Recent Court Decision Reveals An Important Lesson In Dental Collection Compliance


120504_gavel_2Earlier this month, a precedent-setting case was brought against a Mississippi debt collection agency that once again showcased the importance of having a diligent compliance management process in place in healthcare collections. In the case, Bradley v. Franklin Collection Service, a three-judge panel in Atlanta ruled that a healthcare collection agency violated the Fair Debt Collection Practices Act (FDCPA) for adding a 33% collection fee to a consumer’s healthcare-related debt. And while charging consumers a collection fee is not against collection law, the ruling was made as a result of the wording in the original patient payment contract.

The contract stated that, “In the event of non-payment…I [patient] agree to pay all costs of collection, including a reasonable attorney’s fee…” The plaintiff claimed that they were therefore only responsible for the actual costs of collection and that without evidence of the 33% directly correlating to the true collection costs, the charge would be a violation of the FDCPA. Atlanta’s Eleventh Circuit Court of Appeals agreed and held that,

“…the debt collector violated the FDCPA when it charged the debtor a collection fee based on a percentage of the principal balance of the debt due rather than the actual cost of collection.” (Bradley v. Franklin Collection Service, Case: 13-12276 Page: 6 of 7) 

The court noted that had proper evidence of the 33% collection fee correlating to the actual costs of collection been provided, the healthcare collection agency would not have been in violation of the law.

What the Ruling Means for Dental Collections

A Collector at IC SystemThe ruling against the collection agency highlights the importance of aligning with a dental collections partner that places great emphasis on collecting within the limits of the law, especially in today’s age of increased regulatory oversight. Had closer attention been paid by the collection agency to how the patient payment contract was worded, the case could have been avoided and the ruling would never have taken place. Federal regulators are playing an increasingly large role in healthcare collections and with patient protection at an all-time high, dental offices cannot be too careful when it comes to partnering with a collection agency you can trust. Make sure you choose a partner you are confident will always strictly adhere to collection law and will pay close attention to the payment contracts your patients have signed.

Not only can violations such as the one described in the case above damage your dental practice’s valuable reputation, but you also can be held vicariously liable for compliance violations made by your partner in dental collections. For instance, it is permissible for the Consumer Financial Protection Bureau (CFPB) to conduct an “upstream” investigation of both your collection agency AND you (as the originating creditor) when a compliance violation occurs. Meaning, not only can your collection agency be held responsible (and liable) for violating collection law, but your dental office can be as well. So choose your dental collections partner wisely! And for more information, visit our Resources page to learn more about finding the right collection agency for your practice.

YOUR TURN: Is your dental collections partner charging patients a collections fee in addition to the balance on their account? If so, what are you doing to make sure your collections partner is charging patients appropriately and lawfully? Let us know in the comments!

The information provided in this blog does not constitute legal advice and is intended for educational purposes only.



    • Thank you so much for reading our post, what did you like the best about it?

      Elizabeth Thill

      January 21, 2014

  1. Is it ok to suggest collection proceedings will be started if you do not
    presently have an association with a collection company


    February 12, 2014

    • We would not suggest stating that you’ll be forwarding accounts to an outside collection agency if you do not have one in place, and have no intent to establish a business partnership with an outside collection agency. While this is not legal advice, we view that as a deceptive practice and would not advise you suggest it

      Elizabeth Thill

      February 17, 2014

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