The regulations likely will not be finalized until at least January 2022, but the proposed draft points to key interpretations that the agency has proposed to promulgate. Editor’s note: This content is available for members only.
The Nevada Financial Institutions Division has issued draft proposed regulations on S.B. 248 as requested by U.S. District Judge Richard F. Boulware II, who has been presiding over proceedings on an emergency motion for a temporary restraining order (TRO) in a lawsuit filed by ACA International, the Nevada Collectors Association (NCA) and 14 other plaintiffs. Testimony during an Aug. 16 evidentiary hearing focused on the risk of litigation to licensed collection agencies and increased costs because of S.B. 248—but more importantly on whether the law is constitutional, ACA previously reported.
The proposed regulations are only in draft form and therefore do not impose any requirements on ACA members subject to S.B. 248, but they may indicate what’s to come as the NFID works to finalize the regulations.
Based on the timeline from the NFID, final regulations would not be issued until January 2022 at the earliest. The regulatory process includes a small business impact survey and a workshop on the draft regulations.
The draft proposed regulations would be adopted under the Nevada Administrative Code.
S.B. 248, which became effective on July 1, requires debt collectors that collect medical debt, as defined in the law, 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.
“Action to Collect a Medical Debt”
Section 7 of S.B. 248 prohibits debt collectors collecting medical debt from “taking any action to collect a medical debt” within 60 days of sending the Section 7 Notice to a medical debtor.
The draft proposed regulations would define “action to collect a medical debt” as used in Section 7 to mean any attempt by a collection agency, or its manager, agents or employees to collect a medical debt from a medical debtor, including, without limitation:
- Placing telephone calls to a medical debtor.
- Sending communication letters and notices to a medical debtor, other than the 60-day notice required pursuant to S.B. 248.
- Contacting a medical debtor by any electronic means.
- Reporting the medical debt to any credit reporting agency.
- Demanding payment.
- Commencing any civil action.
Under the proposed regulation, “action to collect a medical debt” would not include “any action” initiated by a medical debtor; providing clarification about the “content of a Section 7 notice” if the contact is initiated by the medical debtor; sending the medical debtor verification of the medical debt if they request it; or sending the medical debtor a receipt for a voluntary payment.
The Section 7 Notice
The draft proposed regulations do shed more light on the Section 7 Notice itself, providing that Section 7 Notices need not be sent if sent by a prior collection agency, but must be retained as part of a collection agency’s file, even if sent by a prior agency, to demonstrate compliance.
In addition, the proposed regulations state that Section 7 Notices are not intended to be communications under the FDCPA. That regulatory statement, however, may not be enough to resolve the tension between S.B. 248 and the FDCPA for collection agencies facing private-party FDCPA lawsuits.
A Step Forward
Regardless, the NFID’s issuance of these proposed draft regulations should be viewed as a positive development driven by ACA’s lawsuit. As of mid-July, the NFID had no plans to issue regulations regarding S.B. 248. In the course of the proceedings on ACA’s motion for a temporary-restraining order, Judge Boulware required the NFID to clarify its intent regarding potential regulations and propose a timeline for the issuance of those regulations. Those proceedings appear to have prompted the issuance of these proposed draft regulations.
Despite the fact that the regulations remain in draft form and will not be final for months yet, they point to key clarifications for ACA members.
ACA and the other parties await Judge Boulware’s ruling on the emergency TRO motion. That order could enjoin the enforcement of S.B. 248 temporarily, or it could simply find that, at this juncture, ACA and the other plaintiffs have not sufficiently demonstrated a likelihood of success on the merits of the case.
Following last week’s hearing, the plaintiffs filed an amended complaint to clarify some of the claims in the lawsuit, e.g., that S.B. 248 violates the FDCPA by creating a false sense of urgency when a medical debt collector sends written notification to a medical debtor via certified mail.
Additionally, following testimony and questioning on Aug. 16, Boulware offered Steven Shevorski from the Nevada Attorney General’s Office on behalf of the defendants, and Patrick Reilly, partner at Brownstein Hyatt Farber Schreck LLP, and David Israel, senior partner at Sessions, Israel & Shartle LLC, on behalf of the plaintiffs, the opportunity to present requests to file additional testimony not shared during the hearing before he issues a ruling on the injunction and the TRO.
At that hearing, Reilly reiterated the plaintiffs’ request for a TRO while the NFID promulgates the regulations, but Boulware said his approach would be to first evaluate the facial challenge that S.B. 248 is unconstitutional.
In a previously filed a response to the NFID’s intent to promulgate regulations, plaintiffs in the lawsuit have asserted that the NFID’s timeline appears to be “optimistic” based on prior rulemakings, and asked that the TRO be granted while the regulations are finalized.
“If the state can issue clarifying regulations that can correct the constitutional defects in S.B. 248—and plaintiffs are interested to see how—then the temporary restraining order and preliminary injunction can be lifted by this [c]ourt when completed,” Reilly states in the plaintiff’s response. “But Nevada residents and collection agencies should not be left in limbo for months and potentially years waiting for the [NFID] to fix a bill that is constitutionally infirm.”