Last week the Huffington Post published an article that just sent me over the edge.  The headline read,

Republicans Want Private Debt Collectors To Replace IRS Agents; The GOP thinks it’ll save the government money, but the facts suggest the opposite.

While the headline got my attention.  The first two sentences really got my blood boiling:

Senate Republicans want to replace IRS agents with private debt collection agencies, which are known to harass people for overdue credit card bills and student loan payments.”

It only got worse for me from there.  The next salvo was:

“While privatization is popular with congressional Republicans, collection agencies have terrible reputations. They frequently run afoul of the law by illegally harassing or intimidating borrowers, and sometimes even family members of borrowers who are under no legal obligation to make good on their relatives’ debts. Collectors also often get in trouble with the government for tricking borrowers into ponying up payments they are not actually required to make.” 

Finally, the author, Zach Carter, the Huffington Post’s Senior Political Economy Reporter, gave us this nugget:

“Previous efforts to privatize tax collection, though, have ultimately cost the government money. Two previous government efforts to save money by turning IRS collections over to private industry have backfired, Democratic Senate aides told The Huffington Post. In 1996 and 1997, the government lost a total of $17 million on one such project, the aides said. From 2006 to 2009, a similar effort led to losses of $4.5 million.”

It seems to me that the author did just enough homework on the topic to create a salacious headline and content.  The source for much of the article was “Democratic Senate Aides.” Were Republican Senate Aides not available for background?

He neglected to mention the 33-page September 2010 GAO Report on Tax Debt Collection. I could also point to an excellent insideARM article written by Patrick Lunsford on October 27, 2010.

Mr. Carter might have mentioned the fact that the General Accounting Office (GAO) determined that the IRS’s comparative study of the PDC [private debt collection] program in 2009 was not soundly designed to support its decision on whether to continue contracting out debt collection.”

Had Mr. Carter read the GAO report or Patrick’s article he might have also noted that the Private Agencies had higher quality scores than the IRS employees while collecting IRS debt.  Mentioning that fact would have been inconsistent with the premise that private collection agencies are evil.

If we wonder why the ARM industry struggles with its reputation, look no further than articles such as Mr. Carter’s.

I have been in this industry for a long time.  Are there bad actors? Yes. But we shouldn’t let bad actors define this industry.  Are there complaints against the industry? Yes. Are there “a lot” by absolute standards? Yes, the numbers seem high. However as a percentage of the hundreds of millions of interactions collection agencies have each year with consumers, the percentage of those that lead to a complaint (even including the horrendous actors generating the stories typically quoted in the news, who I would argue are not collectors but crooks masquerading as collectors) amounts to about .1%. That’s well below the natural error rate of almost any industry.

The majority of the ARM industry operates in an honest, ethical manner.  The majority treat consumers with dignity and respect. Somehow, we need that message to resonate.

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