UNITED STATES OF AMERICA
November 10, 1992
Mr. Thomas Isgrigg
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:
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.
Roger J. Fitzpatrick
1. See, e.g., attached informal staff opinion to Michael Heninburg, Health Resources and Services Administration, July 13, 1989.
2. Commentary at 50107.