Lawsuit: GC Services Threatened Consumer with False Debt Settlement Consequences

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GC Services Limited Partnership is on the receiving end of a proposed class action lawsuit that alleges the debt collector attempted to discourage a consumer from accepting a settlement offer by threatening negative tax reporting consequences. According to the complaint, the plaintiff received a letter from the defendant that offered to settle her debt for less than the full balance, but warned her that “a discharge of indebtedness…may have tax consequences.” The plaintiff says she was hesitant to accept the settlement offer as she was afraid she might “get into trouble with the IRS.”

The suit argues that the amount of principal the defendant offered to forgive was less than $600 and would not require reporting to the IRS. In fact, the complaint claims, “there was no set of circumstances, based on the defendant’s settlement offer, in which the IRS would be involved,” rendering the letter and its tax reporting language false and misleading.