Medical Collections

Articles Tagged with: Medical Collections

Medical Collections under Federal and State Law

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.

Resource:

ftc.gov/system/files/documents/plain-language/fair-debt-collection-practices-act.pdf

Alabama Collection Case Heard By U.S. Supreme Court Could Have Broad Implications

On January 17^th, the U.S. Supreme Court heard a case that could have national repercussions for debt collectors. Specifically, the issue at stake is whether debt collectors are abusing the bankruptcy process when they request bills to be paid, bills which are no longer collectible under state laws.

According to the Federal Trade Commission, the nine largest debt buyers are currently facing a value of more than $140 billion, where more than 10 percent of that debt is between six and 15 years old; therefore, this decision in this case will have a broad impact on U.S. collection companies.

The Case

The case heard by the Court originated with the bankruptcy of an Alabama resident who filed for chapter 13 bankruptcy almost three years ago, enabling any businesses who were owed money be paid over the course of three to five years by filing a claim. One of those was a company which filed a claim for credit card debt that was more than six years old.

The Law

Many state laws prohibit medical and credit card collection companies from collecting for debt after three to six years; for example, in Alabama, creditors cannot collect debts that are more than six years old.

However, these companies have traditionally still been able to file paperwork in association with a consumer bankruptcy case in order to collect debts that may technically be ‘expired’ at the state law level. This is because bankruptcy law does not explicitly ban creditors from collecting older debts; in fact, one might argue that bankruptcy law explicitly invites this type of debt collection.

A company requesting payment under bankruptcy law has been both a legal and fair means of collecting past due debts for many years. Collection companies are still technically in keeping with federal law as long as they are, at the federal level, in compliance with the Fair Debt Collection Practice Act, which establishes a system of consumer protection against abusive debt collection practices, promotes fair debt collection, and provides consumers with a means of disputing and obtaining validation of debt information in order to check its accuracy.

Now At Issue

One of the main issues that the Court will decide on is whether this particular debt-collection practice conflicts with the requirement that creditors file claims in good faith. The Court is expected to announce its decision by the end of June of this year.

Attorneys Committed To Protecting Collection Companies

Cloud Willis & Ellis has been serving local and national creditors in commercial, medical, and other collections for years. We work hard to protect those rights for creditors, who depend upon these payments. Contact us in Alabama today and find out how we can help your business efficiently recover delinquent debts.

Resources:

wsj.com/articles/supreme-court-hears-arguments-on-collection-of-expired-debts-1484693691

ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-debt-collection-practices-act-text

FICO’s New Auto Score Affords Consumers With Medical Accounts in Collections Higher Credit Scores

Credit scores are incredibly important for consumers who are interested in financing a vehicle. Your credit score will heavily impact your auto loan rate as lenders often use it to gauge how financially responsible you are. But who calculates this vital score? While there are several agencies that calculate credit scores, FICO is one of the big boys in the business and has been determining credit scores for over 25 years. Lenders can request different versions of FICO’s credit score depending on what type of credit their customer is seeking. For example, FICO has an industry-specific credit score called the Auto Score that is used for auto lending.

According to nbc4i.com, FICO recently announced that it is releasing a new product called Auto Score 9 XT that is designed to calculate a more accurate credit score for consumers who are seeking auto lending-related loans. While FICO often updates their formulas in order to keep improving their products, this updated version should be of particular interest to credit seekers who have medical accounts in collections as FICO’s new formula distinguishes between unpaid medical accounts that are in collections and non-medical accounts in collections. This distinction means that consumers with medical accounts in collections will likely receive a higher FICO Auto Score under the new system than they previously had. This change should also catch the attention of creditors engaged in medical collections as FICO’s changed formula may be viewed as removing an incentive for debtors to repay their medical debts.

FICO’s New Credit Scoring Model

FICO’s new credit scoring model, Auto Score 9 XT, is designed to provide a more accurate picture of a consumer’s financial health as it analyzes trends while previous Auto Score versions analyzed only a snapshot in time. Nbc4i.com explains that the new version looks at a consumer’s credit card data for the previous 30 months in order to identify trends in their finances. For example, FICO will now look at whether a consumer’s credit card balances are increasing or decreasing over an extended period of time. This method departs from the current formula which simply analyzes the consumer’s credit card balances at a particular moment in time.

Additionally, a FICO press release notes that their new Auto Score formula also takes a new approach to analyzing medical debt. Auto Score 9 XT does not take into account medical collection accounts that have been paid in full, and distinguishes between unpaid medical accounts that are in collection versus other types of debt that are in collections. FICO notes that this change to their formula means that many customers with medical collections in their credit history will have higher credit scores with FICO Auto Score 9 XT than they did under previous versions.

What Can We Do To Help?

If you are a creditor engaged in auto deficiency collections or medical collections in Alabama and are interested in exercising your legal rights, contact the experienced creditors’ rights attorneys at Cloud Willis & Ellis, LLC today by calling our Birmingham office at (205) 322-6060 or our Mobile office at (251) 545-4844.

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