Elizabeth Warren photographed in Boston on November 24th, 2019, by Peggy Sirota.
Senator Elizabeth Warren's office issued the following today:
January 9, 2020
The risky practice leaves taxpayers vulnerable to abuse and their data susceptible to exposure; “Taxpayers should not have to risk their financial security in order to pay their tax debts”
Washington,
DC
– United States Senator Elizabeth Warren (D-Mass.), Ranking Member of the
Senate Banking, Housing, and Urban Affairs Committee Subcommittee on Financial
Institutions and Consumer Protections, and Senator Sherrod Brown (D-Ohio),
Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, sent
a letter to Internal Revenue Service (IRS) Commissioner Charles Rettig raising
alarm about the agency’s October 2019 decision to introduce preauthorized
direct debit as a new payment method for the Private Debt Collection (PDC)
program, allowing Private Collection Agencies (PCAs) direct access to
taxpayers’ financial account information to set up automatic deductions. This
is a reversal of long-standing IRS policy that taxpayers should only provide
their financial account information directly to the IRS.
The Fixing America's Surface
Transportation (FAST) Act of 2015, passed by Congress in December 2015,
required the IRS to use private debt collectors. The agency began referring
some taxpayers who were behind on their taxes to private debt collectors in
April 2017.
The private debt collection program has
been troubled from the start. Oversight conducted by Senator Warren soon after
the PDC program started revealed that private debt
collectors appeared to be pressuring taxpayers into risky financial
transactions, and violating the Fair Debt Collection Practices Act and
provisions of the Internal Revenue Code. In October, the IRS announced that
private debt collectors would be allowed to collect personal bank account
information from taxpayers, allowing the private companies to directly deduct
payments from the taxpayer’s account on a preauthorized schedule. This payment
method has already been banned by the Federal Trade Commission (FTC) for
telemarketers due to its high risk to consumers.
“This is a dangerous practice that has
been abused by debt collectors to rip off consumers–and is outlawed in some
cases by the Federal Trade Commission (FTC),” wrote the senators. “We have already called for your agency to end
the private debt collection program, which is an ineffective giveaway to
private companies that balances its budget on the backs of low-income taxpayers.”
Taxpayers already have multiple options to
pay their taxes, and instead of trying to fix the problems with the private
debt collection program, the IRS is now adding another
layer of risk
to taxpayers by allowing private debt collectors to collect taxpayers’ bank
account and routing numbers so that debt collectors can automatically debit a
taxpayer’s account. Consumer protection experts have criticized this payment
method because it lacks the protections guaranteed by other methods like credit
cards and Automated Clearing House transactions, leaving taxpayers exposed to
abuse and with little recourse. This decision may also subject taxpayers to
increased risk of identity theft, as several private debt collectors were found
to have failed to address critical and high-risk vulnerabilities on their
servers within required time periods.
“Taxpayers should not have to risk their
financial security in order to pay their tax debts. The decision by the IRS to
allow debt collectors to use preauthorized direct debits adds an
unnecessary risk for low-income taxpayers to an already failing program,” wrote the senators.
The senators have requested answers to their
questions on the IRS’s plans to protect taxpayers no later than January 22,
2020.
In February 2018, Senator Warren introduced legislation with Senators
Ben Cardin (D-Md.) and Brown to repeal authority from the IRS to contract with
PCAs to collect unpaid taxes. In June 2017, Senator Warren led a letter to
private debt collectors with IRS contracts about abusive debt collection
practices revealed in collector call scripts. In March 2018, Senator Warren wrote a letter to the
IRS, cosigned by Senators Richard Blumenthal (D-Conn.), Bernard Sanders
(I-Vt.), and Bill Nelson (D-Fla.), asking about whether the PDC program unduly
burdened taxpayers affected by natural disasters.
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