ARM Industry Well-Prepared to Collect for IRS

Our guest blog today is from Kimberly A. Mahoney, a corporate development manager with collection law firm Weltman, Weinberg & Reis Co. Kimberly responds to opponents of the IRS privatization program.

I have been following the progress, or considerable lack of it, on the IRS outsourcing issue for the past five years. I have a few comments on recent developments and the opinions expressed by those opposed to the effort.

First, am I the only one who finds it ironic that the IRS itself has been the subject of criticism over lost laptops containing tax payer information? Meanwhile, one of the largest arguments against using private debt collectors has been that we cannot adequately protect data?

Do they not realize that our industry has been scrutinized repeatedly regarding this issue? As a matter of fact we (at least our firm) have been audited over and over regarding the handling of sensitive consumer data by almost every top notch financial institution in the country. We are already held accountable for our ability to protect data. The difference being just that, we are accountable. If we lost laptops containing sensitive consumer data, there is NO WAY, that simply stating that we (via SELF evaluation) could find no "adverse effect" on any consumer would pass muster.

To the effective "neutering" of the private collections agencies due to lack of enforcement methods: Do they forget that the accounts being placed by the IRS are those that, for whatever reason, have yet to be contacted at all by the IRS? They have also not been disputed! If these files were such a priority, then why have they yet to do anything with them? Or to even have an internal process in discussion to fix it? It was not until the Republican Congress decided to revisit the outsourcing of this function, did the union for [the employees of] the Department of the Treasury raise a fuss. It was not until the potential for competition (from those driven by making a profit) became a possibility did they begin to lobby for increasing the IRS budget to accommodate additional agents to handle these previously "low priority" delinquencies.

Many collections agencies and law firms also currently collect funds/taxes on behalf of state governments, state agencies, federal agencies and municipalities, other than the IRS. Collecting federal income taxes would not be much different.

These types of accounts are the types that are highly desirable to collectors (non-disputed/non-worked). We have very sophisticated metrics and call strategies to maximize our recoveries. Please also keep in mind that our communications with debtors/delinquent taxpayers are already highly regulated by the FDCPA/FCRA. Also, although we are not directly subject to such statues as the GLB, Sarbanes Oxley, HIPPA etc., many collections agencies/law firms also adhere to these regulatory standards both as an internal best practice and to comply with the external financial institution audits mentioned above. Also, most of the time, "enforcement efforts" are saved for the very obstinate/hard to collect accounts. They are not the preferred front line method of collection. We would always rather work out an arrangement with a debtor rather than sue and enforce a judgment. Contrary to popular belief, we are not "happy" to litigate with folks.

All things being equal, using private debt collection firms would certainly be a "win/win" situation for all parties involved. The Government (representing the complying taxpayers) would finally collect long over-due taxes (duly owing and non-disputed). Those who DO pay their taxes on time as required would gain some peace of mind knowing that they are not supporting those who choose not to. Well deserving social programs and services would possibly find some desperately needed funding from this "windfall". Many folks would be provided with well paying, respectable jobs.

Best Regards,

From the (single, non-dependent having, taxpaying, young- "upwardly mobile" individual with a ridiculous tax rate that I am happy to pay ~ on time!)

Kimberly A. Mahoney