Touchstar Says IRS Misses Billions Due to Outdated Technology

Legislators on Capital Hill considering funding for the outsourcing of debt collection by the Internal Revenue Service might want to talk to Steve Bederman before casting their vote. That Bederman would like to expand the program should come as no surprise. He’s CEO of Touchstar, a calling center technology provider, and he’d like to supply the call centers with all the latest high-tech phone gear.

Still, Bederman argues that upgrading the technology could make a difference of billions in the amount of debt collected. The IRS’s technology is dated and doesn’t allow for the efficient treatment of debtors, says Bederman. The system apparently doesn’t allow for much sorting of debtor by type, for example someone who has a history of making timely payments compared with someone who hasn’t. “Typically, it’s a laborious process on the phone that doesn’t work well. They handle all calls the same,” says Bederman.

In contrast, private agencies are more likely to have more sophisticated agents and calling technology. “The system can categorize [debtors] by income, credit background, and numerous other ways. Agents are savvy, they can find multiple ways of collecting debt,” says Bederman.

Touchstar’s inbound system can also route debtors, sending them to a specific agent, allowing the debtor to self select whether or not they agree with a payment plan, and if so, how they will make payment, and by what method, credit card or checking account.

It could be that legislators are listening to Bederman. On Tuesday, a Senate subcommittee approved an $11.1 billion budget for the IRS for fiscal 2008. The package includes $282 million for computer modernization, an increase of nearly $70 million from fiscal 2007, according to the Dow Jones News Service. The prospects for the IRS outsourcing program are unclear as legislators negotiate a final bill.

Denver-based Touchstar offers a range of call center technology including on site software, hosted systems, predictive dialers, automated voice messaging and an Internet protocol PBX system.  

A second concern for Congressional opponents of IRS privatization is the possible loss of consumer data by a private agency. Bederman counters that argument too.

Touchstar will introduce an encryption package by the end of this quarter that will secure the consumer data available to agencies, he says. In addition, his firm will begin this year to conduct background checks on its staff that are involved with such programs.

But Touchstar is doing well. Collection agencies account for more than 40 percent of its business, says Bederman. Annual revenues are expected to be $25 million this year but will explode to $100 million in the next 30 months, in part due to acquisitions, he says.

Touchstar is privately held and has a Los Angeles-based equity investor that is helping to fund the growth, Bederman says.