In a recent decision out of the Middle District of Tennessee, a medical provider’s third-party billing servicer did not qualify as a debt collector under the Fair Debt Collections Practices Act (“FDCPA”) because the debt was not in default when it was placed with the extended billing office. The issue on summary judgment was simple: whether the Defendant, NPAS, Inc. (“NPAS”) is a debt collector as defined by the FDCPA. The Court held that, as the debt was not in default when given to NPAS, that NPAS was not a debt collector, and thus not subject to the FDCPA.
Ward’s allegations stemmed from two medical visits he made to Stonecrest Medical Center (“Stonecrest”). On each visit prior to receiving treatment, Ward signed an agreement acknowledging that Stonecrest may use a third party as an extended business office (“EBO”) for account and billing services, and that the account will not be considered past-due or in default while placed with the EBO. NPAS Inc. (“NPAS”) sent two statements to Ward including a payment due date and a payment request and left two voicemails for Ward. Ward subsequently filed suit, alleging that NPAS violated § 1692(d) and (e) of the Fair Debt Collections Practices Act (“FDCPA”) by failing to disclose its identity when contacting Ward, failing to notify Ward that it was attempting to collect a debt, and by failing to use its full “true name” in its voicemail messages.
NPAS subsequently moved for summary judgment arguing that it is not a debt collector as defined by the FDCPA. The Court agreed, holding that NPAS does not fit the FDCPA’s definition of a debt collector as Ward’s debt was not in default when the account was handed to NPAS.
Noting a lack of clarity from Congress as to the definition of “in default,” the Court instead looked to neighboring circuits, which have held that entities such as NPAS do not qualify as debt collectors under the FDCPA. The Court looked to the agreements signed by Ward before each visit, and concluded that the debts were not in default when placed with NPAS, as the agreements stated that while the account was with NPAS, it would not be considered delinquent, past due, or in default. The Court further found that NPAS did not treat the debt as in default, as it did not charge any interest or late fees, refer the account to an outside law firm, or report the debt to consumer reporting agencies.
Ultimately, the Court found that Ward had failed to pay on the account while it was serviced by NPAS, that Stonecrest would not deem the debt to be in default until NPAS’s efforts proved unsuccessful, and the account was returned to Stonecrest. Because the accounts could not have been in default until NPAS returned them to Stonecrest, the Court found that NPAS was not a debt collector as defined by the FDCPA, and dismissed Ward’s suit.
This case demonstrates the importance of clarity when it comes to account statements. NPAS opted to use language such as “current balance” on the statements to Ward instead of the more familiar “amount due” or “default”, which may have led the Court to a different conclusion. It also underscores the importance of clear and explicit disclosures in services agreements, as the medical services agreements signed by Ward expressly laid out the scope of NPAS’s involvement.