Judge Grants MSJ for Defendant in FDCPA Class-Action Over 1099C Language in Letter

In a case that was defended by Rick Perr of Kaufman Dolowich & Voluck, a District Court judge in New Jersey has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act class-action lawsuit over the 1099C language in a collection letter, ruling that the disclosure used was not a false, deceptive, or misleading representation when attempting to collect on a debt.

A copy of the ruling in the case of Bordeaux v. LTD Financial Services and Advantage Assets II can be accessed by clicking here.

The plaintiff received a series of collection letters from the defendant attempting to recover an unpaid retail credit card debt of $4,528.59. The letters offered to settle the debt for less than the full amount. Each letter also included the following disclosure:

Whenever $600.00 or more of a debt is forgiven as a result of settling a debt for less than the balance owing, the creditor may be required to report the amount of the debt forgiven to the Internal Revenue Service on a 1099C form, a copy of which would be mailed to you by the creditor. If you are uncertain of the legal or tax consequences, we encourage you to consult your legal or tax advisor.

The plaintiff filed a class-action suit, alleging the disclosure violated Sections 1692e, 1692e(2)(A), 1692e(4), 1692e(5), 1692e(8), 1692e(10), and 1692f of the FDCPA. A class was certified and an appeal request from the defendant was denied as part of the procedural history of the case. At issue, according to the plaintiff, was that there were some of the offers made by the defendant that would not have resulted in the forgiveness of $600 or more in principal, which is the threshold for requiring a 1099C disclosure to the IRS.

But because there were scenarios where a 1099C would be required, that meant “there was the possibility that defendants would need to report the settlement to the IRS, and so reporting was not ‘an event that would never occur,’ ” wrote Judge Katharine S. Hayden of the District Court for the District of New Jersey.

The plaintiff argued that the language used by the defendant — specifically that the debt would be “reported to the IRS” and that the letter failed to distinguish between principal and finance charges — was misleading. But the plaintiff offered no precedent that supported her argument and Judge Hayden declined to make “such a finding here.”

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