In a case of first impression in the Third Circuit, Vincent Carieri v. Midland Credit Management, Inc., No. 17-0009 (D.N.J. June 26, 2017), the District Court of New Jersey held that that a debt collector does not have a duty to notify a debtor of potential tax consequences for settling a debt at a discount under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (“FDCPA”).

As satisfaction for a debt in the amount of $4,491.47, Midland Credit Management, Inc. (“MCMI”) sent a notice to Carieri offering various debt settlement payment options resulting in savings from continued payments under the terms of the loan (the “Notice”).  Specifically, the Notice offered to extinguish the debt if a discounted total payoff was received by a certain date, resulting in savings of 40 percent (or $1,796.58). Carieri’s complaint alleged that the Notice violated the FDCPA by failing to inform the debtor of the potential tax consequences posed by the savings from the discounted payoff of the debt.[1]

In considering MCMI’s motion for judgment on the pleadings, the Court turned to other federal courts including the Second Circuit for guidance on whether the FDCPA expands a debt collector’s duties with regard to notifying a debtor of tax consequences of debt settlement. Specifically, the Court held that as in Altman v. J.C. Christensen & Assocs., Inc., 786 F.3d 191 (2d Cir. 2015), the Notice did not violate the FDCPA, even though the letter did not warn of potential tax consequences.

The Court granted MCMI’s dispositive motion, and confirmed that a debt collector’s failure to advise a debtor of the tax consequences for a discounted payoff does not serve as a basis for a claim under the FDCPA.[2]

[1] Although Carieri attempted to raise a second FDCPA violation purportedly posed by the Notice in his opposition to the dispositive motion under review, Chief Judge Jose Linares denied Carieri’s attempt to expand his claims, offering a stern reminder to plaintiffs that untimely efforts to amend pleadings—to survive disposition or otherwise—will be barred. Nonetheless, in dicta, the Court roundly rejected Carieri’s last-ditch effort to amend finding that the Notice was misleading to the least sophisticated consumer.

[2] The Court also relied upon the following cases in reaching his decision: Smith v. Nat’l Enter. Sys., Inc., No. 15-541, 2017 WL 1194494 (W.D. Okla. Mar. 30, 2017); Rigerman v. Forster & Garbus LLP, No. 14-1805, 2015 WL 1223760 (E.D.N.Y. Mar. 16, 2015); Landes v. Cavalry Portfolio Servs., LLC, 774 F. Supp. 2d 800 (E.D. Va. 2011); Schaefer v. ARM Receivable Mgmt., Inc., No. 09-11666, 2011 WL 2847768 (D. Mass. July 19, 2011), and rejected the holding in Ellis v. Cohen & Slarnowitz, LLP, 701 F. Supp. 2d 215, 219-20 (N.D.N.Y. Mar. 26, 2010).