Court of Appeals Decision Rocks Collection Industry
The Facts
The 11th Circuit Court of Appeals in Atlanta issued a decision Wednesday, April 21, 2021 that has rocked the collection industry. In short, the federal appeals court ruled that a Florida based collection agency had violated the prohibition of disclosing confidential information about a debt to a third party, as found in the Fair Debt Collection Practices Act (FDCPA), by sending patient information regarding a hospital debt to a mail vendor so that a collection letter could be mailed to the patient. The court ruled that the disclosure of the debt to the third-party mail vendor without permission of the patient violated the FDCPA.
The specific violation of the FDCPA by the collection agency was the provision about third party disclosure of private information. 15 U.S.C. § 1692c(b), which, with certain exceptions, prohibits debt collectors from communicating consumers’ personal information to third parties “in connection with the collection of any debt.”
In the case, the consumer incurred a debt. The hospital then assigned the debt to Preferred Collections & Management Services, Inc. for collection. Preferred in turn hired Compumail, a California-based commercial mail vendor, to handle the written portion of the collection. Preferred electronically transmitted to Compumail certain information about the debtor, including, among other things: (1) his status as a debtor, (2) the exact balance of his debt, (3) the entity to which he owed the debt, (4) that the debt concerned his son’s medical treatment, and (5) his son’s name. Compumail used that information to generate and send a dunning letter to the debtor. This violated 15 U.S.C. § 1692c(b).
The Middle District of Florida first ruled in favor of the agency and dismissed the case in 2019 but the consumer appealed this decision. A three-judge panel of the 11th Circuit reversed and sent the case back to proceed further.
How this affects Healthcare Providers
This effects collection agencies nationwide, which in turn effects Providers that utilize collection agencies outsourcing mailing solutions. Less than a day after the 11th Circuit ruling, a class-action lawsuit was filed in New York federal court accusing a debt collector of violating Section 1692c(b) and 1692f of the Fair Debt Collection Practices Act by communicating with a third party — a letter vendor — about the existence of a debt when it sent the plaintiff’s personal information to the vendor to be included in and mailed out as a collection letter.
Although the newly filed class action is a New York case, similar suits will likely be filed in federal courts across the country. We expect that this decision will impact the industry of debt collection as a whole.
What to do
Reach out to your collection providers to ensure that they are aware of the ruling and have steps in place to safeguard your interests. It is anticipated that this ruling will be appealed by Preferred but we cannot wait until that happens to put a plan of action in place.
Agencies that provide in-house mailing solutions are not in jeopardy for such litigation. Ensure that your revenue recovery processes can continue without interruption or delay. The FDCPA requires that any phone calls on newly placed accounts be followed by a written letter at least within 5 days, so you can see the effect this will have on new placements. No letters mean no calling or communication until a vendor is capable of sending letters.
Sources:
http://www.insidearm.com/news/00047290-breaking-11th-circuit-holds-transmitting-/