IRS Private Debt Collectors Accused Of Pressuring Taxpayers, Breaking The Law

[/et_pb_text][/et_pb_column][/et_pb_row][et_pb_row admin_label=”Row”][et_pb_column type=”1_2″][et_pb_text admin_label=”Fact: There’s a new law in effect where the Internal Revenue Service now can pass along unpaid tax bills to private debt collectors. If you know anything about debt collection at all, you can get a sense for just how problematic this new law may be. In fact, according to Forbes, many U.S. senators have already come on record regarding the way that these debt collectors are handling certain taxpayer accounts. Specifically, Pioneer Credit Recovery has been among those that have been targeted by the concerned senators. ” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

Fact: There’s a new law in effect where the Internal Revenue Service now can pass along unpaid tax bills to private debt collectors.

If you know anything about debt collection at all, you can get a sense for just how problematic this new law may be. In fact, according to Forbes, many U.S. senators have already come on record regarding the way that these debt collectors are handling certain taxpayer accounts. Specifically, Pioneer Credit Recovery has been among those that have been targeted by the concerned senators.

Issues with IRS Private Debt Collectors

So just what are some of the major issues when it comes to IRS private debt collectors? Forbes states that in their letter regarding Pioneer Credit Recovery, Sens. Sherrod Brown (D-OH), Benjamin Cardin (D-MD), Jeff Merkley (D-OR) and Elizabeth Warren (D-MA) have found the issues to be four-fold:

  • Concerns about properly protecting U.S. taxpayers from criminal debt collectors posing as IRS agents.
  • Pressuring taxpayers into illegal, illogical or complicated payment plans or transactions.
  • Violation of the Fair Debt Collection Practices Act.
  • Violation of IRS protocol and guidelines.

While all of the aforementioned issues are of grave concern, the one that the senators have found to be most alarming thus far is the potential violation of the Fair Debt Collection Practices Act. This is largely because of Pioneer’s short lapse in collection attempts regarding letters sent to verify debt and confirm debt collector legitimacy. Pioneer’s short five-day window has the potential to allow scammers to swoop in and capitalize.

[/et_pb_text][et_pb_text admin_label=”Additionally, Forbes reports that there are also major concerns about how much taxpayers are being pressured into settling debts or moving around assets to compensate for their unpaid debts, notably among low-income taxpayers. Under the Federal Trade Commission’s Fair Debt Collection Practices Act, it’s illegal for a debt collector to use any sort of threat, abusive language or unfair or deceptive practices when it comes to collecting debt. However, after looking into the call scripts of Pioneer, the senators have found concerns regarding the collector’s ability to stay within these set confines. ” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

Additionally, Forbes reports that there are also major concerns about how much taxpayers are being pressured into settling debts or moving around assets to compensate for their unpaid debts, notably among low-income taxpayers. Under the Federal Trade Commission’s Fair Debt Collection Practices Act, it’s illegal for a debt collector to use any sort of threat, abusive language or unfair or deceptive practices when it comes to collecting debt. However, after looking into the call scripts of Pioneer, the senators have found concerns regarding the collector’s ability to stay within these set confines.

[/et_pb_text][et_pb_text admin_label=”It’s worth noting that in response to the senators’ letter and concerns about possible illegal collection practices, Pioneer has responded defending its integrity and claiming that all of its collections practices fall within legal lines. Forbes states that Pioneer is just one of four agencies that the IRS authorizes to collect debt on its behalf. The other three are CBE, ConServe and Performant.” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

It’s worth noting that in response to the senators’ letter and concerns about possible illegal collection practices, Pioneer has responded defending its integrity and claiming that all of its collections practices fall within legal lines. Forbes states that Pioneer is just one of four agencies that the IRS authorizes to collect debt on its behalf. The other three are CBE, ConServe and Performant.

