This article has been published in "The Advocate", a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, April 2007 issue, @2007 by Steven J. Bruzonsky, Esq.
Using the Federal Fair Debt Collection Practices Act to Contest Lien Claims
In our never ending battle as plaintiff attorneys for truth and justice in contesting, negotiating and litigating lien and reimbursement claims, perhaps the federal Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692, might be one weapon in our arsenal. Though there is an almost total lack of caselaw applying the FDCPA to liens and reimbursement claims in injury cases.
There is one federal appellate case that applied to FDCPA to Healthcare Recoveries health insurance lien claim. In Hamilton v. United Healthcare of Louisiana, Inc., 310 F.3d 385 (5th Cir. 2002), Healthcare Recoveries, Inc. was held to be subject to the FDCPA as it claimed reimbursement for a group health insurer's contract-based subrogation claim against the employee's uninsured motorist settlement.
On the other hand, we have a recent federal district court case here in Phoenix that refused to apply the FDCPA to hospital balance billing lien collection by Gammage & Burnham. Gacy v. Gammage & Burnham, No. 04-CV-1934-PHX-FJM was as class action brought against the law firm of Gammage & Burnham in their capacity representing Scottsdale Healthcare on an A.R.S. § 33-931 hospital balance billing lien for the balance after payment by health insurance. Paintiff claimed that the lien notice and explanation letter from Gammage and Burnham violated the FDCPA. Judge Martone found that the balance bill did not constitute a "debt" for purposes of the FDCPA and that therefore Gammage & Burnham were not "debt collectors" subject to the FDCPA. Judge Martone noted that § 1692a(6)(F) requires that the debt be in "default" for the FDCPA to apply, citing Bailey v. Sec. Nat'l Servicing Corp., 154 F.3d 384, 387 (7th Cir. 1998), and also that plaintiff failed to define "default" or to explain how plaintiff was in "default".
A few types of lien claims where one might consider using the FDCPA are Medicare+Choice (M+C) and FEHBA. In my opinion, as discussed in previous Liens Corner articles, neither M+C or FEHBA healthplans have liens against Arizona personal injury settlements, as Arizona anti-subrogation caselaw applies and there is no federal preemption. Yet collection companies including Primax and Meridian continue to misrepresent that their principal has a lawful lien. Are they violating the FDCPA? Especially if they continue to claim a lien after the case has settled and thus the alleged debt is in "default", as required by the FDCPA.
At some point in dealing with a lien collection company, you may want to throw in a discussion of how the collection company is violating the FDCPA. In a recent M+C lien claim, the lien collection company persisted periodically contacting my office despite my telling them there was no lien and the funds are disbursed â€“ so in my last letter I made it very personal regarding the collection agent's violation of the FDCPA:
February 14, 2007
Manager, Subrogation Dept.
XYZ Recovery Services
XYZ Subrogation Services
Re: Our Client/Your Insured:
Your File No.:
Date of Treatment:
Please be advised that our client reserves the right to take legal action against you and your company for repeated violation(s) of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692. Mr. Doe, not only your company, but you in particular are liable.
You and your company have violated the Fair Dept Collection Practices Act repeatedly in this case - by falsely asserting that you have a Medicare lien when you represent a Medicare replacement policy with no lien rights, as discussed in my prior letters; by continuing to contact us both by phone and in writing regarding this alleged debt when we previously advised you in writing not to contact us; AND by your giving written notice to the adverse insurance company of this alleged debt (by letter dated 1-31-07, from Mr. Doe, to XXX Insurance, stating "Notice of Lien", which XXX Insurance forwarded to our firm).
Since you obviously do not know the requirements of the FDCPA, let me spell them out for you:
You are acting as a "debt collector", as defined at 15 U.S.C. § 1692a(6), as "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." The provision further states that a creditor who "uses any name other than his own" thereby indicating that a "third person" is performing the debt collection is also within this definition. For example, in Hamilton v. United Healthcare of Louisiana, Inc., 310 F.3d 385 (5th Cir. 2002), Healthcare Recoveries, Inc. was held to be subject to the FDCPA as it claimed reimbursement for a group health insurer's contract-based subrogation claim against the employee's uninsured motorist settlement.
You are acting to collect a "debt", as defined at 15 U.S.C. § 1692a(6) as "any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family or household purposes, whether or not such obligation has been reduced to judgment."
You are not permitted to communicate with third parties concerning this alleged debt, "without the prior consent of the consumer given directly to the debt collector" or absent prior Court permission, as required by 15 U.S.C. § 1692c(b). Accordingly, you do not have our client's permission to contact any of our client's health care providers or any auto insurance companies regarding this alleged debt.
If a consumer notifies you in writing "that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except â€“ (1) to advise the consumer that the debt collector's further efforts are being terminated; (2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or (3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy." 15 U.S.C. § 1692c(b).
The debt collector must refrain for certain "harassment or abuse" practices as required by 15 U.S.C. § 1692d. The debt collection must refrain from "false or misleading misrepresentations" as required by 15 U.S.C. § 1692e. Such "false or misleading" practices outlawed by the FDCPA include using "any false, deceptive, or misleading representation or means in connection with the collection of any debt"; and "The threat to take any action that cannot legally be taken or that is not intended to be taken".
15 U.S.C. § 1692k provides for "Civil liability" for noncompliance with the provisions of the FDCPA in favor of the consumer against the "debt collector" (which includes the debt collection employee as well as his/her employer) in the amount of "actual damage" ; such additional damages as a court may allow not exceeding $1,000.00; certain class action damages as well, not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector; and reasonable attorney's fees and costs. Also, 15 U.S.C. § 1692l provides for administrative enforcement of the FDCPA by the Federal Trade Commission.
DO NOT CONTACT OUR CLIENT, OUR FIRM, OR ANYONE ELSE regarding this alleged debt, except as permitted by the FDCPA as discussed above.
Very truly yours,
Steven J. Bruzonsky
Postscript: The above is not a guaranteed solution. But the FDCPA perhaps is a tool that may be of some help to us in dealing with certain types of lien claims.