Lawsuit: Harvard Collection Services Included ‘Materially Misleading’ Statements in Notice

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A proposed class action out of Georgia against Harvard Collection Services, Inc. alleges the company included “false, deceptive and misleading” language regarding possible tax consequences for the plaintiff should her more than $1,400 debt be discharged. The lawsuit takes issue with the defendant’s inclusion of the following in the plaintiff’s collection notice: 

“. . . financial institutions to annually report all debt cancelations of $600 or more. If the principal balance discharge is $600. . . it is required to report the discharge to the IRS. You may want to consider consulting your tax advisor. . .”

The complaint argues that the defendant’s inclusion of this language is misleading because the company failed to inform the plaintiff about exceptions that may apply to the “mandatory report” requirement, including exceptions for interest and for non-principal debts. 

“By making this statement, the plaintiff believed that the only way she could get out of the IRS reporting requirements and avoid any IRS potential issues would have to pay the entire debt, but for $599.99,” the lawsuit reads. “In reality, [the plaintiff] only needed to pay the entire principal, but for $599.99 to avoid any IRS reporting.”

The lawsuit also wages there was no reason for the defendant to include the above tax statement seeking to collect $919.10 on a $1,414 debt, which, the case says, would result in $494.90 being discharged.