| Statement of COLLECTCORP, Inc.
Company Background
COLLECTCORP, Inc. has been in the
business of debt collection since 1978, specifically with respect to accounts
receivable outsourcing, early-out programs, and third party collection
recoveries. The company has enjoyed
the respect of those in the industry for a number of years as a result of its
long history, reputation, and management style.
We hold to a philosophy of working with the largest debt grantors in
North America, which affords us a unique opportunity to maximize collectible
debt while keeping our client base small. This
mind-set has proven to be tremendously successful.
With fewer than 30 clients, we have accepted over $2.5 billion for
collection in the past 12 months. Our
work is exclusively limited to the banking and finance industry, as well
we work with government
agencies throughout North America. In
fact, 41% of the our collections work
over the past 12 months was derived from government clients, making
government collections and banking/finance collections our largest areas of
business activity. COLLECTCORP has
established itself to be an undisputed leader with respect to third party
collection recoveries for both the private and public sector.
The IRS and Debt Collection
The IRS knows how lengthy and
difficult the collection process can be. It is estimated that within the past three years, the
amount of uncollected individual IRS tax revenue has risen from $7 billion to
approximately $13 billion. The IRS
is not able to recover this amount without additional resources and new
approaches to collections.
While the outstanding tax money comes
from taxpayers of all income brackets, the majority of the backlogged cases
account for a small percentage of revenue outstanding.
It is estimated that approximately 2/3 of the backlogged cases account
for 10% of the missing revenue while the remaining 1/3 account for 90% of
outstanding revenue. The IRS needs
to be able to focus on the 1/3 of their cases that account for most of the
revenue, which requires an amount of time and effort that the IRS does not have
when it is saddled with the other 2/3. Furthermore,
the number of backlogged cases and uncollected revenue is continuing to increase
at an alarming rate.
Private
Collection Agencies
Private collection agencies can be used to support
the IRS’ collection efforts. The
IRS has an opportunity to free up resources through outsourcing to focus the
remaining resources on the most important backlogged cases.
The private collection agencies would focus their resources on collecting
the debts that reap the smallest returns, which would allow the IRS to
aggressively pursue the smaller number of cases that yield much higher returns.
In other words, the IRS would direct its attention to the more high
profile cases, such as tax shelters, while leaving the agencies to the lower
profile cases, such as people who just chose not to pay their taxes.
COLLECTCORP fully supports the Administration’s initiative and believes
that the use of private collection companies is a reasonable addition to the
IRS’ collection efforts.
Our main concern, however, lies in the selection
process: the IRS needs to closely scrutinize those agencies it is considering
for collection work. Each
collection agency employs different collection strategies for individual client
needs and utilizes different approaches to maximize net collections with
differing cost structures and commission rates.
Consequently, in order to better assess the ultimate performance of an
agency, a greater emphasis in the evaluation criteria should be placed on “how
the work will be done” rather than “how much it will cost”.
The criteria for selection must be rigid in order to maintain a sense of
stability, increase consumer confidence, and allay fears of privacy invasion.
Particular to privacy, all employees should be made to sign both a
Confidentiality Agreement and a Notice and Acknowledgement of Federal Tax
Information and Confidentiality of Child Support Information.
COLLECTCORP has a full time Security Officer that ensures full compliance
on all security matters including licensing, security clearances, facilities,
and database. The application of
these security requirements is verified by our Quality Assurance Department
prior to the commencement of the contract.
The Project Manager then signs off on the project after having reviewed a
report from the Security Officer and verification from the Quality Assurance
team. Such privacy measures need to
be considered when choosing a private collection agency.
Moreover, there is always a danger of putting
one’s eggs in too few baskets. COLLECTCORP
believes that the key to the success of the IRS collection outsourcing
initiative is to spread the case load amongst a large enough pool to be diverse.
It has been our experience in working with government clients that fiscal
and operational objectives can be more readily achieved when more than one
agency is employed. The benefit
achieved by using a multiple number of agencies is enhanced competition.
With more competition, greater returns are realized as each agency
strives to outperform its competitor. Furthermore,
the IRS can maximize results by assigning more accounts to those firms that
perform well and fewer accounts to those that perform poorly.
In the end, the IRS would benefit from the use of the maximum number of
agencies your system could administer.
Conclusion
Many states and other government agencies have used
private collection companies in the past with much success.
The use of such agencies would allow the IRS to focus its resources where
they are most needed while making valuable progress in increasing debt
collection and decreasing IRS case workloads.
If implemented properly through the use of multiple agencies that are
selected based on how they plan to achieve the IRS’ objectives and not based
on cost, private collection agencies would be a practical and efficient addition
to the IRS’ current collection process.
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