Northland Group Inc. Hit with Debt Collection Class Action

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A New York woman has filed a proposed class action against Northland Group Inc. claiming the company violated the Fair Debt Collection Practices Act (FDCPA) by way of a collection notice it sent in February 2016. The plaintiff claims the defendant included in its notice “deceptive and misleading” language purporting a requirement to report forgiveness of the debt to the IRS.

The lawsuit argues this language is in violation of the FDCPA because it could lead the least sophisticated consumer to mistakenly believe forgiven debt must always be reported to the IRS when that is not the case. Moreover, the defendant had no obligation to disclose any potential tax ramifications of debt forgiveness. When it allegedly chose to do so in the collection notice sent to the plaintiff, the lawsuit argues that the company should have done so “in a way that will not mislead the least sophisticated consumer as to his or her tax consequences.”

From the lawsuit (emphasis ours):

“Current case law has made clear, that if debt collectors are providing tax advice with regard to the reporting of forgiveness of debt, they cannot provide vague, incomplete and misleading disclosures that leave out the essential element that the reporting of forgiveness of a debt happens only if the principal forgiven exceeds $600, and that reporting of forgiveness of a debt would not happen even if the amount if greater than $600, if the amount forgiven contained interest forgiveness so long as the principal was less than $600.”