IRS Blasted For Keeping Private Debt-Collectors

By ARI PAUL

The National Treasury Employees Union March 3 blasted the U.S. Internal Revenue Service's decision to renew contracts with two private debt collection firms.

COLLEEN M. KELLEY: 'Not in taxpayers' interest.'

The IRS granted one-year contracts, each with a one-year extension option, to Iowa-based CBE Group and Pioneer Credit Recovery of Arcade. Both companies were originally granted similar contracts in March 2006.

'A Financial Flop'

"This wrong-headed decision flies in the face of a mountain of evidence that this program is a financial flop," NTEU President Colleen M. Kelley said of private debt collection in a statement. "The IRS is ignoring the will of Congress - where there is bipartisan opposition to the use of private tax collectors - and making a decision against the best interests of America's taxpayers."

Ms. Kelley has said that private collectors have been known to use excessively abusive collection tactics. Private debt-collectors keep 25 percent of what they retrieve, she said, and therefore have an incentive to be overly aggressive in dealing with taxpayers.

In addition, the NTEU has argued that in-house employees do debt-collection more efficiently, saying they get a 13 to 1 return on investment while private collectors produce a 4 to 1 yield.