The Second Circuit Court of Appeals ruled yesterday that a debt collector does not violate the FDCPA if it does not advise a consumer of the tax consequences of a settlement offer. The case, Altman v. J.C. Christensen Associates (Docket No. 14‐2240‐cv) is very positive for the ARM industry.
The opinion is short and concise. The court made two significant points in their reasoning.
First, the specific language in the letter plainly stated the percentage saved was on “your outstanding account balance.” The fact that the debtor may then have to pay tax on the amount saved is simply not deceptive in the context of what savings are on debtor’s “outstanding account balance.”
Second, the court held that the “FDCPA does not require a debt collector to make any affirmative disclosure of potential lax consequences when collecting a debt and that requiring, as a matter of law, debt collectors to inform a debtor of such a collateral consequence of settling a pre-existing debt seems far afield from even the broad mandate of FDCPA to protect consumers from abusive debt collection practices”.
The issue of disclosures of tax consequences (1099-C Disclosures) on settlement offers and verbal conversations with a consumer is confusing. Courts and client requirements are inconsistent. This decision in the Second Circuit provides positive and clear resolution for the ARM industry…..in that circuit.