In an earlier article, we talked about Regulation F and some of the lawsuits that claim debt collectors were not following the rules and the importance of using the “Service Date” (Transaction Date) for the itemization date on validation notices.
At Americollect, we follow this advice and are happy to explain why we initially made the choice to use service date on validation notices.
Why Use Service Date?
As part of Regulation F, the Consumer Financial Protection Bureau (CFPB) allows one of five dates to be used as the itemization date under the Fair Debt Collection Practices Act (FDCPA). Those dates are:
- Last statement date
- Last payment date
- Charge-off date
- Judgement date
- Transaction date (service date)
So why not use another date, such as the charge-off date? We choose to use the transaction date (service date) because there is always a date of service for accounts referred to Americollect. Unfortunately, the same cannot be said for a charge-off date.
The charge-off date, an accounting term, “is the date the debt was charged off.” An account is charged off on the date of which the creditor (in this case the hospital) charges the account to profit/loss on its books and records. It is possible for a creditor to charge off the account on or before it lists the account with a third-party debt collector. Generally, that is not the case with medical debt, as debts are typically not charged off until after a third-party debt collector has attempted to collect on the account.
Even if an account is charged-off when it is placed with Americollect and there is a charge-off date, we still use the transaction date (service date) because that is what was intended to be used for medical debt. The CFPB says that the debt collectors’ use of any one of the five itemization dates should correspond with events in the debt’s history that consumers may recall or be able to verify with records. Additionally, the CFBP explains that its intent for an itemization date is that it results, “in reasonably meaningful and recognizable debt amounts for consumers.”
Where can Charge-Off Dates go wrong?
The FDCPA puts a broad prohibition on the use of any false, deceptive or misleading representation or means in connection with the collection of any debt. At times, when the charge-off date is used, it can be confused with the list date for the debt. If an agency inaccurately uses the wrong date, they would be providing false information and run the risk of FDCPA lawsuits. Even when the medical debt is actually charged-off, an agency still runs the risk of being sued under the FDCPA if using the charge-off date on its validation notice because the charge-off date is not “reasonably meaningful and recognizable” when it comes to medical debt.
Additionally, telling a consumer that a medical debt is charged-off could be interpreted as a scare tactic by a plaintiff’s attorneys and consumer advocates because companies do report charge-offs to the credit bureaus, and a charge-off is considered a serious negative event in a credit file.
An agency collecting medical debt could easily be sued over this as a false, deceptive or misleading representation or means in connection with the collection of any debt because a charge-off can only be reported to the credit bureaus for certain types of accounts, including credit cards, installment loans and lines of credit.
Service Date is Ridiculously Nice!
Americollect always focuses on being Ridiculously Nice, and part of that is ensuring that we present information to patients in the clearest possible way. Using the transaction date (service date) is the best way for your collections partner to safeguard your facility from the problems that come from using other itemization dates that are not as clear and understandable as the transaction (service) date.
If you are interested in learning more about Americollect’s Ridiculously Nice Early Out and Bad Debt Collections services, contact us today!