Convergent Outsourcing Accused of Falsely Threatening Debtors with Tax Consequences

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Convergent Outsourcing, Inc. is on the receiving end of a proposed class action that claims the defendant violated the Fair Debt Collection Practices Act by falsely suggesting a consumer would suffer tax consequences for settling her alleged debt. According to the complaint, the defendant sent the plaintiff a debt collection letter containing the following statement:

“Notice: The Internal Revenue Service may require financial institutions to file Form 1099-C (Cancellation of Debt) to report the discharge of indebtedness of $600.00 or more.”

The suit notes that the plaintiff’s settlement offer amounted to $237.32, claiming there was “no way” the debt forgiveness could have exceeded the $600.00 threshold. As a result, the complaint argues, the defendant’s statement was misleading and “only served to scare [the plaintiff]” into refusing the offer and paying the full amount of her alleged debt to avoid tax consequences.