Senators question tactics by outside collectors for IRS

Raid your 401(k). Ask your boss for a loan, load up on your credit cards, or put up your house as collateral by taking out a second mortgage.

Those are some of the financially risky strategies that Pioneer Credit Recovery suggested to people struggling to pay overdue federal tax debt. The company is one of four debt collection agencies hired by the Internal Revenue Service to chase down late payments on 140,000 accounts with balances of as much as $50,000.

The call scripts those agencies are using — obtained by a group of Democratic senators and reviewed by the New York Times — shed light on how the tax agency’s new fleet of private debt collectors extract payments from borrowers. On Friday, those senators sent a letter to Pioneer, the IRS and the Treasury Department accusing Pioneer of acting in “clear violation” of the tax code.

In the letter, a copy of which was provided to the Times, the four senators, led by Elizabeth Warren of Massachusetts, say that the IRS’ contractors are using illegal and abusive collection tactics.

In particular, they object to Pioneer’s “extraordinarily dangerous” suggestion that debtors use 401(k) funds, home loans and credit cards to pay off their overdue taxes.

“Pioneer is unique among IRS contractors in pressuring taxpayers to use financial products that could dramatically increase expenses, or cause them to lose their homes or give up their retirement security,” the senators wrote. “No other debt collector makes these demands.”

The debt collectors are paid on commission, keeping as much as 25 percent of what they collect.

On Thursday, in advance of receiving the letter, the IRS said it was comfortable with the approach its outside collectors were taking. The other three are CBE Group, ConServe and Performant Recovery.