A new court decision raises important compliance issues for creditors who use an internal debt collection unit: whether separately naming the unit in a document also naming the creditor in its main business name can cause confusion, giving rise to a claim under the Fair Debt Collection Practices Act.
On September 4, a U.S. district court in Florida denied a hospital’s motion for summary judgment against a patient’s claims under the FDCPA where the communication to the patient included the name of the creditor-hospital, as well as the identity of its collection department, which had a different name. The court held that a genuine dispute of fact exists as to whether the least sophisticated consumer would believe that the communication was sent from the creditor-hospital (whereby the FDCPA does not apply) or from a third-party debt collector (whereby the FDCPA applies).
Creditors are generally exempt from the FDCPA. However, if a creditor uses a name – like a pseudonym or alias – that implies that a third-party is involved in collecting its debts, then the creditor may be subject to the FDCPA under Section 1692(a), known as the “false name exception.”
In Smith v. University Community Hospital, Inc. d/b/a Florida Hospital Carrollwood, case no. 8:18-cv-270, pending in the United States District Court for the Middle District of Florida, Ben Smith, a patient of Community Hospital, filed a complaint alleging that Community Hospital violated the FDCPA and analogous Florida Consumer Collection Practices Act (“FCCPA”) by filing a hospital claim of lien (the “lien”) against Liberty Mutual, Smith’s insurer, in the Circuit Court of Hillsborough County, Florida, where Smith resides.
The lien included the hospital’s logo in the upper left-hand corner, but stated that it was filed on behalf of “Patient Financial Services, a non-profit corporation” and “authorized agent” of the hospital. Community Hospital moved for summary judgment, asserting that neither the FDCPA nor FCCPA apply to a creditor attempting to collect its own debt and that Patient Financial Services is not a separate entity but instead is the hospital’s billing department. Smith filed a cross-motion for summary judgment, claiming that the least sophisticated consumer would believe that Patient Financial Services is a separate entity and that Community Hospital violated various provisions of the FDCPA and FCCPA.
The district court denied both motions. First, the Court held that whether the false name exception applies is a question of fact that must go to the jury based on the evidence in the record. The Court emphasized that the correct standard for the false name exception is whether the least sophisticated consumer would believe that the letter came from the creditor or from a third-party debt collector – not whether the letter was actually sent by the creditor.
Second, the Court held that even assuming that the FDCPA and FCCPA apply, a genuine dispute of fact exists as to whether Community Hospital violated the FDCPA and FCCPA by communicating with Smith after actual knowledge of attorney representation (Section 1692c(a)(2)) or communicating with a third-party (Hillsborough County) without Smith’s consent (Section 1692c(b)).