|
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C.
20580
|
Division of Credit Practices
Bureau of Consumer Protection
|
|
November 10, 1992
Mr. Thomas Isgrigg
Vice President
United States Credit Bureau, Inc.
P.O. Box 74929
Los Angeles, CA 90004
Dear Mr. Isgrigg:
This is in response to your inquiry of September 18, 1992 addressed
to David Medine. You state that your agency has collected delinquent
medical accounts for the County of Los Angeles for the past twelve
years. At present, Los Angeles County is proposing a new arrangement
in which you service the medical accounts for the County as follows:
- Your call or letter written to the debtor would indicate that
there is an outstanding balance and that you are posing a series
of questions to the debtor relating to employment, dependents,
assets and liabilities. Once you obtain this information, your
firm is to refer the account back to the County for "a
decision as to the debtor's ability to pay." All phone
contact and letters with the debtor would be made in your name.
The County does not consider such accounts as being "assigned"
to your firm for collection, but rather "referred"
to your firm for the purpose of locating the debtor.
-
- You further state that the County is of the opinion that your
firm would not have to comply with the Fair Debt Collection
Practices Act ("FDCPA"), particularly Sections 809
and 807(11) of the Act, when engaged in this "locating"
service. Your counsel believes that under this new contract,
use by your firm of the firm's name or letterhead when communicating
with any person requires that your firm comply with the Act.
The California Bureau of Collection and Investigative Services,
by separate letter, has advised that failure to provide the
Sections 807(11) and 809 notices would violate the Act and the
California statutes.
It is not clear from your letter whether, under the new contract,
your firm is required to demand and collect payments at the time
it contacts borrowers. Also, it is not clear whether the County
of Los Angeles considers the medical debts as current or in default
at the time they are forwarded to your firm to make the contact
with the debtors as described above. Essentially you ask whether
the consumer contacts envisioned by the proposed County contract
are governed by the Act. The ultimate question is whether United
States Credit Bureau, Inc. acts as a "debt collector"
if it engages in these activities.
The term "debt collector" is defined in Section 803(6)
of the FDCPA as "any person who uses any instrumentality
of interstate commerce or the mails in any business the principal
purpose of which is the collection of any debts, or who regularly
collects or attempts to collect, directly or indirectly, debts
owed or due or asserted to be owed or due another . . .."
Since the ultimate goal of the contacts made by your firm under
the new arrangement proposed by the County is to obtain payment
of patients' hospital bills, it is clear that your firm is regularly
engaged in collecting, or attempting to collect, directly or indirectly,
debts owed to others. As such, this collection effort brings United
States Credit Bureau, Inc. within the definition of "debt
collector" set out in Section 803(6) of the FDCPA and would,
all else being equal, require it to comply with the Act.
You state in your letter, however, that, under the proposed arrangement,
once your inquiries are completed, the accounts will be referred
back to the County for a decision as to the debtor's "ability
to pay." As stated previously it is not clear whether the
County, when it refers the accounts to you under the proposed
arrangement, considers the accounts in default or as accounts
receivable. Section 803(G)(F)(iii) exempts from the above definition
any person who collects debts owed or due another to the extent
that such activity concerns debts that are not "in default"
at the time they are obtained by such person. Whether a debt is
in default is generally controlled by the terms of the contract
between the hospital and patient creating the indebtedness or
applicable state or federal laws or regulations that may define
when a loan is in default (e.g., in the case of direct
or guaranteed loans made or secured by government agencies).(1)
If the accounts, at the time they are referred to your firm, are
not yet in a default status, then the efforts of your firm would
appear to be in the nature of servicing outstanding current accounts
receivable which are not yet in default status. As such, they
would be exempt under Section 803(6)(F)(iii), and no section of
the FDCPA would be applicable to the activities of the United
States Credit Bureau, Inc as outlined in your letter of inquiry
. The status of the accounts when sent to you by the County is,
of course, a fact-specific question.
On a matter unrelated to your inquiry, please be advised that
the use of name of your firm, United States Credit Bureau, Inc.
may violate Section 807(16) of the FDCPA. Section 807 of the FDCPA
provides that "a debt collector may not use any false, deceptive,
or misleading representation or means in connection with the collection
of any debt." Included with the proscriptions of Section
807 is the "false representation or implication that a debt
collector operates or is employed by a consumer reporting agency
as defined by Section 603(F) of this Act."
The FDCPA does not prohibit a debt collector from operating a
consumer reporting agency. However, only a bona fide consumer
reporting agency may use names such as "Credit Bureau,"
"Credit Bureau Collection Agency," "General Credit
Control," "Credit Bureau Rating, Inc,." or "National
Debtors Rating." A debt collection disclaimer in the text
of a letter that the debt collector is not affiliated with (or
employed by) a consumer reporting agency will not necessarily
avoid a violation if the collector uses a name that indicates
otherwise. Whether a debt collection firm that has called itself
a credit bureau actually qualifies for such is also a factual
issue, to be decided based upon the debt collector's actual operation.(2)
The opinions expressed herein are unofficial and not binding
on the Commission, however, they do represent the current enforcement
position of the staff.
I hope this information will be helpful.
Sincerely,
Roger J. Fitzpatrick
Attorney
Division of Credit Practices
1. See, e.g., attached informal
staff opinion to Michael Heninburg, Health Resources and Services
Administration, July 13, 1989.
2. Commentary at 50107.
|
