Product: Debt collection

Subject : Request for Clarification on 1099-C Issuance Dear CFPB and Sofi Bank Dear Consumer Financial Protection Bureau , I am submitting this complaint regarding SoFi Bank , N.A.s handling of my personal loan account and their failure to issue a Form 1099-C following the charge-off of my debt. 

Background 1. I took out a personal loan from SoFi Bank on XX/XX/year>, totaling {$65000.00}, with a fixed interest rate of 15.85 %. 
2. Due to financial hardship, my account became delinquent, and SoFi charged off the debt on XX/XX/year>. 
3. SoFi subsequently transferred the debt to XXXX XXXX XXXX XXXX XXXX 
4. I requested that SoFi issue a Form 1099-C to reflect the cancellation of the debt due to the charge-off. However, they refused, claiming the debt is still owed and transferred ownership to XXXX. 

Issues 1. Failure to Issue 1099-C in Compliance with IRS Regulations : Under IRS regulations ( 26 C.F.R. 1.6050P-1 ), creditors are required to file a Form 1099-C for debts of {$600.00} or more that are discharged or written off due to specific identifiable events, including charge-offs. The charge-off of my debt by SoFi meets this criterion, yet they failed to comply with the reporting requirements. 
2. Contradictory Information : SoFi asserts that a 1099-C is inapplicable because the debt was sold and remains collectible by XXXX XXXX XXXX XXXX However, IRS guidance specifies that a debt can still be reportable as canceled if the original creditor charges it off and discontinues its collection efforts. Transferring the debt does not absolve SoFi of this obligation. 
3. Lack of Transparency : SoFi has not provided sufficient clarification or documentation to justify their decision not to issue a 1099-C. This creates confusion and raises concerns about compliance with federal regulations. 


Supporting Legal Framework 1. IRS Regulations : 26 C.F.R. 1.6050P-1 ( Cancellation of Indebtedness ) : According to IRS regulations , a creditor is obligated to file a Form 1099-C for debts of {$600.00} or more that are discharged or meet one of the identifiable events outlined in the regulation, including charge-offs. The relevant provisions include : Identifiable Event ( 26 C.F.R. 1.6050P-1 ( b ) ( 2 ) ( i ) ( G ) ) : A discharge of indebtedness includes an event where a creditor charges off or stops active collection efforts. 
Creditors Obligation : If the original creditor has charged off a debt and ceased collection efforts, it has a legal obligation to issue a Form 1099-C, even if the debt is subsequently transferred to another entity for collection. 
2. IRS Guidance on Debt Transfer : The Internal Revenue Manual ( IRM ) Section 5.16.1.2.9 clarifies that creditors must report a cancellation of debt ( COD ) if the debt is deemed uncollectible or is otherwise charged off, regardless of any subsequent transfer of ownership. SoFis argument that the debt is still owed and transferred does not negate its obligation to report the charge-off. 
3. Consumer Protection Under the Fair Credit Reporting Act ( 15 U.S.C. 1681 ) : Under the FCRA, creditors and debt buyers are required to ensure the accuracy of information reported to credit bureaus. This includes properly reflecting the charge-off status and subsequent cancellation of debt to prevent inconsistent or misleading credit reporting. 
4. Fair Debt Collection Practices Act ( FDCPA, 15 U.S.C. 1692e ) : SoFis actions in this matter may conflict with FDCPA provisions prohibiting false or misleading representations regarding the character, amount, or legal status of a debt. By charging off the debt but not issuing a 1099-C, SoFi is contributing to consumer confusion about the legal status of the obligation.

5. Debt Ownership Does Not Negate 1099-C Filing Obligations : The sale or transfer of a charged-off debt does not absolve the original creditor of its obligation to file a 1099-C if the debt was effectively canceled or written off in SoFis books. The IRS requires creditors to report the cancellation of debt when the creditor has determined that it will not pursue further collection directly, even if the debt is sold to a third party.