[/et_pb_text][/et_pb_column][/et_pb_row][et_pb_row admin_label=”Row”][et_pb_column type=”4_4″][et_pb_text admin_label=”Separating Scam from Legit: What You Need to Know” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

Separating Scam from Legit: What You Need to Know

[/et_pb_text][et_pb_text admin_label=”You’ll get an IRS letter if your tax account has been passed to a debt collector. Private debt collection agencies still must abide by the Fair Debt Collection Practices Act. All payments must go to the IRS – not to any debt collection agency (or those posing to be a debt collection agency). Debt agencies are unable to place tax liens or issue any sort of a levy against taxpayers. ” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

  • You’ll get an IRS letter if your tax account has been passed to a debt collector.
  • Private debt collection agencies still must abide by the Fair Debt Collection Practices Act.
  • All payments must go to the IRS – not to any debt collection agency (or those posing to be a debt collection agency).
  • Debt agencies are unable to place tax liens or issue any sort of a levy against taxpayers.

New Credit Scoring Models Won’t Work if Lenders Ignore Them

Chances are you’ve already heard some of the rumblings regarding the way new credit scoring models work. To recap, some of the newer models exclude any medical debt that consumers owe as well as the likes of settled delinquencies and collections. Under new scoring models, tax liens and civil judgments have also changed in the ways they are reported – all for the betterment of consumers. In a perfect world, this is great news for the consumer, as individuals are likely to see a boost in their credit scores and qualify for lower interest rates on long-term financed purchases like auto and mortgage loans. As a result of these changes, credit score boosts may be enough to qualify consumers that otherwise wouldn’t have even qualified for a loan. But there’s one problem – lenders aren’t embracing them to the same degree that consumers are. In fact, some are using old formulas to determine consumer risk that don’t exclude everything that we listed above.

Chances are you’ve already heard some of the rumblings regarding the way new credit scoring models work. To recap, some of the newer models exclude any medical debt that consumers owe as well as the likes of settled delinquencies and collections. Under new scoring models, tax liens and civil judgments have also changed in the ways they are reported – all for the betterment of consumers. In a perfect world, this is great news for the consumer, as individuals are likely to see a boost in their credit scores and qualify for lower interest rates on long-term financed purchases like auto and mortgage loans.

New Credit Scoring Models Won’t Work if Lenders Ignore Them. New Credit Scoring Models Won’t Work if Lenders Ignore Them”

As a result of these changes, credit score boosts may be enough to qualify consumers that otherwise wouldn’t have even qualified for a loan.

But there’s one problem – lenders aren’t embracing them to the same degree that consumers are. In fact, some are using old formulas to determine consumer risk that don’t exclude everything that we listed above.

Why Aren’t Lenders Using New Scoring Models?

So just why aren’t the majority of lenders using the new scoring models and instead relying on old FICO scoring formulas? That’s a good question, and it’s one where the answer varies based on the lender. For instance, some lenders have stated that they’re too small and the older formulas are a better indication of potential consumer risk. Other lenders, conversely, say that they’re too big to institute changes in how they determine consumer risk and that any change this significant could be disruptive to the way that they do business. Then there are the lenders who are just simply putting off integrating such formulas.

Whatever the reason, the true loser is the consumer in all of this. In a way, lender refusal to use new credit scoring formulas discourages responsible credit behavior. Think about it: Why should a consumer be motivated to pay off a collection if a settled collection is still going to be counted against them on their credit report and credit score? The refusal of lenders to adapt to the current times and the newer scoring models could actually prevent consumers from enacting credit repair strategies.

Taking things a step further, the lender would also benefit by adopting these new scoring formulas. That’s because weighing consumers under the new scoring formulas would likely earn them new customers that may not have qualified for a loan before. New customers and more customers equal more revenue for a firm. Isn’t growing to become more profitable the goal of any business, big or small? Credit scoring is changing to become more consumer-friendly. Lenders need to be changing too. It should be a win-win for both parties involved.

Tax Liens, Judgments Could Be Omitted from Credit Reports in Near Future

For tax liens The Consumer Financial Protection Bureau (CFPB) has been winning a lot of battles for the people lately. Aside from socking Equifax and TransUnion with fines for deceiving consumers back in January. More recently, it hit Experian with a $3 million fine for the same thing in March. Now, it’s recently championed an effort to change the way tax liens and judgments are reported on your credit record. It’s a major shakeup when it comes to credit reporting.

