Lawsuit Against IRS For-Profit Debt Collector

If you live in Oak Park and owe tax debt, you may have received a call from a debt collection company seeking to collect on the debt you owe. It is important to remember that, as a consumer, you have protections under the Fair Debt Collection Practices Act (FDCPA). According to a recent report from CNBC, the IRS has hired for-profit debt collectors to track down consumers, and the Consumer Financial Protection Bureau (CFPB) intimates that not all of these for-profit debt collection companies are operating clearly within the bounds of the law. Have you been harassed or misled by a for-profit debt collector seeking to obtain back taxes? It is important to discuss your situation with an Oak Park consumer protection lawyer.
Why Did the IRS Hire For-Profit Debt Collection Companies?
As the report explains, “for-profit debt collectors have been hired by the IRS to chase down long-overdue taxes that the government agency lacks the resources to work on.” The IRS extended contracts to four different debt collection companies, including Pioneer Credit Recovery, ConServe, Performant, and CBE Group.
Why did the IRS hire these for-profit debt collectors? Congress mandated that it do so back in 2015 in a highway funding bill. Consumers advocates have expressed concerns. For instance, according to David Vladeck, a current Georgetown Law professor and former director of the Federal Trade Commission consumer protection bureau, “I worry whenever a federal agency employs for-profit debt collectors to settle debts.” As Vladeck underscores, “when you align a situation where the IRS is unable to collect, the incentive to really turn the screws hard is pretty high because that’s the only way they’re going to get paid.” He went on to call the IRS’s use of for-profit debt collection companies “a really toxic combination.”
Yet that is not the only problem at present.
Pioneer Credit Recovery and Other For-Profit Debt Collectors
What is wrong with the use of these specific for-profit debt collectors? The article cites a present issue surrounding the use of Pioneer Credit Recovery, a company that is a subsidiary of Navient, “the student loan giant,” which is currently the target of a CFPB lawsuit that was filed back in January. In that January claim, the CFPB contended that Pioneer Credit Recovery, seeking to obtain student loan debt on behalf of Navient, “systematically misled consumers” in violation of the FDCPA.
Obviously, Pioneer Credit Recovery and the other companies are required to abide by the law when attempting to collect on the debts owed. However, that does not mean that the companies will, necessarily, follow the law and respect consumer protections that are in place. What is more, statistics suggest that the use of for-profit debt collectors for IRS debts tends to be relatively ineffective.
The last time the IRS used for-profit debt collection companies was back in 2006. At that point in time, those collectors were supposed to obtain “1.8 billion in ‘easy’ debts that were 1-3 years old,” yet “an analysis by the Office of the Taxpayer Advocate showed that over the two years it was contracted, the private companies had little success after working the easy cases.” The IRS itself has proven to collect around 62% more on tax debts than for-profit debt collectors.
As such, consumer protection advocates are concerned that the potential harms of contracting with Pioneer Credit Recovery—a company that is the subject of another consumer protection lawsuit—simply do not have the likelihood of outweighing the benefits for the IRS.
Contact a Consumer Protection Lawyer in Oak Park
Have you been harassed or misled by a private debt collector? You may be able to file a claim. You should discuss your case with a consumer protection lawyer in Oak Park as soon as possible. Contact the Emerson Law Firm today for more information.
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