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Collector’s IRS 1099 Notification Letter Can Violate Fair Debt Laws

A debt collector’s IRS 1099 notification letter can violate fair debt laws. The typical scenario is you receive an official looking letter that reminds you of a debt that you have failed to pay. The letter purports to be a 1099 from debt collector. 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, 15 USC 1692(e)(5) “False threats of legal action” See FAQ, IRS Form 1099 – FAQ

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