Friday, September 17, 2010
By Dan Schulte, J.D.
MDA Legal Counsel
From the September 2010 issue of the Journal
Question: Our practice has several longstanding patients who have lost their dental insurance. Many of them now have past-due balances. Mailing reminder statements over and over again to their home addresses is getting us nowhere. Can I have my staff call them and ask for payment? I have their work locations included in the insurance information I have on file — can the calls be made to them at work? Should I call later at night when we expect they would be at home? What law governs my efforts to collect these debts?
Answer: Debt collection practices are regulated under federal and Michigan law.
The Federal Fair Debt Collection Practices Act ("FFDCPA") was enacted to eliminate abusive debt collection. You would be considered a "debt collector" and therefore be subject to the FFDCPA only if: (1) your principal purpose is debt collection; (2) your regular activity is collecting debts owed to third parties; and (3) you create the appearance that the debt is being collected by an outside party when in the process of collecting your own debts.
Since a dental practice’s principal purpose is the provision of dental services, it is neither principally concerned with debt collection nor regularly in the business of collecting debts owed to another creditor. As long as a dental practice attempts to collect, in its own name, debts owed to it arising from the provision of dental services to its own patients, the practice will fall outside the definition of a "debt collector" and therefore not be subject to FFDCPA.
The Michigan Collection Practices Act ("MCPA") also restricts practices used in the collection of consumer debt. Since it is unclear whether the provision of dental services creates consumer debt subject to the MCPA, prudence dictates that this type of debt be treated as regulated by this law. The MCPA also broadly defines the entities it covers, prohibiting most creditors from engaging in certain conduct as a means to collect upon a debt. A dental practice collecting debts arising from the provision of services to its patients would be a type of creditor regulated by the MCPA.
The MCPA precludes you from communicating information relating to a debtor’s indebtedness to an employer or an employer’s agent. So, you may not legally disclose specific information regarding a patient’s past-due account to his/her employer or fellow employees. It is also possible that contacts that merely raise an employer’s suspicions that its employee is the subject of debt collection activities are sufficient to violate this provision. The best practice would be to only speak with the patient himself/herself. If leaving a message, do not state that you are calling about a past-due balance.
The MCPA also prohibits the use of "harassing," "oppressive," or "abusive" methods to collect a debt. This includes calling a debtor either repeatedly, at unusual times or places which are known to inconvenience the debtor, or between the hours of 9 p.m. and 8 a.m. without the debtor’s permission. All your communications must be civil in tone, and not so frequent as to constitute harassment. If your patient says that it is inconvenient for him or her to receive calls at work, you should cease making these calls.
There are many other collection activities expressly prohibited or required by the MCPA. Also prohibited are the use of false or misleading statements, communications with a debtor known to be represented by an attorney (with exceptions), threats of physical violence, publicizing debtor information, or the use of profane or obscene language. The statute also affirmatively requires an entity conducting collection activities to accurately disclose its identity when communicating with a debtor.
Any collection activity other than polite calls and mailings to the patient’s home should only be undertaken after a careful review of the MCPA. Another alternative would be to engage a professional collection agency and have an agreement indemnifying you in the event the MCPA or FFDCPA is violated.