JWK Defeats Motion to Dismiss in FDCPA Case Involving Collection Letter Containing Debt Forgiveness IRS Reporting Language

               Jones, Wolf & Kapasi, LLC ("JWK") defeated a motion to dismiss by Northstar Location Services, LLC ("Northstar") on behalf of a plaintiff and a putative class of New Jersey consumers who received debt collection letters which violated 15 U.S.C. §1692, the Fair Debt Collection Practices Act ("FDCPA"). Specifically, the Plaintiff alleged that Northstar's debt collection letters violated the FDCPA as they contained misleading and deceptive statements related to when debt forgiveness is to be reported to the Internal Revenue Service ("IRS").

                In partially denying Northstar's motion to dismiss, the court wrote:

"In light of §1.6050P- 1, Plaintiff contends the Letter’s statement, “Barclays Bank Delaware is required to report the amount of the debt forgiven to the Internal Revenue Service on Form 1099C” is literally false, or at least capable of two different meanings.(See Compl. Ex. A). This language can be understood to say that Barclays must report any amount of debt forgiveness to the IRS, when in fact the applicable regulation only requires reporting forgiven amounts greater than $600, not including interest. When Defendant sent Plaintiff this notice, Plaintiff and Defendant had not yet determined how much principal, if any, would be forgiven from Plaintiffs debt. It was very possible on July 20, 2015 that, contrary to the Letter’s language, Barclays would not be required to report to the IRS the forgiveness of Plaintiffs debt. çç Good v. Nationwide Credit, Inc., 55 F. Supp. 3d 742, 749 (E.D. Pa. 2014) (statement about tax implications of debt forgiveness was deceptive before an offer of settlement was made because “[i]t remains to be seen whether Defendant will offer to forgive more than $600, or any portion, of the debt”). Therefore, this statement can be seen as false, deceptive, or misleading to the least sophisticated debtor, and Plaintiffs allegations state a claim."

             The case is Rafael Disla et al. v Northstar Location Services, LLC, 2:16-cv-04422(CCC)(SCM)(D. New Jersey June 27, 2017) and the court's Opinion can be read here.


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