Judge Defines ‘Default’ When Granting Defense’s MSJ in FDCPA Case Over Medical Debt

A District Court judge in Indiana has granted a defendant’s motion for summary judgment after it was sued for violating the Fair Debt Collection Practices Act and, at the same time, grappled with a provision of the statute that probably should not be so ambiguous — when does a debt go into default?

A copy of the ruling in the case of Wagoner v. NPAS can be accessed by clicking here.

The defendant is a collection agency that specializes in collecting early-out healthcare debts. A healthcare organization treated the plaintiff three times and her child once during the course of 2017. The facility had a contract with the defendant to service its accounts between 30 and 64 days after the dates of service and discharge. The defendant sent two statements to the plaintiff. Both statements said the defendant “is a company that is managing your account for the healthcare provider” and the second statement included a disclosure, warning that “if payment in full is not received, your account may be referred to a debt collector without further notice.”

The plaintiff filed suit, alleging the defendant did not make the required disclosures under the FDCPA. The defendant argued that it was not required to do so because the debts were not in default at the time that statements were sent, which is a requirement for a debt to be covered under the FDCPA.

Under the FDCPA, a debt collector is defined as “any person collecting any debt owed or due or asserted to be owed or due another to the extent such activity . . . concerns a debt which was not in default at the time it was obtained by such person[.]” But the FDCPA does not define default or how to determine whether a debt is in default.

Judge Damon Leichty of the District Court for the Northern District of Indiana, South Bend Division, was left to try and figure out whether the debts in question were in default or not when the defendant sent its statements to the plaintiff.

Because, at the time the statement were sent, the plaintiff had no idea how much she owed and the facility never gave her a bill each time she was discharged, and because no interest had accrued on the debt and no payments had been missed, there is no way the debts could be considered to be in default, Judge Leichty ruled.

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