In Bordeaux v. LTD Financial Services, L.P., No. 2:16-0243 (KSH) (CLW) (D.N.J Sept. 28, 2021), plaintiff Roberta Bordeaux, on behalf of herself and a class of similarly situated persons, asserted that defendant debt collector LTD Financial Services LP (LTD) violated the Fair Debt Collection Practices Act (FDCPA) by sending collection letters, referencing potential tax reporting consequences of accepting a debt settlement. The District of New Jersey rejected these claims, finding that the letters were not false or misleading.
The plaintiff owed a debt of $4,528.59 as a result of an unpaid balance on a retail credit card account. LTD sent her four letters offering to settle the outstanding obligation for less than the full amount due. Each of these letters contained that following language regarding the potential tax consequences of such a settlement:
Whenever $600.00 or more of a debt is forgiven as a result of settling a debt for less than the balance owing, the creditor may be required to report the amount of the debt forgiven to the Internal Revenue Service on a 1099C form, a copy of which would be mailed to you by the creditor. If you are uncertain of the legal or tax consequences, we encourage you to consult your legal or tax advisor.
In her suit, the plaintiff alleged this statement was false, deceptive, or misleading in violation of FDCPA Section 1692e and that it was an unfair or unconscionable means to collect or attempt to collect any debt in violation of FDCPA Section 1692f.
LTD moved for summary judgment, arguing (1) the plaintiff lacked Article III standing because she has not suffered an injury-in-fact, and (2) the letters at issue did not violate the FDCPA because they accurately conveyed the potential negative tax consequences of settling a debt for less than the amount owed.
The court rejected LTD’s argument regarding standing. Unlike cases from other jurisdictions that have dismissed FDCPA claims where the plaintiff failed to show an actual injury — see, e.g.,Smith v. GC Servs. Ltd. P’ship, No. 19-3494 (7th Cir. Jan. 21, 2021) — the court held that that an FDCPA violation is the invasion of a “substantive, statutory right,” which “gives rise to injuries sufficient to establish Article III standing.”
However, the court held that the letters accurately state that there are tax consequences when $600 or more of debt is forgiven. Because they reflected an outcome that could come to pass, they could not be viewed as “false and misleading” even to the least sophisticated debtor. Accordingly, the court granted summary judgement in favor of LTD as to the plaintiff’s claim under Section 1692e. Further because the plaintiff premised her claim for Section 1692f violation on the same conduct, the court held that this claim also could not survive summary judgment.
This case provides a reminder that not all jurisdictions require a plaintiff to establish a concrete injury beyond a technical violation of the FDCPA. But even in such jurisdictions, the mere assertion that a plaintiff found accurate information to be misleading is not sufficient to state a claim.