this fourth case this morning is dunbar versus the common law firm these are consolidated cases numbers seventeen twenty one thirty four and seventeen twenty one sixty five may please the court counsel and daniel letterman for the appellate attorney sent collection letters which offered settlements and gratuitously stated that the settlements quote may have tax consequences clo this is done to collect more money in older cases such as sledge versus seeing and the letters explicitly stated there are no tax consequences if you pay in full that was found problematic so now it's left for inference and oral communication there is of course no reporter meant that a debt collector say anything about tax consequences what was said is very misleading the true statement would be quote nonpayment of principal of it that may result in taxable linkup but it will net if you file bankruptcy at the insufficient funds to pay all of your debts or have a good faith dispute of the debt and the reason that new test is insolvency right that is correct as opposed to whether you got cash it is a balance sheet in solvency as opposed to having the money correct on the other hand the vast majority of people to whom that collection letters are sent earn fact installed their statistics about twenty percent of american households have a negative net worth about twenty percent of american households have collection items that doesn't matter  can we use an architect and test to determine whether this is misleading and i don't know how and innocuous statement like this may have tax consequences may doesn't mean well  or about the amounts to six hundred of the amounts that would trigger the tax obligations here we just have the statement the settlement may have tax consequences it doesn't have the the vagueness amplifies the problem doesn't mitigate it if you actually specifically outlined the exceptions this the disclosure statement would be truthfulness why in the case of the simply have to inform the i r s that you filed bankruptcy and along those lines what happens if you don't inform the iris when the so you haven't you have a positive obligate affirmative obligation to inform the i r s of your status and if you don't don't file bankruptcy you may have to submit a balance sheet in a form provided for that purpose but the problem is this the i r s reference is a significant threat people actually fame millions of dollars to fake iris agency called the i r s puts that on their website it's a serious threat and you can't make a statement which is true in a very few cases people who willfully refused to face just debts without sclerosing when the statement of tax consequences is true using may as opposed to really doesn't make it any better that's the decision from yesterday  you can't use of vague language to overstate the magnitude of what's going to happen you have cases like drain in versus van rule legal review connotes some kind of legal action being taken f t c vs check investors references to criminal consequences of dishonor chips may not make such statements if the proportion of people who are actually prosecuted for sure dishonored check is miniscule and it and saying consult your tax advisor doesn't help the people to whom these letters are dressed doesn't don't have the wherewithal to do so a lawyer sends a letter to talking about x kind of assets going to be taken seriously adding a advisor simply means you better really take this seriously and get your own lawyer well it may be cheaper for the consumer to just pay the debt in full and avoid the tax consequences and when you get groundless this is correct and yet we have this line of cases from around the country in which debt collectors have been sued on precisely that theory you make of it what do you make of that if you're a debt collector who says i want to be cautious if a well a few years ago a few cases were brought out of that nature nobody accepted the theory except one case from the northern district of new york second circuit said it's just wrong since the second circuit decision there have not been any such cases the second circuit decision was at least six months part of the letters in this case and yet in this area this this pattern of damned if you do damned if you don't litigation has a long history and precedents can be overruled witnesses are suez decision dealing with venue then the answer would be make a full statement the way all statement you've described is not accurate those that you've suggested as a safe harbor because of the difference between insolvency and not having money available and the more proof the more disclosure that's required that might be required the more risky opposed to cash flow of though to the consumer that's my understanding of the if it weren't but if you are but it's also the kind of discrepancy that could easily draw a lawsuit right i would disagree i don't think anybody wants the disclosure is made about inability to pay debts i don't think anybody would be confused by balance sheet insolvency versus i don't think i've ever heard you say somebody might not be confused by anything can thank you in any way a full disclosure would alert the consumer to the fact that exceptions based on inability will remove the vast majority of tax consequences the exceptions apply to the vast majority of people who get collection letters reference a vague reference to tax consequences without disclosure of that critical exception is highly misleading there are no tax consequences of any significance to most consumers protected by the f t c be a therefore you should match reference tax consequences and collection that the financial institutions like my clients and it should many ten ninety nine s in the first part of the year they get in data with many people say why are we getting this this is an effort to try to at least let them know something's coming remember the  oprah the last show she did she gave away two hundred fifty cars to all the audience members great p r time and what happened a few months later they are going to have a six thousand dollar tax bill became a fiasco people had to sell the cars this is an effort to try to avoid that kind of thing as you know in your private practice if you're a plaintiff lawyers or as a judge that in the cases you've got to front the tax aspect of it get say something about it otherwise what happens and i plentiful or friends tell me this and i get phone calls the first part of the year you get inundated with people when i get this tonight it's an effort to try to present the issue and as you said and the courts have said a simple stated a simple statement the courts have said this is ok and this is the simplest one has been accepted by many courts as soon as you start getting into the to the to the more complex statement or state start raising some things like insolvency bankruptcy six hundred dollars i r s ten then that's when the courts have said now you might be going across the line now you might be deceiving or confusing people misleading them and so those claims state our clients try to follow what's going on in the law and a benign state like this nothing going to happen and that's what the letter says and it got focus on it but the complaint was that somehow somehow that that state senate sent us misled by implying that unless the person pays the entire amount that is alleged the consumer could be reporting the iris that's the allegation or unless the person pays the entire amount alleged letter the consumer is going to have to pay taxes on the unpaid balance that's the theory that the m about that same thing with middling funding and and these are obviously large financial institutions that they want to be careful with the i r s the i r s audits them on the ten to one it's a big issue in the financial industry miller fund is part of a publicly traded tracks along the lines of those cases that said way too much not complete night cross a line nice try to confuse this is kind of this is more like what the court did when the every case you had that we are not advocates we use offer a nice simple sentence about settlement i thought was your case actually it was my case and if i recall correctly and remember testing indicated that the letters were less confusing than the seventh circuits proposed safe argument about risk litigation risk if you say nothing but i didn't see it and i was wondering is that a tactical or strategic reason that i'm just not gotten grasping here you know that now it's i will twelve when i was trying to report the i r s they have to pay an extra two hundred dollars and the claim is going to be you said i was done with this for two thousand six hundred dollars that's not true it was a false to me knew it was false statement i actually had to pay two thousand eight hundred dollars because the i give the count another thing i could see that's where it's going to go if you don't give him some kind of head's up and that's what this is a simple heads up and when you get more complicated also if you know could no court except for that one ellis decision though has accepted that do it in a fairly benign way i think the interpretation that this is really meant to get full payment if you're a if you were worked at one of the companies in our market person said here's a great here's a great plan boss what we're going to do is we're going to substantial discount you know why because this one sentence here about tax consequences and settlement is going to cause unpaid full that's crazy it's bizarre nobody do what they say they want to get paid they want to settle it's been a while these debts were charged off a number of years ago they went to judgments confusing to it but that's there was a truthful state and they ended opinion by saying  you know the section six need to eat bars debt collectors from deceiving or misleading consumers it does not protect consumers from fearing the actual consequences of the other debts there's a consequence of the sudden it will let them know about that when i try to inject fear or anything but having to pay twenty eight hundred dollars as opposed to twenty six hundred dollars is not in the record if people are in fact failing to pay for long periods of time it is likely that they meet the test of insolvency and don't of course it does it's a case it's a statement which is one hundred percent or close to one hundred percent true as opposed to one which may be true in one or two percent of cases and false in all the