Must a debt collector submit a 1099C form for any cancelled debt of $600 or more?
Pennsylvania residents had been sent collection notices by Nationwide Credit which stated that Nationwide’s lender clients were “required to file a form 1099C with the Internal Revenue Service for any cancelled debt of $600 or more.” They were told to consult a tax advisor concerning any tax questions.
Consumer class action attorneys, Flitter Milz, P.C. of Narberth, PA and the Sabatini Law Firm of Dunmore, PA, argued that this statement was false and deceptive as it unnecessarily injects the IRS into collection letters in order to intimidate consumers.
In an October 2014 opinion, the federal court agreed. The class action settlement achieved the maximum amount of statutory damages available at $196,960. This will be shared among a class of Pennsylvania borrowers who received the threatening collection letter mentioning the IRS.