IRS is standing in the way of Congress’ innovative solution to fight fraud and expand access to capital
While it is not uncommon for Congress to intervene when federal programs are not serving the public interest, it is unfortunate that a new law must be considered to...
Things aren’t going well when Congress has to legislate twice just to ensure a federal agency follows its directions. Unfortunately, this is the case with the IRS’ implementation of a 2018 law that requires the agency to build a modern, real-time income verification system for the financial industry. Despite widespread opposition from the user community, the IRS is insistent on spending tens of millions of dollars to build an unusable system that won’t benefit borrowers.
In response, Reps. Patrick McHenry (R-N.C.) and Jimmy Panetta (D-Calif.), have introduced a new bill — the “IRS eIVES Modernization and Anti-Fraud Act,” H.R. 3335 — aimed at ensuring the IRS follows the intent of the original law, which McHenry also authored. We applaud this bipartisan effort to salvage an important federal program and, if the IRS continues on its current path, encourage Congress to act quickly.
The 2018 Taxpayer First Act directed the IRS to upgrade the Income Verification Express Service (“IVES”), which is currently a consent-based, fax-based system used by financial institutions to verify a consumer or small business loan applicant’s income data. Today this process takes days to weeks to complete. Congress called for the creation of a fully automated, real-time capability that uses an application programming interface (API) to make the process seamless, fast and unobtrusive for consumers.
Instead, the IRS has proposed to derail any hope of efficiency by deciding that the agency, and not the financial institution, should control verification of the consumer’s identity applying for a financial product or service. Specifically, IRS wants to mandate that a consumer or small business owner applying for a loan be directed to stop the application, navigate to the IRS website or download its app, create an account, validate their identity with the IRS, and grant approval to the IRS before any income verification and progress with the loan application can take place.
It’s hard to imagine a worse customer experience. This bipartisan bill seeks to fix this by relying on the one element of the existing IVES system that works: Under this proposal, financial institutions seeking to use the new “eIVES” system would be required to “know their customers,” something already required by law and regulation. This approach would uphold privacy standards and consumer demands for a smooth and speedy loan process.
Moreover, we already have a battle-tested example for how such a program should operate. Over the last few years, many in the financial industry have begun using a system built by the Social Security Administration that is nearly identical in form and function to what the IRS should be building. The Electronic Consent Based Social Security Number Verification system (“eCBSV”) is also a real-time validation service used by financial institutions. In designing this system, SSA recognized that the only “identities” it needs to validate are those of the financial institutions or service providers directly accessing the system, not every consumer applying for financial products, since they’re not the actual users of the system.
The IRS, which not-so-secretly wants every American taxfiler to create an IRS.gov account, is using that agenda to compromise the future of the eIVES income verification system, at the expense of consumers seeking access to capital or related financial services. No one should be forced to interact with the IRS as a condition of applying for a mortgage, personal loan or small business loan. It is now up to Congress to course-correct the IRS.
While it is not uncommon for Congress to intervene when federal programs are not serving the public interest, it is unfortunate that a new law must be considered to fix the misguided implementation of “eIVES.” The IRS should follow the example set by the SSA and build the system as Congress intended, so consumers and business owners can benefit from this important modernization effort. Barring that, we urge Congress to enact H.R. 3335.
Jason Kratovil is head of external affairs and public policy at SentiLink, a provider of fraud and identity solutions. Ryan Metcalf is head of public affairs for Funding Circle US, an online lending marketplace for small and medium-sized businesses.
IRS is standing in the way of Congress’ innovative solution to fight fraud and expand access to capital
While it is not uncommon for Congress to intervene when federal programs are not serving the public interest, it is unfortunate that a new law must be considered to...
Things aren’t going well when Congress has to legislate twice just to ensure a federal agency follows its directions. Unfortunately, this is the case with the IRS’ implementation of a 2018 law that requires the agency to build a modern, real-time income verification system for the financial industry. Despite widespread opposition from the user community, the IRS is insistent on spending tens of millions of dollars to build an unusable system that won’t benefit borrowers.
In response, Reps. Patrick McHenry (R-N.C.) and Jimmy Panetta (D-Calif.), have introduced a new bill — the “IRS eIVES Modernization and Anti-Fraud Act,” H.R. 3335 — aimed at ensuring the IRS follows the intent of the original law, which McHenry also authored. We applaud this bipartisan effort to salvage an important federal program and, if the IRS continues on its current path, encourage Congress to act quickly.
The 2018 Taxpayer First Act directed the IRS to upgrade the Income Verification Express Service (“IVES”), which is currently a consent-based, fax-based system used by financial institutions to verify a consumer or small business loan applicant’s income data. Today this process takes days to weeks to complete. Congress called for the creation of a fully automated, real-time capability that uses an application programming interface (API) to make the process seamless, fast and unobtrusive for consumers.
Instead, the IRS has proposed to derail any hope of efficiency by deciding that the agency, and not the financial institution, should control verification of the consumer’s identity applying for a financial product or service. Specifically, IRS wants to mandate that a consumer or small business owner applying for a loan be directed to stop the application, navigate to the IRS website or download its app, create an account, validate their identity with the IRS, and grant approval to the IRS before any income verification and progress with the loan application can take place.
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It’s hard to imagine a worse customer experience. This bipartisan bill seeks to fix this by relying on the one element of the existing IVES system that works: Under this proposal, financial institutions seeking to use the new “eIVES” system would be required to “know their customers,” something already required by law and regulation. This approach would uphold privacy standards and consumer demands for a smooth and speedy loan process.
Moreover, we already have a battle-tested example for how such a program should operate. Over the last few years, many in the financial industry have begun using a system built by the Social Security Administration that is nearly identical in form and function to what the IRS should be building. The Electronic Consent Based Social Security Number Verification system (“eCBSV”) is also a real-time validation service used by financial institutions. In designing this system, SSA recognized that the only “identities” it needs to validate are those of the financial institutions or service providers directly accessing the system, not every consumer applying for financial products, since they’re not the actual users of the system.
The IRS, which not-so-secretly wants every American taxfiler to create an IRS.gov account, is using that agenda to compromise the future of the eIVES income verification system, at the expense of consumers seeking access to capital or related financial services. No one should be forced to interact with the IRS as a condition of applying for a mortgage, personal loan or small business loan. It is now up to Congress to course-correct the IRS.
While it is not uncommon for Congress to intervene when federal programs are not serving the public interest, it is unfortunate that a new law must be considered to fix the misguided implementation of “eIVES.” The IRS should follow the example set by the SSA and build the system as Congress intended, so consumers and business owners can benefit from this important modernization effort. Barring that, we urge Congress to enact H.R. 3335.
Jason Kratovil is head of external affairs and public policy at SentiLink, a provider of fraud and identity solutions. Ryan Metcalf is head of public affairs for Funding Circle US, an online lending marketplace for small and medium-sized businesses.
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