TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION
THE IDENTIFICATION AND REPORTING OF POTENTIAL FAIR DEBT COLLECTION PRACTICES ACT VIOLATIONS CAN BE IMPROVED
Reference No. 2000-10-109
The Fair Debt Collection Practices Act (FDCPA) includes provisions that restrict various collection abuses and harassment in the private sector. These provisions did not apply to the United States (U.S.) Government when the FDCPA was enacted. However, the Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 (RRA 98) now requires the IRS to comply with certain provisions of the FDCPA and to be at least as considerate to taxpayers as private creditors are required to be with their customers. In addition, taxpayers who believe their FDCPA rights have been violated by the IRS can file a civil action under Civil Damages for Certain Unauthorized Collection Actions for damages against the U.S. Government. A Fiscal Year 2000 IRS Collection report shows that over 2.4 million taxpayers were in active collection status as of March 2000. All of these taxpayers have the potential to have their FDCPA rights violated if IRS employees do not comply with the regulations.
The overall objectives of this review were to determine whether potential violations of the FDCPA were effectively identified and reported by IRS personnel and whether violations were minimized. Additionally, we performed this review to provide an assessment of whether the Treasury Inspector General for Tax Administration (TIGTA) can rely upon IRS information systems when providing the Congress with information required by the RRA 98 on any administrative or civil actions due to FDCPA violations.
The process used to identify and report potential FDCPA violations can be improved. Collection Division management is not always identifying employee actions as potential violations of the FDCPA when reporting these cases to the Labor Relations function for tracking on the Automated Labor and Employee Relations Tracking System (ALERTS). As a result, data related to potential FDCPA violations captured on the ALERTS may not always be complete and accurate.
In contrast, we determined that civil action information with a FDCPA code on the Counsel Automated System Environment (CASE) is accurate. There was one suit open on the CASE coded with the new FDCPA code, and we determined that the suit was correctly coded as a potential violation of the FDCPA.
The Process Used to Identify and Report Potential Fair Debt Violations Can Be Improved
Our interviews with Collection Division managers and employees in three districts indicated that they were aware that certain restricted practices in the FDCPA are prohibited practices for the IRS, but did not always realize that most of these actions were violations of the FDCPA.
To determine whether Labor Relationsí ALERTS database contained complete and accurate information related to potential and actual FDCPA violations, we selected Collection and Customer Service Divisionsí employee cases opened on the ALERTS after July 22, 1998, and resolved during the period March 19 through September 30, 1999, that had a high probability of containing potential FDCPA violations. Our review of all 249 cases that met our criteria identified 26 potential violations of the FDCPA not coded as FDCPA violations. Instead, the cases were categorized using other violation codes available on the ALERTS. National Office Collection management agreed that these cases involved potential FDCPA violations. None of the 26 cases resulted in administrative actions against IRS employees.
After the RRA 98 became effective, the IRS did not provide specific guidance to Collection Division or Labor Relations employees on the applicable FDCPA regulations or the process for reporting violations. The IRS provided extensive training on the new RRA 98 ß 1203 provisions; however, only limited guidance was provided on the FDCPA regulations included in the RRA 98.
On February 23, 2000, National Office Collection management issued procedures requiring Collection Division managers to identify potential violations of the FDCPA and report these allegations to the Labor Relations function by the close of the next business day. These procedures require Collection Division managers to categorize the complaints using the ALERTS FDCPA Issue Codes.
In addition to the cases on the ALERTS with a high probability of having potential FDCPA violations, we reviewed all nine cases coded with FDCPA Issue Codes on the ALERTS during our audit period. We determined that seven of these cases were inaccurately coded because they were not potential FDCPA violations. Six of these seven cases were coded as potential FDCPA violations by the TIGTA Office of Investigations and uploaded to the ALERTS from the Investigations Management Information System (IMIS). Labor Relations personnel incorrectly coded the remaining case with a FDCPA Issue Code after receiving it from the TIGTA Office of Investigations. Procedures for the TIGTA Office of Investigations require senior field management to be familiar with the provisions of the FDCPA to ensure cases are properly coded on the IMIS. Office of Investigations management stated that these provisions would be re-emphasized at the next senior management conference to ensure cases are properly coded in the future.
If management is not sufficiently aware of the applicable FDCPA provisions, taxpayer complaints of fair debt collection violations will not be properly identified and reported to the Labor Relations function for determination of appropriate administrative action. In addition, IRS employees who do not comply with the regulations could continue to potentially violate taxpayersí rights. If this information is not tracked on the ALERTS as required, IRS management will not know the extent of the offenses.
Civil Action Information Classified As Fair Debt Violations on the Counsel Automated System Environment Is Accurate
We obtained CASE information related to the one suit coded with the new FDCPA code during the period June 11 through September 30, 1999, and determined that the suit was correctly coded as a potential violation of the FDCPA. This suit was still open at the time of our review.
To determine if there were other civil actions involving potential FDCPA violations, we reviewed 24 cases opened after July 22, 1998, that were still open at the time of our review, or were closed during the period February 1 through December 31, 1999. The Department of Justiceís Tax Division provided the case information. None of the 24 cases involved potential FDCPA violations.
Summary of Recommendations
National Office Collection management should provide increased awareness of the FDCPA to Collection Division employees to ensure violations can be properly identified and reported. Additionally, Labor Relations personnel should review cases open on the ALERTS involving Collection and Customer Service Divisionsí employees to identify potential FDCPA violations and ensure these cases are accurately coded.
Managementís Response: National Collection management issued a memorandum on July 5, 2000, to re-emphasize Collection compliance with certain sections of the FDCPA. Additionally, field Labor Relations functions will run a case listing of open Collection and Customer Service employee cases from the ALERTS and distribute to local functional management for their identification of any FDCPA issues previously unreported.
Managementís complete response to the draft report is included as Appendix IV.