Judge Certifies FDCPA Case As Class Action Over Tax Language in Letter

A federal judge in New Jersey has granted a class-action certification motion in a case alleging the defendant violated the Fair Debt Collection Practices Act by sending a letter that included “confusing and incorrect tax information.”

A copy of the ruling in the case of Saroza v. LTD Financial Services can be accessed by clicking here.

The letter sent by the defendant included the following language: “IRS requires certain amounts that are discharged as a result of the cancellation of debt to be reported on Form 1099-C.”

Through the discovery process, it was uncovered that 1,151 individuals had received letters from the defendant including the same language as the one that was received by the plaintiff.

In challenging the certification, the defendant noted the sentence that follows the challenged language: “You will receive a copy of the Form if one is required to be filed with the IRS.” Since the plaintiff would have received the form if the amount of the cancelled debt exceeded $600, the defendant argued that the statement was truthful.

In using the least sophisticated debtor perspective, Judge Jose Linares ruled that the language would be confusing because nowhere in the letter does it mention the $600 threshold.

“Thus, the least sophisticated debtor may be confused by the language and when he or she would be required to file a Form 1099-C with his or her annual tax return,” Judge Linares wrote in his opinion.

Hence, the judge ruled, an FDCPA violation is plausible.