District Court (NY) Finds that Collection Letter Offering Debt Reduction During Tax Season Was Not Deceptive for Failing to Advise the Debtor that the Debt Reduction Had Tax Consequences

In Altman v. J.C. Christensen & Associates, Inc., 2014 WL 2612124 (E.D.N.Y. 2014), Judge Ross refused find a deceptive statement for a settlement offer collection letter mailed during tax season.

In Landes v. Cavalry Portfolio Services, LLC, the District Court for the Eastern District of Virginia cogently addressed nearly the same circumstances as are presented here. In Landes, the defendant debt collector had sent the plaintiff a letter offering options to settle the plaintiff’s purported debt on terms providing a 10 or 20 percent discount on the amount owed. 774 F.Supp.2d at 801. The letter, sent during tax season, stated that “[defendant] wants you to get the most out of your tax refund this year” and that “[defendant] wants you to get tax season savings!,” presumably with the intent that the plaintiff debtor could use her tax refund to settle her debt. Id. Under those facts, the Landes court rejected the plaintiff’s argument that the debt collector’s failure to affirmatively disclose the income tax consequences of the settlement offers was misleading. The court concluded: “[A] careful reading of the letter reveals that the only promise being made by [defendant] was to reduce the amount of indebtedness by a specified percentage if the debtor paid in full or on a specified payment schedule. Nowhere did [defendant] promise that the discharge of indebtedness would or would not have potential tax consequences, and under the circumstances, no reasonable debtor could construe the language to suggest otherwise.” Id. at 804; see also Schaefer, 2011 WL 2847768, at *5 (following Landes ).  This court agrees with the decision in Landes. Although the requested tax disclosure in Landes was more specific than the disclosure demanded by Altman here,  the reasoning from that case is equally applicable to the facts at hand. As in Landes, the only promise made by J.C. Christensen in its Letter to Altman was “to reduce the amount of indebtedness by a specified percentage if the debtor paid in full or on a specified payment schedule,” i.e ., here a specified reduction in Altman’s “outstanding account balance” if he chose one of the settlement options. As was the case in Landes, nothing whatsoever in the Letter can be reasonably construed as a representation by J.C. Christensen as to the collateral consequences–––tax–related or otherwise—of settling the debt at a reduction. Moreover, Altman’s argument here is even weaker than the plaintiff’s argument in Landes because, unlike in Landes where the debt collection letter at least mentioned “tax season savings,” 774 F.Supp.2d at 801, there is simply no mention of taxes or tax savings whatsoever in the Letter to Altman.    The fact that, here, the Letter to Altman used the word “savings” in spelling out for Altman what percentage or dollar value the “savings … on [his] account balance” would be is a distinction without a difference. The addition of the “savings” statement in the Letter simply makes plain what is already obvious: When you settle a purported $6,068.13 debt for a single $3,155.43 payment, you have paid your creditor 48% less than the $6,068.13 balance on your account. When you instead settle that same $6,068.13 debt for three payments of $1,314.76, you have paid a total of $2,123.85 less to your creditor than the amount shown as the outstanding balance on your account. Put simply, J.C. Christensen’s “savings” representations involve nothing more than “doing the math” on the settlement terms. They cannot reasonably be construed as implying what extra money plaintiff will or will not have “net” in his pocket after the settlement; nor can they reasonably be understood as representing anything about collateral consequences or taxes. The “savings” statement does nothing more than break down for plaintiff how much his payment will be reduced from what is shown as due on his “outstanding account balance.” This is not a representation one way or the other about tax implications. Under these circumstances, such a statement cannot be false, deceptive, or misleading under the applicable standard in this circuit.FN3