The typical scenario is you receive an official looking letter
that reminds you of a debt that you have failed to pay. It then refers to the
creditor's "right to forgive this debt and submit a Form 1099 to the Internal
Revenue Service on all bad debt accounts. The last sentence usually reassures
you that the creditor does not intend to take such an action at the time, and
then urges you to remit payment to "avoid any additional collection activity."
According to the FTC website, this letter, because of its
implied threat, clearly violates the FDCPA, Section 807(5) "False threats of
legal action" See my answer to this FAQ,
IRS
Form 1099 - FAQ