For Immediate Release
February 8, 2008 For More Information: www.budhibbs.com
Bud Hibbs 817-348-0818

It’s not a brand new scam, but it is one that’s growing in popularity among the debt collection industry. Jane Consumer has a debt that’s been passed around collection agencies for eight to ten years, and because of its age, lack of ownership records and so on, it can’t be collected. The debt buyer that holds the paperwork last, though he paid only pennies on the dollar for the right to try and collect, now claims, based on interest and other fees, as much as three hundred percent of the original debt and fills out IRS Form 1099-C.

The unsuspecting consumer gets the 1099-C in their mail box, knowing full well the IRS has a copy and will be expecting taxes based on the amount reported. According to the consumer website, www.budhibbs.com, the public is in a panic.

“We get nearly three million hits per week at the site,” Consumer Advocate Bud Hibbs stated, “consumers are searching for information on how to fight back against illegal debt collection. My mail box has been flooded with complaints from all across America stating that they have received IRS Form 1099-C from Portfolio Recovery Associates on debts they purchased. Many claim these debts date back into the mid 1990’s and are no longer on their credit reports, most are past state statues for taking legal actions and the majority appear to be far past the seven year statue for credit bureau reporting.”

Portfolio Recovery Associates, of Norfolk, VA is a purchaser/seller/collector of junk debts purchased for pennies on the dollar. The debts are inflated from the original balance by adding interest and fees, resulting in very high profit margins which they attempt to collect on them from consumers, according to Hibbs.

That PRA and others are flooding consumer mailboxes with 1099-Cs on decade old debts should be a concern to both consumers and lawmakers. A junk debt buyer can pay pennies for old, worthless debt, then convey to the IRS that they are entitled to a tax break?? That’s enough to make former Enron bookkeepers envious.

Think about it. The collector has been unable to collect the debt for years, and the consumer knows their rights, because the debt is barred by the statute of limitations. The philosophy seems to be if the consumer won’t pay PRA, then the consumer should pay someone-and that someone is the IRS-so PRA can reap the benefit of a tax deduction (?). The question seems to be whether creative accounting allows collection agencies to deduct the amount of the debt as shown on the 1099-C, and not the pennies on the dollar that they actually paid for the worthless debt. “In effect, “Hibbs said candidly, “screwing the taxpayer twice.” He recommends you contact a tax professional for advice and assistance if you receive a 1099-C from a collection agency. “There are creative ways to turn the tables.”