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By Daniel J. Schulte
MDA Legal Counsel
Published in the May 2007 issue of the Journal

Debt collection practices, including contacts by mail and/or telephone at a debtor’s place of employment, are closely regulated under both Michigan and federal law. However, a dental practice collecting in its own name on debts arising from the provision of services to its own patients can successfully comply with these regulations to allow contacts with the patient-debtor at his or her place of employment.

The Federal Fair Debt Collection Practices Act was enacted to eliminate abusive debt collection. Three types of entities are classified as "debt collectors," subject to the provisions of the act. These include: (1) entities whose principal purpose is debt collection; (2) entities who regularly attempt to collect debts owed to third parties; and (3) entities who, in the process of collecting upon their own debts, utilize a different name to create the appearance that the debt is being collected by an outside party. 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, it falls outside both the definition of a "debt collector" and the requirements of this federal act.

The Michigan Collection Practices Act ("MCPA") 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 the act. 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.

Two MCPA requirements are especially applicable to the practice of contacting a patient-debtor by mail or telephone at his or her place of employment. The first flatly precludes a collecting entity from communicating information relating to a debtor’s indebtedness to an employer or an employer’s agent. This provision clearly prohibits a creditor from disclosing specific information regarding a debtor’s past due account to a debtor’s 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. Therefore, a creditor must exercise sound judgment and the utmost caution to ensure that any contacts made to a debtor’s place of employment to collect a debt are discreet and targeted solely at the debtor.

The second regulation proscribes 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. Pursuant to these restrictions, any mailings or phone calls to a debtor’s workplace must be civil in tone, and not so frequent as to constitute harassment. If the debtor informs the collector-creditor that it is inconvenient for him or her to receive calls at work, a creditor should discontinue such calls.

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 and to implement procedures to prevent violation of the MCPA by its employees. Obviously, a careful reading of the MCPA should precede any action to collect a debt.

It would also be wise to consider whether the benefit of utilizing these collection practices outweighs the risk of the potential penalties for violation of the MCPA, which include fines and private lawsuits by debtors.

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