Sometimes consumers do win. The Federal Trade Commission just announced a $1 million settlement with debt collection agency CAMCO (Capital Acquisitions and Management Corp.) and affiliated companies. The company was sued back in December 2004 for the kinds of abusive, illegal and deceptive debt collection practices that consumers often complain about:
Trying to collect "zombie debts" — debts so old that they are beyond the statute of limitations and cannot appear on credit reports; and pressuring consumers to pay debts that don’t even belong to them.
While the FTC doesn’t get involved in individual disputes, you should complain to them about unfair debt collection or creditor practices, because they will collect those complaints and take action if they find a pattern of abuse by a particular company. They also report annually to Congress on debt collector complaints they receive, and it’s important for consumers to weigh in. It just takes a moment to file a complaint at FTC.gov.
And speaking of debt collectors, one of the trickiest collection issues these days is a medical bill that ends up in collections, usually because the consumer thought the insurance company should or would pay for it. It is especially frustrating to consumers who always always pay their bills on time but wind up with damaged credit because of a small bill. And it’s also unfair to consumers who are injured or ill and can’t stay on top of every single little bill, to add long-term injury to their credit reports.
We’ve blogged on that topic here on CreditBloggers before, and now I have some more advice to pass on to you. Here is the question I received from a reader:
Peter was monitoring his credit when he discovered a collection account on his credit report. It turns out it was for medical services received in 2005. He paid his co-pay at the time of treatment and never knew that his insurance didn’t pay the balances, because the Explanations of Benefits were sent to another address. (Apparently the doctor didn’t bill him directly, either.) Now his credit has taken a serious hit. He also mentions the medical office that turned him over to collections won’t return his phone calls.
Robert Brennan, a savvy consumer law attorney with experience in credit cases (and a website with helpful info on credit damage cases), offers this advice:
"Gerri, I’ve seen this in a lot of cases where the patient signs a fine-print admission form stating that he/she is fully responsible for the costs of the treatment. First thing is, tell consumers to find that clause in the admissions forms and cross it out, replacing it with, "If my insurance does not pay, I will not be responsible for any unpaid balances other than the agreed-upon deductible." That puts the pressure back on the doctor’s office to go after the insurance company, not the patient.
Unfortunately a lot of medical insurance contracts have a fine-print clause stating that you have to dispute a denial of benefits within one year of denial, and a lot of patients do not even learn of the denial until much later. If this is the situation, have consumers contact the state insurance commissioner, which can frequently pressure the insurer into paying. Also, the insurance company is supposed to give notice if it’s declining benefits, and if the patient did not receive the notice, this is another "arrow in the quiver" for the consumer.
If this happened to me, I simply would not pay. I’d write a letter back to the collector and the creditor telling them that I would be glad to assist them with making a claim against the insurance policy, but the treatment should have been covered by the insurance policy and therefore I’m not paying and if they persist, I would file a bad faith claim against the insurance company as well as a wrongful debt collection claim against the debt collector. If the consumer keeps the letter professional and sincerely offers his/her assistance in making a claim against the insurance policy (documenting everything, of course), that of course makes the consumer look better later on down the road in case the consumer does need to pursue litigation.
By the way, most experienced debt collectors are very handy at making claims against an insurance policy if they think it will get the debt paid. I’ve seen it a lot."
Robert adds, "This is a good example of why you should (and I believe you do) advise your clients to pull their credit reports at least 3 to 4 times a year, to catch stuff like this and dispute it early.
Remember, even if the patient has signed a financial responsibility statement, he/she can still dispute the credit reporting and have it entered on their credit reports as a disputed debt because there is a dispute–whether the insurance company should pay for it."
I’ll add to Robert’s comments by reiterating my earlier advice: If you have a problem with a medical collection account damaging your credit, speak up! Let us know about your experience here, and also file a complaint with the FTC. The only way the rules will change is if we all start demanding they do!