Debt Collection Done From India Appeals to U.S. Agencies

GURGAON, India — In a glass tower on the outskirts of New Delhi, dozens of young Indians are on the telephone, calling America’s out of work, forgetful and debt-stricken and asking for cash.

The Encore Capital Group, a debt collection company based in San Diego, has pep talks for workers at its call center in India.

“Are you sure that’s all you can afford?” one operator in a row of cubicles asks politely. “Well, how do you take care of your everyday expenses?” presses another.

Americans are used to receiving calls from India for insurance claims and credit card sales. But debt collection represents a growing business for outsourcing companies, especially as the American economy slows and its consumers struggle to pay for their purchases.

Armed with a sophisticated automated system that dials tens of thousands of Americans every hour, and puts confidential information like Social Security numbers, addresses and credit history at operators’ fingertips, this new breed of collectors is chasing down late car payments, overdue credit card debt and lapsed installment loans. Debt collectors in India often cost about one-quarter the price of their American counterparts, and are often better at the job, debt collection company executives say.

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I.R.S. Use of Private Debt Collectors Is Criticized

The national taxpayer advocate called on Congress yesterday to repeal the authority of the Internal Revenue Service to use private debt collectors.

In her annual report, the taxpayer advocate, Nina E. Olson, said the private debt collection program was economically inefficient and prone to abuse. In particular, she faulted the I.R.S. for not disclosing certain “psychological techniques” used by the private contractors to try to collect unpaid taxes.

The office of the taxpayer advocate was created by Congress to identify problems within the I.R.S. that affect taxpayers and to promote their interests before the agency and Congress, which writes the tax code.

Ms. Olson’s office provided its most extensive review yet of the private debt-collection program, which it has been monitoring for two years since plans for it were announced. The program, which formally started in September, is meant to farm out easily collectible tax bills, typically owed by low-income taxpayers, to private collection agencies. When the I.R.S. announced the program, it said that the private entities would abide by the same publicly disclosed rules as I.R.S. employees.

Private debt collection has drawn criticism that it is not cost-efficient and that some of the private firms hired by the I.R.S. have questionable business practices. One firm hired by the agency was the law firm of Linebarger Goggan Blair & Sampson of Austin, Tex., whose former partner, Juan Peña, pleaded guilty to federal bribery charges for his role in winning a collection contract from the city of San Antonio.

The taxpayer advocate also criticized some of the techniques used by private collectors. “In an initial draft of this report, we cited sections of a collection script used by one of the contractors which used psychological tricks during the conversation to get the taxpayers to commit to a payment, which is then followed by a belated Fair Debt Collection Practices Act warning at the end of the conversation,” the report says.

“The I.R.S. informed us that private collection agencies had designated the ‘collection scripts’ and operational plans as proprietary and that we could not cite specific portions of the scripts.”

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