A scary fact floats in the ether; one that every day affects far too many people yet flies much too far under the radar.
Nearly 20% of people have medical debt in collections.
But what does that even mean? What is “collections”? What does a collection agency do? And how does this impact your life? Lucky for you, we will explain it all.
Welcome to Collections 101: Intro to Collections.
It all starts with a trip to the doctor’s office. You go in, pay your co-pay, see the doctor, and then head home. Perhaps you get a prescription, or maybe a referral to a specialist. Possibly the doctor tells you to get more sleep or go on a diet. No matter what happens at the appointment, what happens afterward remains somewhat the same–doctors take notes of the services they provided to the patient, those notes turn into bills, and those bills have to be paid.
Because most people utilize insurance to pay for healthcare, those bills get sent to insurance providers. Insurance providers then review the bills and either deny the claims or pay for the services. They also send an explanation of benefits (EOB) letter to you, the patient, explaining what they’re paying for and what your responsibility is. But that EOB letter is not a bill–it’s more like a warning. It’s the insurance provider giving you a heads up that, “Hey, you’ve got a bill coming your way!”
Because the world is never as efficient as it should be, after the insurance providers have either paid or denied the claims, the doctor also has to send you a bill. Typically this happens via mail, and often the only way to pay these bills is over the phone or by mailing a check.
By the time you get your first bill, it is usually several weeks after your appointment. If the doctor doesn’t hear back from you after sending the first bill, they will usually send another a month or so later, and then another a month after that. Different clinics have different policies regarding how long they will attempt to collect payment. When they have hit the end of their in-house collection window, they will typically "send you to collections” by contracting with a debt collection agency to assist them in collecting the debt.
Debt collection agencies typically make money on a contingent basis. This means that they only make money when they get you to pay your bill. This works in favor of the doctors because they don’t have to pay the agencies unless they get their payment. However, this results in some unfortunate tactics by debt collection agencies. These agencies often will send you nasty letters and harass you via phone call, and they’ll even place the debt on your credit report.
After your doctor’s office turns your debt over to a collection agency, a 180-day waiting period begins. At the end of this waiting period, the collection agencies can report the debt to the credit bureaus, an action that negatively impacts your credit score. Collection agencies have been known to illegally “park” debt on credit reports, waiting until you are at your most vulnerable point to coerce you into paying the debt (more on that here).
The Fair Debt Collection Practices Act
In the 1970s, Congress found debt collection practices so harmful that they enacted the Fair Debt Collection Practices Act. Congress had found “abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.” They explained that “abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.” In other words, the debt collection industry was so abusive, deceptive, and unfair that Congress felt it necessary to step in and pass laws to protect consumers.
Still, debt collectors can call, text, and send you letters. They can also contact your friends and family to find your address, home phone number, and even where you work. Oh, and if you think that sounds bad, you’ll be horrified to learn that they can sue you and then garnish your wages. Then, even when your debt is so old that they can no longer sue you, they can still contact you and ask you to pay it!
Essentially, debt collectors have the power to harass you in pursuit of payment as long as they stay within the bounds of the Fair Debt Collection Practices Act.
What can you do if you get sent to collections?
First, ask for a written “validation notice.” Collectors are required to send this to you within five days of contacting you for the first time; this notice will tell you how much you owe, to who, and what to do if the debt is not yours.
Second, if you don’t think you owe the debt, send the debt collector a letter asking for verification of the debt. If you send your request within 30 days of the validation notice, the collector is required to send written verification of the debt before attempting to collect the debt again.
Third, you can stop a debt collector from contacting you by simply sending a letter asking for the contact to stop. It is wise to send this via certified mail and request a return receipt so that you can be sure that the collector received the mail. After the collector has received this request, they can only contact you for two reasons: to tell you about a specific action they are taking–like filing a lawsuit–or to confirm that they will stop contacting you.
Finally, the most prudent thing you can do is seek legal counsel. While the tips above are helpful (you can find more information like this on the Federal Trade Commission’s website), they’re not legal advice. Experienced lawyers can provide more nuanced advice that is catered to your specific situation. And there are many free or low-cost legal assistance options that you can utilize if you’re struggling to afford a lawyer.
If you are being, or have been, contacted by a debt collection agency, don’t stand idly by. Even with the Fair Debt Collection Practices Act’s restraints, debt collectors still hold a serious amount of power. They can and will harass you and harm your credit. Don’t ignore them. Seek help and do your best to take control of the situation. The law exists to protect you, and with proper guidance, you can find a beneficial solution.