Ninth Circuit Hears First Appeal Attacking Nevada S.B. 248- The Medical Debt Collection Law

On July 1, 2021, medical collection activity stopped in Nevada because S.B. 248 became effective.

Nevada’s S.B. 248 requires debt collectors to send a “60-day breather” letter to consumers, via registered or certified mail. Before the law went into effect, Sessions, Israel & Shartle, LLC and Brownstein Hyatt Farber Schreck, LLP filed a lawsuit seeking to enjoin enforcement of S.B. 248 on behalf of the ACA, various debt collectors, debt buyers and a debt collection law firm from inside and outside Nevada.  

Unfortunately, the trial court found that the new state law did not interfere with or was preempted by the FDCPA and the Fair Credit Reporting Act, and was a constitutionally permitted limitation of free speech rights. But the plaintiff debt collectors and debt buyers took the fight to the Ninth Circuit Court of Appeals, and on the Friday before Labor Day, September 2, an oral argument was held for the appeal.

During the course of the nearly 45 minute argument on Friday, the 3 judge panel peppered industry counsel and special appeals counsel for Nevada with multiple questions on whether the new prohibitions on collection activity should stand with a focus on 3 issues.

First, the judges heard how the law served as an unconstitutional infringement on debt collector’s speech rights, as only medical debt collectors are prohibited from discussing medical debt, while other types of debts, and other types of companies are left unregulated. Industry counsel argued that such a content based restriction violates the debt collectors’ free speech rights.  

Second, the industry parties argued that S.B. 248 is preempted by the FCRA, as the NV state law takes away a debt collector’s right under the FCRA to furnish to credit bureaus information about the medical debt. This 60-day pause undermines a primary purpose of the FCRA. The FCRA requires an accurate credit history on consumers vs. the effect of S.B. 248 by forcibly omitting for 60-days a consumer’s current financial history.

Third, the industry highlighted the irreconcilable conflicts between the FDCPA and S.B. 248, proving how it is impossible for a debt collector to comply with the FDCPA and the NV law. Compliance with both cannot be done: Regulation F makes clear that federal law requires the initial written notice to contain certain disclosures and information about the debt, while S.B. 248 requires the initial written notice to include a “60-day breather” and specifically bars the issuance of the FDCPA mandated disclosures.

As the end of the hearing, the case was submitted for further consideration. Though it is impossible to predict timing, a decision will hopefully to be issued before year-end.