Last week, the Ninth Circuit Court of Appeals affirmed a lower court’s denial of preliminary injunctive relief to plaintiffs challenging Nevada Senate Bill 248 (S.B. 248), which places new restrictions on the collection of consumer medical debt. In doing so, the court found the bill neither ran afoul of the First Amendment, nor was preempted by the federal Fair Debt Collection Practices Act (FDCPA) or Fair Credit Reporting Act (FCRA). Read on for further analysis.
By way of background, S.B. 248 amended chapter 649 of the Nevada Revised Statutes governing debt collection agencies. Passed in response to the uptick in needed medical care caused by the COVID-19 pandemic, S.B. 248 was designed to protect Nevada consumers from potential financial ruin caused by medical debt by imposing new restrictions on the collection of such debt. Among other provisions of the bill, § 7 requires debt collection agencies to send written notification to medical debtors 60 days before taking any action to collect such debt (Section 7 Notice). The Section 7 Notice must inform the debtor that the “medical debt has been assigned to the collection agency” for collection or that the “collection agency has otherwise obtained the medical debt for collection.” During the 60-day period following the notice, a collection agency cannot take “any action to collect a medical debt.” Voluntary payments during the 60-day period are permitted, but a debt collector must disclose to the debtor that “payment is not demanded or due,” and that the “medical debt will not be reported to any credit reporting agency during the 60-day notification period.” Implementing regulations define “action to collect a medical debt” as “any attempt by a collection agency or its manager or agents to collect a medical debt from a medical debtor” and provide examples of what are, and are not, “attempts” to collect such debt.