The Court of Appeals for the Ninth Circuit has affirmed a ruling in favor of a credit reporting agency sued for violating the Fair Credit Reporting Act but overturned a ruling in favor of a collection operation for allegedly violating the Fair Debt Collection Practices Act on the grounds of whether the plaintiff actually owed the debt to the creditor — a hospital.
The background: The case stems from a debt incurred by the plaintiff following medical care at a hospital. The plaintiff argued that the debt should have been covered by Washington’s Medicaid plan or through charity care, and thus she did not owe it. When the debt went unpaid, it was assigned to a collection agency, which began reporting the debt to the credit reporting agencies.
- The plaintiff disputed the validity of the debt, claiming that the hospital had failed to process the insurance claims correctly, leading to the debt being improperly assigned to collections.
- The debt was ultimately discharged in early 2021 under Washington’s Charity Care Act after the plaintiff provided the necessary information. The collection agency and the credit reporting agency were subsequently sued by the plaintiff, who alleged that the debt should not have been reported because it was not legally owed. The plaintiff’s claims included violations of the FCRA and the FDCPA.
The ruling: The Court of Appeals for the Ninth Circuit upheld the lower court’s decision to dismiss the claims against the credit reporting agency, agreeing that it had no obligation to resolve disputes related to the legal validity of the debt.
However, the Ninth Circuit vacated the summary judgment that had been granted in favor of the collection agency regarding the alleged FDCPA violations. The court highlighted that there were unresolved factual questions about whether the plaintiff actually owed the debt at the time it was assigned to collections. Specifically, the plaintiff argued that Washington law prohibits healthcare providers from directly billing Medicaid patients for covered services, even if Medicaid initially fails to pay. The court noted that while this is generally true, exceptions exist when a patient fails to complete necessary paperwork or provide accurate information for billing.
The appeals court found that there were genuine issues of material fact regarding whether the plaintiff was responsible for failing to provide the necessary information, such as her date of birth and details about her third-party insurance. Given this uncertainty, the Ninth Circuit determined that summary judgment was inappropriate and remanded the case back to the district court for further proceedings.
