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After Years of Threatening to Terminate Debt Collection Program, IRS Makes Final Decision to Shut Down Private Debt Collection, Threatening Vibrancy of Pioneer, Which Employs 1400 in Arcade, NY

In Letter to IRS and Treasury Department, Schumer, Lee Urge Secretary of Treasury to Reverse Decision Since Program Was Never Allowed to Operate at Full Capacity

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In an effort to further safeguard 90 jobs in Arcade, U.S. Senator Charles E. Schumer and Congressman Christopher J. Lee today urged the Internal Revenue Service (IRS) and Department of the Treasury (DOT) to reverse its decision to terminate the Public Debt Collection Program (PDC). The IRS has continually threatened to shut down the PDC since 2006, claiming that the program does not operate properly. Last month, Senator Schumer wrote a letter to the DOT and the IRS urging them to keep the program in place since the necessary data had not been collected to allow an informed decision to be made about the project's effectiveness. The IRS announced last week that it will terminate the PDC program, something that comes as a blow to Pioneer Credit Recovery, a nationally recognized collection service in Arcade, NY, which employs 1400 people, with approximately 90 of them doing work related to the PDC program.


Today, to help further protect the jobs in Arcade, Senator Schumer and Rep. Lee sent a letter to the Secretary of the Treasury and the Commissioner of the IRS, urging them to reverse their decision to terminate the program and allow it to independently operate for two years, with enough of a caseload to allow it to operate without any appropriated funds, before making a final decision.


"The bottom line is that this decision was made prematurely and without sufficient information," said Schumer. "Pioneer Credit Recovery is a prime economic bright spot in western New York and they need the time to show they can do the job right. It makes no sense to attempt to shut down this program without allowing it to operate at full capacity. This is an unfortunate and unwise decision and I urge the DOT to reconsider its decision until the program has a chance to effectively prove its worth."


"It is regrettable that the Treasury Department has made this decision without having all the facts," said Lee. "Pioneer Credit Recovery is Wyoming County's largest privatesector employer, and there could not be a worse time to put these goodpaying jobs at risk. I am pleased to join with Senator Schumer to urge the Treasury Department to reconsider its decision."


Pioneer Credit Recovery is a debt collection agency that the IRS selected as part of its Private Debt Collection Program to collect amounts it lacks the manpower to collect itself. It is a nationallyrecognized, awardwinning collection service specializing in federally based contracts. During the two years that the PDC was semioperational, Pioneer Credit Recovery played a pivotal role in the program as one of the two major contractors used by the IRS, helping the IRS close the tax gap that would otherwise have gone uncollected.  


Senator Schumer has stated in the past that if the DOT and IRS can show that the program is genuinely unsuccessful through a detailed and comprehensive study, they find no reason why it should not be terminated. However, the program has never been allowed to operate at full capacity.  Last month, Senator Schumer sent a letter to the DOT and the IRS urging the agencies to conduct comprehensive a study before the IRS made any final decision about the PDC program - but the IRS study that was released last week simply verified data that the IRS had already collected on its own.  It was not a truly independent review.


Despite the Senator's efforts, last week the IRS announced that it will terminate the PDC Program, threatening the 90 jobs at Pioneer Credit Recovery in Arcade, NY. Today, in a final effort to keep the PDC program running and further protect the 90 jobs in New York, Senator Schumer and Rep. Lee sent a letter to Treasury Secretary Tim Geithner and IRS Commissioner Douglas H. Shulman, urging their agencies to reconsider their decision and let the program function for two years before making a final verdict.


In the letter, Schumer and Lee wrote, "We believe the program should be given a sufficient caseload that would allow it to function without appropriated funds for two years. Only after that point can its success or failure be definitively determined"


A full copy of the letter is below





March 10, 2009



The Honorable Timothy F. Geithner

Secretary of the Treasury

Department of the Treasury

1500 Pennsylvania Avenue

Washington , DC 20220


The Honorable Douglas H. Shulman

Commissioner of Internal Revenue

Internal Revenue Service

1111 Constitution Avenue, NW

Washington , DC  20224



Dear Secretary Geithner and Commissioner Shulman:

We write to express our disappointment regarding what we believe is an unfortunate and unwise decision to terminate the IRS's private debt collection (PDC) program, which helped support 100 goodpaying jobs in Western New York.

As the nation's leading debt management agency, Pioneer Credit played a pivotal role in the IRS' PDC program during the two years it was operational. As you know, PDC helped the agency close the tax gap by obtaining debt that would otherwise go uncollected. Indeed, in his May 2007 testimony before the Committee on Ways and Means, Subcommittee on Oversight, Acting Commissioner Kevin Brown confirmed that the IRS would not otherwise pursue debts turned over to PDC even if the IRS was given additional resources.

One of the common criticisms of PDC is that it is unfair to taxpayers. Since its inception, however, PDC has operated under commonsense safeguards for taxpayers. Indeed, the costeffectiveness study commissioned by the IRS notes that the private collection agencies have received a taxpayer satisfaction rating of 96 percent.  We hasten to add that the initial Cost Effectiveness Study of the PDC program was conducted by the IRS itself - not an independent entity outside the agency - and the followup review of that study by the MITRE Corporation was also based on the IRS's work product.

In our view, it appears that the deck was stacked against the program's success. It was never allowed to operate at full capacity, and then it was prematurely terminated based on data from a flawed report. To say that IRS collections personnel would collect these debts "more efficiently" than private contractors is only a viable argument if IRS personnel would pursue these debts in the first place. Therefore, PDC program should have been exposed to more independent scrutiny and objective review before a final decision was made, since the independent study did not make an applestoapples comparison.

We have had the opportunity to visit Pioneer Credit's facility in Wyoming County, New York and meet with the employees there. These are good, hardworking people who take pride in their company's sterling reputation. Given the current economic crisis, we do not believe these jobs should be put at risk before PDC is allowed to operate as originally intended.


We respectfully request that you reconsider your decision to terminate the PDC program. We believe the program should be given a sufficient caseload that would allow it to function without appropriated funds for two years. Only after that point can its success or failure be definitively determined.


We appreciate your time and consideration, and look forward to your response in this matter.







Charles E. Schumer                                           Christopher J. Lee
United States Senator                                        Member of Congress