New Year, New Debt Collection Laws and Regulations Take Effect

The debt industry will almost surely see significant regulatory — and even legal — changes this year when the CFPB issues its new rules. But there are some more immediate changes that have already gone into force or will be very soon.

Medical Debt Collection

The IRS closed out 2014 by issuing new final rules for debt collection and billing practices for non-profit hospitals. A couple of years in the making, the regulations cover how charitable medical providers interact with patients that need financial assistance.

A big part of the final rule is that non-profit medical centers are prohibited from engaging in “extraordinary debt collection practices” until they have made an effort to determine whether a patient is eligible for financial assistance. Under the rule, the extraordinary collection practices are defined as reporting a debt to a credit bureau, filing for wage garnishment, or selling or contracting with third party debt collection agencies.

If the hospital decides to move forward with those debt collection practices, it must notify the patient of the availability of a financial assistance program.

“Reports that some charitable hospitals have used aggressive debt collection practices, including allowing debt collectors to pursue collections in emergency rooms, have highlighted the need for clear rules to protect patients,” Treasury Department deputy assistant secretary for tax policy Emily McMahon wrote in a blog post late last year. “For hospitals to be tax-exempt, they should be held to a higher standard.”

These requirements should impact medical debt collection agencies that count non-profit hospitals as clients. There could be some delay in seeing some accounts placed as providers ramp up compliance with the rules.

Georgia Tax Offset

A new law in Georgia took effect today that allows the state to use residents’ tax refund check to cover delinquent debts from courts and other political subdivisions. HB 1000 passed the legislature last year and was signed into law by the governor.

This law could impact debt collection agencies that focus on Georgia debt now covered by the offset program.

International Debt Collection Laws

Two large economies that are active trading partners with the U.S. are enacting FDCPA-style collection laws this year.

In Mexico, new debt collection rules have already taken effect. Collection agencies must register with the new Registry of Collection Offices. Their behavior is being restricted similarly to the FDCPA, including call time prohibitions (7am to 10pm on business days only) and a ban on third party disclosure.

Thailand also passed debt collection legislation late last year that will go into effect “soon,” according to regulators. The new Thai law very closely mirrors the FDCPA and sets restrictions on call time for debt collectors, third party disclosure, abusive or harassing behavior, and misrepresentation. It goes beyond the FDCPA, however, in establishing criminal penalties in addition to civil redress and bars government officials from operating a debt collection business or collecting debts which are not their own.