Judge Grants MSJ for Defendant in FDCPA Case Over Early Out Collection Efforts

A District Court judge in Illinois has granted a defendant’s motion for summary judgment after it was sued for allegedly violating the Fair Debt Collection Practices Act, ruling that the defendant was engaged in early-out collections and that it was not attempting to collect on a debt that was in default when it contacted the plaintiff.

A copy of the ruling in the case of Palacio v. Medical Financial Solutions can be accessed by clicking here.

The plaintiff received medical treatment from a healthcare provider. The provider sent three statements to the plaintiff to collect on the debt. The defendant then sent two statements, indicating that she owed the same amount that was referenced on the three statements sent by the provider. The letters from the defendant including the following information:

“You have an active balance of $495.00 with AMITA Health. To assist you in resolving this balance, AMITA Health has sent your account to Medical Financial Solutions. The amount due of $495.00 is not currently in default…If you are unable to remit payment in full at this time, you may contact Medical Financial Solutions to establish payment arrangements to resolve this unpaid balance as soon as possible……AMITA Health has a Financial Assistance Policy for those who qualify.”

The plaintiff did not make any attempt to collect on the debt, and filed suit after her parents saw envelopes from Medical Financial Solutions on it, which led the plaintiff to explain that she believed she was being contacted by a debt collector. Her suit accused the collector of failing to identify itself and using unfair and unconscionable means of attempting to collect on the debt.

After first ruling that the plaintiff had standing to sue because her parents saw the envelopes, Judge Manish S. Shah of the District Court for the Northern District of Illinois turned to the facts of the case. The agreement between the defendant and the healthcare provider spelled out that the defendant had the authority to act as a collector, but the operations director of the defendant said that it does not collect on bad debt. Ultimately, it was the plaintiff’s burden to show that the debt was in default at the time the defendant was attempting to collect on it, and there was nothing to show that this was the case.

“In sum, it doesn’t matter that defendant is a licensed collection agency or that Amita’s statements set payment deadlines and asked for ‘prompt payment,’ ” Judge Shah wrote. “Plaintiff’s debt was not in default when defendant acquired it, and under the Act, that is enough to conclude that defendant was not acting as a debt collector in relation to plaintiff.”

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