Published: April 2014

Privatizing tax collection wastes taxpayer money, and that’s not the only problem

Coalition advocates oppose language in the EXPIRE Act of 2014 that requires the use of private collection companies to collect taxes on a commission basis. The use of private debt collectors harms taxpayers by exposing them to potential abuses that are unfortunately common within the student loan industry. It will also disproportionately impact low-income taxpayers. Paying private collectors is a waste of taxpayer dollars, lining the pockets of private companies at the expense of the U.S. Treasury.

The Senate Finance Commitee wants to hire private debt collectors to go after deliquent taxpayers. However, the IRS has already tried to utilize private companies in past decades. The result: numerous complaints and penalties against the companies for taxpayer harassment. Not only does the use of private collectors disproportionately burdent low-income taxpayers, it has repeatedly been shown to be a waste of taxpayer dollars. The 1996-1997 pilot resulted in a $17 million net loss to the government, while the mid-2000s program resulted in a net loss of almost $4.5 million. Meanwhile, the private collectors earned more than $16 million in commissions during the latter program.

Numerous documented abuses by private debt collectors used to collect another type of government debt – student loans - have been exploding in recent years. Common problems include aggressive and abusive collection tactics, and failure to accurately inform borrowers of their rights. In many cases, private collectors do not know about (or claim not to know about) borrowers’ rights, such as the right to loan cancellation or an affordable repayment plan. Other times, as a GAO report issued just last month documented, private collectors gave inaccurate or misleading information about borrowers’ rights and options.

Consumer Action urges the Senate to oppose the language in the EXPIRE Act of 2014 and keep IRS debt collection in house.

Lead Organization

Americans for Financial Reform (AFR)

Other Organizations

Americans for Financial Reform | National Consumer Law Center (on behalf of its low-income clients) | Appleseed | Center for Digital Democracy | Center for Economic Justice | Consumer Action | Consumer Federation of America | Consumers Union | NAACP | National Community Reinvestment Coalition | National Consumers League | National Council of La Raza (NCLR) | National Fair Housing Alliance | Nebraska Appleseed | Woodstock Institute

More Information

For more information, please visit the AFR website.

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Privatizing tax collection wastes taxpayer money, and that’s not the only problem   (OpposeEXPIREActSenate.pdf)