The Court of Appeals for the Ninth Circuit has upheld — albeit in a split decision — a medical debt collection law in Nevada that was enacted in the wake of the COVID-19 pandemic, ruling that the law is not pre-empted by either the Fair Debt Collection Practices Act or the Fair Credit Reporting Act, and is not a violation of the First Amendment.
A copy of the ruling in the case of Aargon Agency, ACA International, Allied Collection Services, AssetCare, Business and Professional Collection Service, Capio Partners, CF Medical, Clark County Collection Service, Collection Service of Nevada, Donna Armenta Law, Nevada Collectors Association, PlusFour, Progressive Management, and The Law Offices of Mitchell D. Bluhm & Associates v. Sandy O’Laughlin can be accessed by clicking here.
The law — SB248 — requires collection agencies to send written notifications to consumers 60 days before taking any action to collect on an unpaid medical debt. Collectors are also barred from filing collection lawsuits if the amount of the medical debt is less than $10,000 and must limit fees to less than 5% of the balance owed.
The plaintiffs filed a lawsuit after the bill was signed into law, seeking a temporary restraining order and a preliminary injunction, which was denied by a District Court judge, leading to this appeal.
Only one of the three judges on the panel were persuaded by the plaintiffs’ arguments. The law is not unconstitutionally vague with respect to the term “any action to collect a medical debt,” doesn’t violate the First Amendment because debt collection communications are commercial speech and thus not covered, and is not pre-empted by either the FDCPA or the FCRA, two of the three judges determined. The 60-day notice prevents collection agencies from providing consumers with the mini-Miranda notice, but the 60-day notice is not an attempt to collect a debt and therefore does not require the mini-Miranda, the two judges ruled.
In a dissenting opinion, Judge Lawrence VanDyke — a former solicitor general of Nevada — disagreed with his brethren, saying that “common sense” shows the 60-day notice is an attempt to collect on a debt. “The only reason that a debt collector sends a Section 7 Notice is so that he can later start collecting a debt,” Judge VanDyke wrote. “It is impossible to imagine a situation where a debt collector would send such a notice except in pursuit of his goal of ultimately obtaining payment for (i.e., collecting) the debt.”
