California Medical Debt Collection Laws – Overview
If you receive a notice from a debt collector, it is important that you respond to the letter as soon as possible. This is true even if you do not owe any debt.
Otherwise, the debt collector will keep pursuing the collection and even sue you. This negative information may cause your credit to suffer.
Effective September 1, 2020, debt collectors have been prohibited from entirely draining an individual’s bank account following Governor Newsom’s signing of SB 616 into law in October 2019. The credit reporting agencies announced they would stop reporting paid medical debt and medical debt under $500 that is less than a year old, effective July 1, 2022.
According to this law, debt collection agencies licensed to work in California are restricted in the extent of their actions to collect medical debts.
In addition, their healthcare clients will now need to have a written policy on how they hand over accounts to third-party collection agencies, among other major changes.
Details of the New California Medical Debt Collection Laws
California Assembly Bill No. 1020, related to expanding protections against debt collection.
Displaying Notice of Debt Collection Criteria
The new legislation requires hospitals to prominently display a notice of their policy regarding financially qualified and self-pay patients on their website, along with a link to the policy.
The original Senate Bill No. 616 amends and adds several California statutes. This is an effort to impose new limitations on collecting certain hospital debts.
This includes laws that dictate when and how debt collection agencies may buy and collect hospital debt.
Amending Section 127425 of CHSC
Once in effect, the new law will successfully amend Section 127425 of the California Health & Safety Code.
It limits the conditions under which hospitals can sell patient debt to debt collectors. It also imposes new rules for hospitals before assigning a bill to a collection agency.
This rule applies to reporting debts to consumer credit agencies and filing collection action for non-payment.
Additional Notice to Patients
Under the new law, hospitals are prohibited from assigning hospital debt for collection or sale of a hospital debt to a debt collection agency unless and until the hospital has sent the patient a notice that includes the following details:
- The dates of service of the medical bill that the hospital plans to assign to a debt collection agency.
- The name of the entity (a debt collection agency) to which the hospital will assign or sell the bill in question.
- A statement detailing how to obtain an itemized bill from the hospital.
- The name and plan type of the health insurance carrier of the patient on record with the hospital at the time of service or a statement that the hospital does not have the information.
- An application for the hospital’s charity care and financial assistance initiatives.
- The dates on which the hospital or collection agent originally sent the patient a notice about applying for financial assistance, and a financial assistance application, along with the date if applicable, on which the hospital made the decision to provide the financial assistance application to the patient.
Amending California Civil Code Section 1788.14
The new law also amends the current California Civil Code Section 1788.14. It prohibits debt collection agencies from collecting medical debts without including the first written communication with a consumer.
The hospital must send a copy of the notice before assigning the debt collection task to a debt collection agency.
In addition, debt collectors must attach a statement that the debt collector will wait 180 days from the date of notifying the consumer to repay the original amount owed to the hospital.
This should also be included in the first written communication from the debt collection agency to the consumer.
This should be done before reporting adverse information to a credit reporting agency or filing a lawsuit against the consumer for non-repayment of hospital bills.
The new law also adds section 1788.185 to the California Civil Code, imposing restrictions on the legal collection of debts that originated with a general acute care hospital.
These new provisions in the law specify certain factual allegations that need to be included in any complaint filed for legal action in a hospital debt collection case.
Besides this, the new rule requires hospitals to attach documents relating to applications of financial aid programs to any complaint for hospital debt collection.
Conclusion
If you believe that a debt collection agency may be possibly breaking a law, you can report your complaint to the Attorney General’s Office at the official website using this link https://oag.ca.gov/contact/consumer-complaint-against-business-or-company.
It is important to consult with a lawyer before filing a complaint against any debt collection agency.
See Also
Self-Prescribing Laws by State
How to Get Medical Bills Forgiven
Best Credit Card for Medical Expenses
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