California Legislature Passes AB1020

The California state Senate has followed the Assembly in passing AB1020, a bill that would restrict hospitals from selling certain patient debts, require collectors to certify that patients have been screened for public programs and financial assistance before filing a collection lawsuit, and extend the period before a debt could be placed with a collection agency until 180 days after the initial billing, among other provisions.

The bill now moves to the desk of Gov. Gavin Newsom for his signature or veto.

In order to be eligible to sell a debt, hospitals must ensure the patient is ineligible for financial assistance or that the patient has not responded to any attempts to bill or offer financial assistance for 180 days, include language in the agreement selling the debt allowing the debt buyer to return the debt if the balance has been determined to be incorrect due to the availability of a third-party payer, restrict the debt buyer from reselling the debt, prohibit the debt buyer from charging interest or fees, and sell only to an entity that is licensed by the state’s Department of Financial Protection and Innovation.

Collectors and debt buyers are prohibited from making written statements to individuals attempting to collect on a debt unless they possess specific information, including:

  • The debt balance at charge off and an explanation of the amount, nature, and reason for all post-charge-off interest and fees
  • The date of default or the date of the last payment
  • The name and an address of the charge-off creditor at the time of charge off, and the charge-off creditor’s account number associated with the debt
  • The name and last known address of the debtor as they appeared in the charge-off creditor’s records prior to the sale of the debt
  • The names and addresses of all persons or entities that purchased the debt after charge off, including the debt buyer making the written statement
  • The California license number of the debt buyer

Debt buyers are also required to make additional disclosures when collecting and possess specific information when filing collection lawsuits.

Hospitals are required to send patients information about charity care and financial assistance before placing a debt with a collector.

AB1020 was introduced by state Assemblymember Lauren Friedman, a Democrat. It was referred out of committee in May via a unanimous vote and passed in the state Assembly by a vote of 65 to three. 

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