Schultz v. Midland Credit Management –
3d Cir.- September 24, 2018
A
statement in a debt collection letter to the effect that forgiveness of the
debt may be reported to the Internal Revenue Service constitutes a violation of
the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §1692 et. seq. ,
particularly the threat to take any action that cannot legally be taken or that
is not intended to be taken. . . . The use of any false representation or
deceptive means to collect or attempt to collect any debt or to obtain
information concerning a consumer. §§ 1692e(5), (10).
Whether
a collection letter is “false, deceptive, or misleading” under § 1692e is
determined from the perspective of the “least sophisticated debtor.” Brown, 464
F.3d at 453.
Here,
the reporting requirement under the Internal Revenue Code is wholly
inapplicable to the Schultzes’ debts because none of them totaled $600 or more,
and IRS regulations clearly state that only discharges of debt of $600 or more
“must” be included on a Form 1099-C and filed with the IRS. See 26 C.F.R. §
1.6050P-1(a). By including the reporting language on
collection letters addressing debts of less than $600, we believe that the
least sophisticated debtor might be persuaded into thinking that the discharge
of any portion of their debt, regardless of amount discharged, may be
reportable.
Based
on the foregoing, we will reverse the May 8, 2017, Order of the District Court
as we find that the Schultzes have pled sufficient factual allegations that
state a plausible claim upon which a court may grant relief under the FDCPA. We
will therefore remand for further proceedings consistent with this opinion.
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