In Bordeaux v. LTD Fin. Servs., L.P., a Third Circuit district court granted summary judgment to the defendants in a Fair Debt Collection Practices Act (FDCPA) case. In its holding, the court emphasized Third Circuit precedent that the inclusion of 1099C language in collection letters indicating that reporting to the IRS may be required in the event of settlement on a debt for $600 or more is not false, deceptive, or misleading if there is possibility that the defendants would need to report the settlement to the IRS (i.e., that settlement could be for more than $600).
In Bordeaux, the plaintiff had an outstanding balance on a Home Depot credit card account, and defendant Advantage Assets II, Inc. (AA II, Inc.), a debt buyer, retained defendant LTD Financial Services, L.P. (LTD) to collect on the $4,528.59 debt. LTD subsequently sent four collection letters to the plaintiff that identified the creditor as “Citibank (South Dakota), N.A. Home Depot,” included offers to settle the debt obligation for lesser amounts, and included the following relevant language:
Whenever $600.00 or more of the 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. To read more click here.