Today's Trends in Credit Regulation

Consumer Debt Collection Anecdotes
By Elizabeth C. Yen

I have received a few debt collection communications concerning personal medical bills and state income taxes that might be of interest to financial services providers and their debt collectors. If my personal experiences are at all representative, non-mortgage lenders should think about "continuity of contact" and other account servicing issues that might bleed over from the mortgage world.

A few years ago I received a form letter from a debt collector, asserting that I was unethical and irresponsible because I had not paid a certain medical bill. The amount claimed was small (less than $200) and the debt was about three years old. This was the first time I had been told this debt was outstanding. The debt was owed to a physician who had treated my father, and I had a Blue Cross/Blue Shield explanation of benefits showing the exact amount in question having been paid to the physician three years earlier. (If any portion of the physician's bill had not been covered by insurance, I would have paid the balance due after receiving an invoice, acting as my father's attorney-in-fact, and I would have kept a record of that payment.) I telephoned the debt collector using the phone number in her collection letter, and offered to send her a copy of the explanation of benefits. She said this was not necessary - apparently it was within her discretion to write off debt under a certain dollar amount as uncollectible without any further documentation, so she preferred to take that route. When she asked if there was anything else she could do (apart from zeroing out my father's account balance), I asked for a formal apology and retraction because I thought her letter was rude (and incorrect). She refused - she told me that she was not authorized to issue apologies. Apparently her job was limited to sending debt collection letters, answering the phone if debtors called, and either accepting payments or writing off small accounts. Her job evidently did not include apologizing for erroneously sending debt collection letters for accounts that were already paid in full. It was not clear whether she had drafted the collection letter in question or whether the physician's office had approved the wording of the letter. Fortunately for all concerned, my father was not applying for credit at that time and would not have been adversely affected if the physician's office reported his account as past due and written off. I was apparently dealing with an independent contractor doing debt collection work from her home, and decided I had reached a reasonably satisfactory resolution of the matter under the circumstances. However, I wonder whether these types of erroneous debt collection letters generate extra income for billers, above and beyond what they are actually entitled to receive, because other customers might not keep their explanation of benefits and similar payment-related records for three years.

About a year ago, I had a routine preventative medical scan done that was supposed to be completely covered by my medical insurance without any deductible or other charge to me. The outpatient facility where the scan was performed submitted a bill to the insurance company with a typographical error (apparently they used a comma instead of a period in a procedure code), so their claim was processed as a non-preventative medical procedure and I was billed for my share since I had not yet used up my deductible. I appealed informally to the insurance company (not knowing at that time about the typographical error) and received a form letter indicating that the insurance company could only process claims based on submitted procedure codes, not based on supplemental information provided by the insured patient. So I telephoned the facility to ask whether they could resubmit using the correct procedure code (I still did not understand that the error in the submitted code was a comma instead of a period), and was told that all such requests must be made by the physician who actually used the facility - I apparently had no authority to unilaterally ask the facility to change a procedure code since my physician had chosen to use the facility, and I did not have a direct patient relationship with the facility. (I also understand that medical providers resist changing procedure codes for a variety of reasons, even if requested by a direct patient.) I telephoned my physician's office and asked them to please tell the facility to resubmit its insurance claim using the correct procedure code. Evidently this sort of mistake happens frequently, because my physician's office warned me that it could take 3 months to straighten this out and that I should disregard any dunning notices I might receive in the next 3 months.

As predicted, I started to get form letters and telephone calls from the facility, indicating that I had not yet paid my share of their bill. Each time I was called about the balance owed, I told the caller I was waiting for the facility to resubmit its claim to my insurance company using the correct procedure code. This information was duly typed by the collector into a field on a computer screen and then apparently ignored, because a month later I would get another call from another collector, and I would again explain to that collector that I was waiting for the claim to be resubmitted using the correct procedure code. If I missed a collector's call and tried to return the call, I would often have to leave a message, and several times my messages were not returned.

After the letters and calls started to escalate, I called my physician's office and asked them to please try to intervene on my behalf. They kindly made a few phone calls and determined that a coding correction request had been sitting in someone's inbox at the facility for three months, and they asked for expedited processing of the coding correction so that their patient would not continue to receive debt collection communications. I eventually received a telephone call from the facility, advising that my account was under review and I did not have to take any further action unless and until otherwise advised. In due course, my insurance company paid the facility the difference between its original non-preventative care claim and its corrected preventative care claim.

I warned my husband during this episode that he and I should not be seeking new credit. One small irony was that the facility that made the coding error was an entity affiliated with my husband's employer, so my husband (or I) might have been able to complain to someone higher up in the chain of command. But I wanted to resolve this matter without using his contacts - I thought I already had a minor inside-track advantage because my physician's professional activities intersect with those of my husband. It became evident to me while I was trying to straighten out this billing problem that collectors were not reading and also did not understand what their colleagues were typing into the "Notes" or "Comments" field on their computer screens. Each time I spoke with a collector about the need to fix the procedure code, there would be a pause and then a confirmation that they saw a note on their computer screen indicating that the procedure code needed to be corrected, but the collectors calling me clearly did not understand what that actually meant (and evidently didn't care, because their job was limited to making telephone calls). I suspect my experience was not unusual or unique to the medical field - if a collector is paid only to make telephone calls, the collector cannot reasonably be expected to initiate or pursue back-office error correction procedures. Quality assurance monitoring of debt collection telephone calls may not suffice to overcome compartmentalization of telephone debt collector responsibilities - perhaps someone should have performed random checks of the "Notes" or "Comments" field and referred selected accounts to others within the organization for appropriate follow-up.

Last but not least, I recently had several friendly telephone conversations with collectors employed by the Comptroller of Maryland, after having received various computer-generated form letters advising that I owe back income taxes, interest, and penalties. (In fact, the Comptroller's office owed me a refund of overpaid taxes, but because they had not finished processing my electronically filed personal income tax return, they thought I owed them back taxes.) Income taxes are not consumer debts, and the collection of such taxes is not subject to fair debt collection practices requirements. Friendly individuals within the Comptroller's office advised me that I would continue to receive computer-generated escalating dunning notices until others in another division of that same office finished processing my tax return. I was also cautioned that this could take a few months. When I asked what I could expect in the way of debt collection escalation, I was told that if it took more than six months to resolve this matter I might find a lien placed on my home. (My husband was not amused.) In due course I received my income tax refund, and I learned an important lesson - for a variety of reasons the Comptroller of Maryland has difficulty processing my electronically filed tax returns, so in the future I will file paper returns.

These are just three random debt collection examples. (I am happy to say that I haven't experienced any other debt collection episodes in the last several years.) In all cases, the collectors appear to have been working in a vacuum (a silo) and apparently were not interfacing with colleagues that had the capability of speedily correcting or processing an internal record. In each case that took months to resolve, the collectors apparently were powerless (or not motivated) to turn off auto-generated escalating form letters or to discontinue scheduled periodic telephone calls. Everyone was polite on the telephone but largely unhelpful, giving me fresh perspective on the RESPA "continuity of contact" servicing regulations that recently took effect, as well as related "single point of contact" directives. I also have a better appreciation of how difficult it might be to have a near-perfect credit score.

Elizabeth C. Yen is a partner in the Connecticut office of Hudson Cook, LLP. Elizabeth can be reached at 203-776-1911 or by email at

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