Collectors raising concerns

GANNETT NEWS SERVICE

WASHINGTON - The Internal Revenue Service is turning over 10,000 taxpayer delinquencies a month to three private collection agencies that are using telephone techniques one critic thinks are inappropriate psychological ploys.

Nina Olson, the IRS Taxpayer Advocate, said she is bound by federal contracting laws to not publicly disclose what the ploys are, but defenders of the program say it concerns a technique that creates a pause in the telephone conversation.

Tom Penaluna, president and chief executive of The CBE Group Inc., one of the three companies under IRS contract, defends the practice.

"You tell somebody they have a balance due and ask them how they would like to take care of that," Penaluna said. "And in that script, they had something that said 'psychological pause.' Which means, all you do is, wait for the consumer to respond to that."

Olson, whose job is to defend taxpayers' rights, opposes the program for additional reasons, including its cost and the contractors' lack of the authority to counsel delinquent taxpayers. Parts of the contracts are shielded from the public as proprietary information, contractors operate under a profit motive, there are "belated warnings" about consumer rights, she says.

IRS collection employees, in contrast, are supposed to work with taxpayers to prevent future problems, such as suggesting to the taxpayer that his payroll withholding be increased. "If you use federal employees, there is required to be a great deal of transparency about our rules and our procedures," said Olson.

Executives of two of the collection firms said in interviews that the IRS provides oversight of the program and IRS auditors have given their firms a customer service rating between 97 and 100 percent, which is higher than the rating given to the IRS' own employees, according to the Senate Finance Committee.

"Our people are being very polite and having success at the same time," said Penaluna, whose firm is based in Waterloo, Iowa.

Penaluna agreed that much of what his firm does is considered proprietary. The debt collection contracts he has with three states and a number of municipalities prevent him from disclosing the identities of those states or municipalities. However, his firm's contract with the U.S. Department of Education for delinquent student loans is public.