Glitch sends dunning notices to city taxpayers

Posted: June 12, 2013

A collection agency working for the City of Philadelphia mistakenly sent out 1,490 dunning notices this spring to business taxpayers who were not actually delinquent - an error that Revenue Commissioner Clarena Tolson blames on "a glitch" in the city's data-processing system.

The errant notices came from Pioneer Credit Recovery Inc., a Sallie Mae subsidiary that is one of several debt collectors that contract with the city. They came to light when a taxpayer complained to a northwest Philadelphia newspaper.

In a letter published last week by the Germantown Chronicle and the Northwest Independent, the taxpayer said she and her husband had been "confused and upset" by the notice for a good reason: They had paid their taxes a week before the usual April 15 deadline.

The taxpayer, whose name was withheld, said Pioneer employees told her that the mistake affected "a number of people" and had occurred because "checks received had not yet been applied to the appropriate accounts."

Pioneer officials declined to discuss the incident, saying their contract requires them to refer questions to the city. Tolson said the problem reflected a data glitch, not misapplied tax payments.

Tolson said the problem arose April 26 when a file with data on 4,700 taxpayers was mistakenly forwarded to Pioneer. The file misidentified them as delinquent in payment of the city's business income and receipts tax, formerly known as business privilege tax. Last year, 89,000 taxpayers paid the tax.

The mistake was noticed and Pioneer was alerted within three hours the same afternoon, but not before damage was done, Tolson said. "The vendor's system is automated and generated the legal notices promptly," she said via e-mail.

Before the error was fully corrected, dunning letters had been directed to nearly a third of the 4,700 mis-flagged taxpayers, Tolson said. She said none of the supposed delinquencies were reported to credit bureaus.

Tolson said that so far this year, Pioneer has sent about 5,000 proper collection notices to businesses on the city's behalf - all for previous years' taxes that the city has been unable to collect with its own delinquency notices. Under its contract, Pioneer keeps 18 percent of its tax collections, she said.

Tolson said the Germantown paper's letter was the only complaint she was aware of about the error, although the letter writer said Pioneer had received multiple complaints. "We checked with both Pioneer and our people internally," Tolson said. "We believe this case in discussion is the only inquiry received."

Has Pioneer or the city sent a letter to the taxpayers correcting or apologizing for the mistake? Not yet, but the city plans to "sometime in the next few days," Tolson said.

"We will send letters addressing the businesses that incorrectly received the April letters," Tolson said via e-mail.


Contact Jeff Gelles at 215-854-2776, jgelles@phillynews.com, or @jeffgelles on Twitter. Read his blog at www.inquirer.com/inquiringconsumer.

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