Debt collection laws are constantly evolving; for example, the IRS issued reformed medical debt rules at the end of 2014 which affect how hospitals can engage in debt collection practices by contracting with a third party debt collection agency.
With more than 40 million Americans accruing medical debt, it is worth looking at how medical collections work within the legal system and what collection companies can and cannot do with respect to their own legal rights.
The Fair Debt Collection Practices Act
Collectors are subject to the Fair Debt Collection Practices Act. They have a right to contact those with medical debt by phone, or mail in order to collect a debt, as long as they honestly disclose that they are debt collectors. They can also communicate with the consumer’s spouse, parent, guardian, executor, or administrator. However, they cannot communicate with the consumer at an unusual time, or if they are aware that the consumer is represented by an attorney.
Within five days after initially communicating with the consumer (in connection with the debt owed), the collector must provide the consumer with written notice of the amount of the debt, the name of the creditor owed, and the option for the consumer to dispute the debt within thirty days of receiving the notice.
Debt collectors wishing to bring legal actions on a debt should work with experienced legal representation, and bring that action either in the judicial district in which the real property is located or where the consumer either signed the relevant contract or that consumer resides.
Collection Law in Alabama
Collections law is also governed by common law and state statutes. Alabama recognizes two general categories of debts that are collectible/enforceable through the legal system: contracts and accounts. Accounts generally include services rendered and work/labor performed, while contracts can cover an agreement governing a business transaction, such as that between a hospital and patient.
The statute of limitations—or time limit within which legal action must be brought—is six years with contract claims, and is calculated starting from when the debtor’s obligation to pay became enforceable or from the date of the debtor’s last payment.
Existing regulations allow medical bills to appear on credit reports, with some restrictions in place. However, under Alabama law, the first 75 percent of a debtor’s wages are exempt from wage garnishment.
Creditor’ Rights Attorneys
Cloud Willis & Ellis has long been serving local and national creditors in medical collections. With the laws constantly changing, it is crucial that you work with an experienced attorney in order to ensure that you aren’t violating federal or state law via your collections practice. Contact us today to speak with our Birmingham creditors’ rights attorneys and find out how we can help you.