If there are certain defenses, such as compelling mandatory arbitration, that are available to defendants, they would be wise not to wait to use them, according to a ruling from a judge the District of New Jersey, who denied a motion to compel arbitration from a defendant accused of violating the Fair Debt Collection Practices Act by mentioning the tax implications in a collection letter.
A copy of the ruling in the case of Maher v. Northland Group, Inc., can be accessed by clicking here.
The plaintiff received a collection letter in regards to an unpaid retail credit card debt. The letter, which was sent in 2016 and offered to settle the $629.10 that was owed for $471.94, included the following passage:
Department Stores National Bank will report any discharge of indebtedness as required by the Internal Revenue Code and corresponding IRS regulations. Please contact your tax advisor if you have any questions.
The plaintiff filed suit in 2017, alleging the letter was misleading and deceptive and violated the FDCPA because the settlement offer would need not be reported to the IRS because it did not meet the $600 threshold for doing so.
The defendant responded to the suit and litigated it for 22 months before obtaining a copy of the plaintiff’s cardholder agreement and seeking to compel arbitration. The defendant said it sought to obtain the agreement from the plaintiff, but she said she did not gave a copy of it. The defendant finally subpoenaed its client for a copy of the agreement, which it received six days later.
“I give little credit to Northland’s pose of helplessness,” wrote Judge Kevin McNulty in denying the motion. “I find it highly unlikely that DSNB — the creditor — would have moved to quash a subpoena from the debt collector acting on its behalf. But assume for a moment that Northland wished to first seek the documents from Maher. Even so, it learned in January 2018 that the plaintiff possessed no responsive documents. Yet Northland waited another year before serving a subpoena on DSNB. And DSNB, of course, did not move to quash, but swiftly furnished the documents within days.
“All of the foregoing, moreover, ignores the real-world likelihood that Northland could have confirmed the terms of the New Cardholder Agreement/Arbitration Agreement with a phone call to DSNB. The documents, unavailable in discovery, suddenly became available when Northland wanted them. I do not propose to rule on Northland’s position under the discovery rules; my point here is that Northland was less than diligent in pursuing the arbitration issue on its own behalf.”