Debt Collection Class Action Filed Against Capital Management Services

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Debt collection firm Capital Management Services, LP is facing a class action filed over claims that the company violated the Fair Debt Collection Practices Act (FDCPA). According to the suit, the plaintiff was sent a letter from the defendant that claimed Citibank, N.A. would report forgiveness of her debt as called for by IRS regulations. The FDCPA, however, does not permit debt collectors to make any “threat or take any action that cannot legally be taken or that is not intended to be taken.”

The lawsuit argues the defendant’s declaration to report the plaintiff’s debt forgiveness to the IRS was “effectively a threat to take action the defendant does not intend on taking” because the debt— reportedly for $500—fell short of the minimum amount required under IRS regulations.

“Because [the defendant] offered to forgive only $295 of [the plaintiff’s] alleged debt, an amount significantly short of the $600 principal forgiveness requirement,” the suit claims, the defendant essentially made an empty promise that could very well deceive the unsophisticated consumer.

The proposed class covers anyone in New York who was sent a collection notice from the defendant that included language noting “Citibank, N.A. will report forgiveness of debt as required by IRS regulations” within the last year of the lawsuit’s filing.