Specifically, per a report in the Wall Street Journal, Experian, Equifax and TransUnion – the three major credit reporting agencies – will soon be readjusting their respective credit reporting models to omit tax liens and judgments. It’s a move that could help out millions of Americans when it comes taking control of their finances in the future.

What This Means

This move looks to help out millions of consumers and could very well raise the overall average credit score nationwide. This news is especially significant when you consider how crippling tax liens and judgments currently are to most consumers. Presently, tax liens and judgments, even if they’ve been resolved, can stay on a credit report for up to 10 years. That’s right, even if they’ve been paid off, a consumer’s best bet is to get it released and then petition the credit agencies to remove it from their record to avoid extensive credit repair.

Unresolved liens and judgments stay on a credit report for 15 years.

To be fair, there’s still some things that we don’t yet know when it comes to this news. For instance, will consumers have to petition the agencies to have liens and judgments removed? Or will the agencies perform this automatically? That’s an unknown. What’s not an unknown, however, is how positive a move like this can be for consumers.

Not Everyone’s Happy About It

While consumers should be welcoming this news, not everyone is happy about it. For instance, this report is putting lenders a little bit on edge. Why? Simple – it provides less data for them to assess consumer risk. When lenders make the decision on whether or not to approve a loan, it becomes a question largely of how reliable of a consumer they’re working with. A tax lien or judgment on one’s credit report would certainly factor into their decision, and being that it can take up to 15 years for such to be removed from an individual’s credit report, it provides lenders with more of a comprehensive history of consumer behavior. This news, obviously, alters that, giving lenders one less thing to ultimately analyze. In a worst-case-scenario situation, it could wind up burning a lender in the long run.

Public records

Public Records – How do they affect my credit score?


How Do Public Records Affect Your Credit Score?According to BSC Alliance, it’s estimated that anywhere from 1.3 to 1.5 million Americans file for bankruptcy protection each year. In 2013, Fox Business News reported that the IRS filed over 300,000 tax liens, or unpaid assessed money against your property or salary. Hundreds of thousands more Americans have court judgments filed against them.

So just what do bankruptcy, tax liens and court judgments have in common? They’re all types of public records – or public legal documents – that can appear, linger and negatively impact your credit score. In fact it’s estimated that bankruptcy alone can dock an otherwise good credit score of up to 200 points. But that might not be the worst part about this public record. Arguably the worst part about bankruptcy is that it can stay on your credit report for up to 10 years, if credit repair or debt management strategies are not applied.

Yes, for bankruptcy – as well as many other types of public records – one way to repair credit is to wait out the years until it expires from your credit history. It goes without saying that a key credit tip to maintaining a favorable score is to avoid these public record pitfalls. Here’s some additional information on public records and how it can impact you:

  • Bankruptcy: We already covered a bit about how filing for bankruptcy impacts your credit score and how it can stay on your credit history for 7 to 10 years, depending on which Chapter you file for. Having a bankruptcy removed from your credit report is challenging and will require several disputes, but it is possible, as long as it has been discharged.
  • Tax Lien: Tax liens are filed either against your money or your property, indicating that you owe money to the IRS. But tax liens work a bit differently than bankruptcy and other public records. That’s because after you pay a tax lien, it is “released.” And although even tax liens that have been released can stay on a credit report for up to 7 years, you can contact the IRS and request that the released lien by withdrawn. If your request is granted, the lien is removed from your credit report immediately.
  • Court judgment: Judgments are filed after you lose a trial or ignore a lawsuit and a court grants the opposing party the right to claim money, property, etc. from you. After they’re filed, they’ll stay on your credit report for up to 7 years. Additionally, judgments can be re-filed within that 7-year span and tack an additional 7 years onto the time it will impact you. Needless to say, it’s wise to avoid judgements, whether it be with a creditor, landlord, etc. So if you believe a court date is imminent, do what it takes to explore settling outside of the courthouse. Your credit score will thank you for the next seven years.
  • Other public records: Other types of public records your credit score could be burned on include foreclosure, wage garnishment and past due child support payments.

Public records can be a burden to your personal finances as well as your credit score. So try to avoid them, if at all possible. But if you can’t, it’s important to know what to expect. For additional information feel free to contact our office at 617-265-7900, or schedule s free consultation below.