The Court of Appeals for the Ninth Circuit has affirmed a lower court’s decision in granting summary judgment for the defendants in what is known as a “flat-rating” case after a plaintiff alleged a collection agency violated the Fair Debt Collection Practices Act by implying it was meaningfully involved in collecting on an account.
A copy of the ruling in the case of Echlin v. PeaceHealth, d/b/a PeaceHealth Southwest Medical Center and Computer Credit, Inc., can be accessed here.
The collection agency and the healthcare facility had a longstanding arrangement where the hospital would place unpaid accounts with the collection agency, after which the agency would send two collection letters to those individuals who had not paid their debts. If no payment was received after the two letters were sent, the accounts were then returned to the hospital.
For performing the process of sending two letters, Computer Credit was paid a fixed fee by the healthcare company. Once an account was placed with the agency, an employee would review the information for red flags before determining whether to send the first collection letter.
The letters were sent on agency letterhead and directed individuals to a website owned and maintained by the agency that offered payment information and other details about the debt. The first letter asked the plaintiff to make a payment in order to “prevent further collection activity by” the agency.
By implying that further collection activity may be on the horizon, the plaintiff alleged the defendant violated the FDCPA, specifically Section 1692e(5), which states collectors are prohibiting from threatening to take any action that can not be legally taken or that is not intended to be taken. Outside of sending a second letter, the defendant had no authority to take any further collection action, the plaintiff alleged.
That claim was not originally included in the complaint and would not have been allowed in a second complaint, a District Court ruled, because by then, the one-year statute of limitations had expired.
Section 1692(j) of the FDCPA prohibits flat-rating, which occurs when someone impersonates a debt collector when that individual has no involvement in the collection effort.
From the Appeals Court:
Although CCI could not negotiate, process, or seek to compel repayments, it participated in the attempts to collect debts owed to PeaceHealth in a variety of other ways. Undisputed evidence in the record shows that: (1) CCI independently screened accounts for barriers to collection; (2) CCI alone drafted and mailed the collection letters, without input from PeaceHealth; (3) the letters invited debtors to contact CCI by mail or phone and CCI trained its personnel to handle such inquiries; (4) CCI in fact received approximately 500 calls a week from debtors of its various clients and received several hundred pieces of mail from PeaceHealth debtors; (5) in their conversations with debtors, CCI staff provided a variety of information about their debts and how to repay them; (6) CCI maintained a website where PeaceHealth debtors could access individualized information about their debts and submit documents to CCI; and (7) CCI sometimes received and forwarded to PeaceHealth payments it received from debtors. Certainly, CCI could have been more directly interested in the outcome of PeaceHealth’s attempts to collect on patients’ debts. Nonetheless, CCI’s assistance in facilitating those efforts went beyond acting simply as a mailing house for PeaceHealth.
