Debt Collectors Sued Over Alleged False Threat of ‘Tax Repercussions’

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Harvard Collection Services, Inc. and Pendrick Capital Partners II, LLC are on the receiving end of a proposed class action in which an Illinois consumer claims the defendants sent her a collection letter that contained a false threat. The letter supposedly concerned a medical debt Harvard was attempting to collect on Pendrick’s behalf and presented the plaintiff with a settlement offer to forgive $391.25 of the total she owed. According to the suit, the notice informed the woman that if the amount of her debt forgiveness exceeded $600, her creditor “may be required to report the discharge to the IRS.”

The case argues that this statement was misleading in that “there is no way that the amount of debt forgiveness could reach $600.00.” To include a warning “that can never apply during this collection” constitutes a deceptive collection tactic, according to the lawsuit, and put the plaintiff at risk of paying more than she needed to pay “for fear of tax repercussions” she would never actually suffer.