Debt Collector Sued Over Alleged IRS Threat in Collection Letters

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Phillips & Cohen Associates, Ltd. is the defendant in a proposed class action lawsuit that claims it included an IRS statement in a debt collection letter as a “threat” to alleged debtors. The plaintiff says he received a debt collection letter with a settlement offer and a statement informing him that the defendant may be required to report debt forgiveness to the IRS. The suit argues that Phillips & Cohen included this information to falsely imply that the plaintiff would suffer tax consequences if he accepted the settlement offer. In reality, the amount of his debt forgiveness “could not possibly have been reportable,” the complaint claims, since it was below the $600 minimum. This “misleading” practice would dissuade the least sophisticated consumer from accepting any debt forgiveness, the suit argues.