ACA International, the Nevada Collectors Association and other stakeholders applied for a temporary restraining order and preliminary injunction enjoining enforcement of Nevada S.B. 248. Editor’s note: This article is available for members only.
On June 28, ACA International, the Nevada Collectors Association (NCA) and 14 other plaintiffs — including nine local collection agencies and law firms — collectively filed an emergency motion for a temporary restraining order seeking to prevent Nevada S.B. 248, recently enacted by the Nevada legislature, from taking effect on July 1.
The new law requires debt collectors, as defined by statute, to provide medical debtors with a 60-day notice of placement or assignment before the debt collector takes any action to collect a medical debt. It also prohibits certain practices relating to the collection of medical debt, including restrictions on civil actions to collect medical debt, restrictions on credit reporting medical debt, and restrictions on collection fees (including attorney’s fees) that can be added to medical debt balances.
As previously reported, ACA, NCA and other stakeholders filed a lawsuit in the U.S. District Court for the District of Nevada on Friday against Sandy O'Laughlin, commissioner of the Nevada Financial Institutions Division (NFID), seeking to prevent S.B. 248 from taking effect unless and until the state provides clarity on the bill’s requirements.
“There can be no dispute that S.B. 248 is a terribly written piece of legislation,” according to ACA’s emergency motion. “It seems to be designed more to disrupt the collection industry for the sake of disrupting it, rather than finding meaningful ways for genuine reform. It is so poorly written it does not even contain a severability clause, which would provide that if any part of S.B. 248 is held unconstitutional, those parts would be severed from the bill and the remainder would be ‘saved.’”
Among other things, the motion argues that:
- S.B. 248 is preempted by the Fair Credit Reporting Act.
- The plaintiffs will suffer immediate irreparable harm absent the court’s imposition of injunctive relief.
- The deprivation of constitutional rights, including First Amendment rights, constitutes a “significant public interest” that outweighs the state’s interest in protecting its citizens.
- It is in the public interest to enjoin an unconstitutional law.
In addition, as of June 28, the case has been reassigned to Judge Richard F. Boulware, II, and referred to Magistrate Judge Brenda Weksler, after Judge James C. Mahan recused himself from the case.
ACA’s Legislative Advocacy Efforts in Response to S.B. 248
ACA members including ACA President G. Scott Purcell, president of Professional Credit, NCA President Tim Myers, business development at Clark County Collection Service LLC, and ACA Board Member Christian Lehr, president of Health Care Collections-I LLC, testified in opposition to the bill before the Nevada Assembly Committee on Commerce and Labor April 23.
Their testimony expressed concerns about the payments process from consumers who may want to make a voluntary payment during the proposed 60-day waiting period before collection actions can begin, ACA previously reported.
The Nevada Senate approved the bill on April 12; the assembly approved it with amendments on May 21; Governor Sisolak signed the bill into law on June 2.
After the amendments and additions to S.B. 248 that were approved on May 10, some of which reflected and responded to ACA members’ concerns, the final bill includes the following provisions:
- A definition of “medical debt” that includes the financing or an extension of credit established by a third party solely to purchase goods or services provided by a medical facility, a provider of health care or a provider of emergency medical services.
- Under this definition, however, medical debt does not include open-ended or closed-ended credit furnished by a financial institution to a borrower and used, at the borrower’s discretion, for the purchase of goods or services provided by a medical facility, health care provider, or provider of emergency medical services.
- At least 60 days before taking “any action” to collect a medical debt, a debt collection agency must send to the medical debtor via registered or certified mail a notice identifying the name of the collection agency and informing the medical debtor that it has been assigned or otherwise obtained the medical debt for collection.
- This 60-day notice must set forth the name of the medical facility, health care provider or emergency medical services provider that furnished the goods or services for which the medical debt is owed; the date on which those goods or services were provided; and the principal amount of the medical debt.
- Debt collectors may still accept “voluntary payment” from medical debtors within the 60-day waiting period so long as the medical debtor initiates the contact with the collection agency and the collection agency discloses to the medical debtor both that “payment is not demanded or due” and that the medical debt will not be reported to a credit reporting agency during the 60-day waiting period.
- Any voluntary payment by a medical debtor to a collection agency shall not extend the applicable statute of limitations for that debt.
- Any voluntary payment made by a medical debtor to a collection agency shall not constitute an admission of liability for the medical debt and shall not be construed as a waiver of any defenses to the collection of the medical debt.
- The new law expressly states that the protections set forth in it shall be deemed remedial — i.e., for the purpose of protecting the medical debtor — and cannot be waived.
ACA members who testified during the state’s legislative session expressed that the bill will limit health care providers’ solutions for recovering past-due receivables; will limit consumers’ access to affordable health care; and will create confusion for debt collection agencies, attorneys and consumers alike because of tensions and conflict between applicable state and federal law.
“We’ve got really good frameworks in play, and I feel like this [bill] is really well intended but is going to hurt providers, which will reduce access and increase costs for the materially poor and the middle class,” Purcell said during his April testimony. “I don’t think [that] is what everybody is trying to accomplish."