Northland Group Sued for Alleged 'Ploy' in Debt Collection Letters

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A New York woman has filed a proposed class action against defendant Northland Group, Inc., claiming the debt collector included a “misleading” statement in debt collection letters as “a ploy” to deceive recipients into paying off their alleged debts. The plaintiff says she received a collection letter from the defendant stating her “Current Balance,” a settlement offer, and the following statement:

“Department Stores National Bank will report any discharge of indebtedness as required by the Internal Revenue Code and corresponding IRS regulations.”

According to the complaint, “plaintiff believed, erroneously, that if she negotiated to settle the debt for less than the full balance claimed the creditor would report the settlement to the IRS.” The settlement offer in the letter allegedly did not meet the $600 minimum that would require the creditor to report it to the IRS. The suit claims that Northland Group “included the IRS statement in expectation that plaintiff, having been deceived, would then be misled into settling the debt without negotiating it out of fear that the settlement would be reported to the IRS.” This fear tactic used by the defendant to increase its debt collections violates the Fair Debt Collection Practices Act, the complaint says.