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Washington, D.C.—The National Treasury Employees Union (NTEU) is urging lawmakers to reject a provision in the pending Highway Trust Fund bill that would revive the ill-conceived idea of using private agencies to collect unpaid taxes.

NTEU National President Colleen M. Kelley wrote to senators today, urging them to reject a provision, which would require the Treasury Secretary to contract with private collection agencies (PCAs) as an offset for some of the costs of extending funding for the Highway Trust Fund.

“The use of PCAs to collect tax debts has repeatedly been shown to be a waste of taxpayer dollars,” President Kelley wrote. “The Treasury Secretary currently has the authority, but has chosen not to enter into such contracts,” she added.

The first attempt to privatize tax-debt collection was scrapped a year after the program was launched in mid-1990s. Taxpayers lost $17 million and some of the companies selected for the pilot projects were found to have violated federal Fair Debt Collections Practices Act. The second attempt began in 2006, when proponents estimated that the program would bring in up to $2.2 billion in unpaid taxes. That attempt was mothballed three years later, after the program netted a loss of almost $4.5 million, President Kelley wrote.

“In addition to being fiscally unsound, allowing PCAs to collect tax debt on a commission basis led to taxpayer abuse. … In one instance, private collectors made 150 calls to the elderly parents of a taxpayer after the collection agency was notified he was no longer at that address,” Kelley wrote.

Taxpayers who are unrepresented and vulnerable are disproportionately likely to be contacted by private tax collectors. According to the National Taxpayer Advocate, who studied the second failed program, the median income of taxpayers whose cases would most likely be assigned to the PCAs is significantly less than the median income of taxpayers whose cases would be assigned to IRS collection personnel.

Additionally, PCAs do not have the ability, as the IRS does, to:

• postpone, extend or suspend collection activities for limited periods of time;

• make available flexible payment schedules that provide for skipped or reduced monthly payments;

• consider waiving late penalties or postponing asset seizures and Offers In Compromise (OIC), or

• enter into an agreement between a struggling taxpayer and the agency that settles a tax debt for less than the full amount owed.

“If a taxpayer’s case gets assigned to a PCA, the taxpayer effectively has fewer options than other, mostly better off taxpayers,” President Kelley said. “To offset the cost of funding the highway bill by letting PCAs—which will pocket up to 25 percent of what they bring in—loose on these taxpayers in not right and should be rejected.”

NTEU is not alone in its opposition to the use of private debt collection companies. The National Taxpayer Advocate, consumer and civil rights organizations and numerous newspapers’ editorial pages have opposed using private tax collectors.

NTEU is the largest independent federal union, representing 150,000 employees in 31 agencies and departments.