A group of four Senators, led by Sen. Elizabeth Warren [D-Mass.] have gone public with their concerns regarding the collection policies and practices of Pioneer Credit Recovery, one of four collection agencies that are working on behalf of the Internal Revenue Service, according to an article published in today’s New York Times.
The article cites suggestions made by Pioneer employees to individuals, including asking a boss for a loan, taking out a second mortgage, or running up bills on credit cards.
The four senators sent a letter on Friday to Pioneer Credit president Jeff Mersmann, and John Remondi, the president and CEO of Navient, which owns Pioneer Credit. Copies of the letter were also sent to the IRS and the Treasury Department.
The senators obtained copies of the call scripts being used by Pioneer in collecting on on unpaid debts owed to the IRS, via a Freedom of Information Act request. The senators also said they would be forwarding their findings to the Federal Trade Commission because many of the allegations could be interpreted as violations of the Fair Debt Collection Practices Act.
There have been many cases of individuals accused of impersonating IRS agents in attempting to collect on fake debts from individuals, and that concern was a major reason why consumer advocates were against the proposal for the IRS to outsource collections to third-party agencies. The IRS was required to do so as part of a budget bill that was passed by Congress in December 2015.
To combat the concern that legitimate contractors were impersonating fake collectors, the four agencies were instructed to suspend collection activities for 60 days while a letter is sent to the individual to confirm the legitimacy of the collection activity. Pioneer, according to the letter, waits only “five calendar days” before resuming collection activities.
Pioneer’s script for the initial contact with individual includes suggestions about where the individuals can find money to pay their debt.
As “Money Sources,” Pioneer suggests that agents list traditional sources such as banks, stocks, and CDs when indicating to taxpayers how they might resolve the debt. But Pioneer’s script also includes three options that are extraordinarily dangerous for taxpayers’ financial security: “Credit Card,” “2nd Mortgage,” and “Borrow against 401K.”Similarly, the Pioneer “Resolution Script” advises Pioneer employees to “suggest that liquidating assets or borrowing money may be advantageous,” and also suggests a second mortgage or 401 K loan. No other debt collector makes these demands.
Pioneer may also be violating the FDCPA by making an “implied threat” in its script.
“If unable to come to a resolution, we advise the taxpayer we will notate the account and advise our client that they do not want to voluntarily satisfy their obligation.”
By using the word “voluntary,” the senators allege, the script implies that Pioneer will subsequently have to use “involuntary” measures to recoup the debt.
Pioneer is also allowing installment agreements of up to seven years, which violates the Internal Revenue Code, and the agency says it will accept “extra” payments at any time, which is also in violation of the Code.
The senators made three requests in their letter:
- Modify all scripts so they comply with the law, your contract, and IRS policy.
- Review all previous taxpayer interactions and retroactively address problems caused by the faulty scripts.
- Send all revised and final call scripts to our staff and brief our staff on these matters within two weeks.
