Consumer Law Center, has joined with NTEU in criticizing the measure, citing the example of an Education Department practice of using contractors to collect student loan debts.

Wu said borrowers have been subject to aggressive and illegal collection methods, including threats that collectors would withhold borrowers' Supplemental Security Income benefits, even though those benefits are protected by law.

"Some of the abuses in the student debt program have arisen specifically because it's a federal program," Wu said.

"Student loan borrowers, like taxpayers, have important rights when they're debtors, and [hiring contractors] results in borrowers being deprived of important options," she said. "These agencies only get paid when they collect -- not for protecting taxpayers' rights or for handling data properly."

"That kind of incentive structure," she said, "is a recipe for taxpayer abuse."