On June 23, several United States senators, led by Sen. Elizabeth Warren (D-Mass.), accused a debt collector of relying on unscrupulous collection practices while collecting on behalf of the Internal Revenue Service.

The IRS is owed approximately $138 billion in back taxes.  To reduce the backlog of taxes owed and to supplement the agency’s internal collection efforts, Congress mandated on December 4, 2015, as part of the Fixing America’s Surface Transportation Act, that the IRS hire outside debt collectors.  This is the third time Congress issued such an order, having scrapped its prior two mandates due to collection abuses and cost overruns.

With the implementation of the new mandate to hire outside debt collectors, consumer advocacy groups are concerned about a recurrence of the same unscrupulous collection practices that plagued previous mandates.

The senators shared the consumer advocacy groups’ concerns, issuing a letter to the IRS and Pioneer Credit Recovery regarding Pioneer’s collection practices.  According to the letter, Pioneer contacted taxpayers and suggested they engage in financially risky strategies to pay their delinquent taxes.  These strategies included paying their taxes on a credit card, taking out a second mortgage, and borrowing from their 401(k) retirement plans.  The senators note that each strategy has the potential to financially ruin the taxpayer, resulting in additional strain on the government if the taxpayer needs public assistance after engaging in the suggested strategies.

The senators also lambasted Pioneer for telling taxpayers they could send extra payments to the IRS and for providing taxpayers extended payment options for up to seven years, in violation of the IRS code.  The IRS code “allows collectors to ask only for a payment in full, or an installment agreement providing for full payment over a maximum period of five years.”

The senators requested Pioneer to modify its call scripts to comply with applicable law and IRS policy, and to submit the modified scripts to the senators for review.

Based on the senators’ letter, we expect continued oversight of debt collectors working on behalf of the IRS.  We will continue to monitor and report further developments.