We all live in a country that strives to be fair. The United States of America was founded on many noble principles, the chief one among them being “freedom”. Freedom for businesses, however, cannot ride roughshod over freedom for individuals. There are thousands of pages in the law books dedicated to this end.
The Debt Collection Improvement Act was passed by Congress in 1996 and has been a source of confusion for consumers since that time. While there are laws attempting to the stem the tide of rampant abuses and fraud committed by debt collectors (like the Fair Debt Collection Practices Act passed in 1978 and under the jurisdiction of the Federal Trade Commission), the Debt Collection Improvement Act of 1996 is not one of them.
The Debt Collection Improvement Act (or DCIA) was passed only to benefit the government itself. The Act allows a framework under which the United States government (namely, the United States Treasury) could collect on its “delinquent, non-tax debt” receivables. The best known example of non-tax federal debt is federally subsidized student loans. A whole new arm of the federal government was thus born, and it was dubbed the “Financial Management Service”, or FMS.
Until 1996, each bureaucratic entity was left to its own devices when it came to collecting on delinquent accounts. Sure, the Treasury and OMB (Office of Management and Budget) would offer their two cents on collecting this debt, but there was no standard operating procedure in place. Since 1996 all federal agencies are required to send all of their non-tax collections to the Financial Management Service. The DCIA consolidated all debt collection operations under the FMS, who also enlists the help of the IRS to tackle this monumental task.
The Internal Revenue Service naturally keeps a database of all tax identification numbers. Along with those numbers is information on the refunds to which those individuals or businesses are entitled, if any. If there is a tax ID number match between the IRS and FMS systems, the refund is reduced and the outstanding debt amount is thereby adjusted.
The process is simple in theory, but there are hundreds of millions of tax identification numbers to track. Mistakes are bound to happen. If you fall victim to such an error, do not hesitate to contact the IRS. You may also contact the FMS at http://www.fms.treas.gov/index.html.
