United Collection Bureau Accused of Sending Unlawful IRS Threats

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A New York man has filed suit against United Collection Bureau, Inc. claiming the defendant unlawfully included a threatening and misleading IRS statement in a collection letter it sent him. The letter allegedly warned the recipient that the creditor “will report any discharge of indebtedness as required by the Internal Revenue Code and corresponding IRS regulations.” The suit argues that this statement is misleading because the IRS only requires that debt forgiveness be reported if the principal amount forgiven exceeds $600. The statement, however, implies to the unsophisticated consumer that his or her acceptance of a settlement offer would be reported under all circumstances. According to the complaint:

“Any tax advice that does not specify the tax consequences as it applies to the consumer’s circumstances is nothing more than a ploy to elicit a more substantial payment from the consumer than the consumer would have paid, had he or she understood the tax reporting consequences.”