Several class action lawsuits have recently been filed against medical providers, and their contracted collection agencies and law firms. It’s likely that the filing of these class action lawsuits will have a serious impact on the collection industry—including attorneys, collection agencies, and large medical providers which use collection agencies (like Dynamic Recovery Solutions)—regardless of how the suits fare in court.
The circumstances of the cases are similar, and rather widespread in the health care industry: a patient racks up medical bills (from a hospital, doctor, etc), which are sent to the insurance carrier. Insurance pays some but not all of the bills; the balances are small, but the patient can’t pay them, so the account is turned over to a collection agency, which is unsuccessful in its attempts to collect. So the creditors hire a law firm, which sues to collect the medical bills. Usually, the smaller bills are signed over to the creditor holding the largest bill (typically a hospital), and the lawsuit is filed only in the hospital’s name. Details on the smaller amounts owed are included in the collection lawsuit, but only the hospital files the suit. And the plaintiffs in the current class actions in Michigan say this process violates the Fair Debt Collection Practices Act (FDCPA) and similar Michigan state laws.
The plaintiffs are arguing their rights under the FDCPA are violated because assigning bills from smaller creditors to hospitals are done only for the purpose of allowing the collection agency to file one collection lawsuit against the patient, rather than filing separate lawsuits for each of the medical providers—a deceptive, misleading, and unfair practice. And the class action suits are also arguing the collection agencies committed the unauthorized practice of law, by doing things that only lawyers should do, like deciding how the collection lawsuit is handled, and telling the law firms and medical providers what to do.
The plaintiffs have asked the courts to include cases of all other persons who were sued in creditor harassment cases with similar account assignments; they’re asking for treble damages and attorney fees. FDCPA damages awards are big; if the class is validated and moves forward (and even if it’s not), these cases are likely to change how hospitals, collection agencies, and attorneys file suits around medical bills.