Uncovering health debt collection tactics Date: 06/21/16
By Paul Kiel
Two and a half years ago, I set a broad goal to provide the first comprehensive view of debt collectors’ use of lawsuits to collect debt. I cover consumer finance for ProPublica, and it was amazing to me that there was so little information, especially given how dire the consequences can be for the debtor: Laws in most states permit the plaintiff, after obtaining a court judgment, to garnish a quarter of the debtor’s after-tax wages or empty their bank account.
All anybody knew was that there were millions of these suits every year, although the exact number was anybody’s guess, and it seemed like there were more than ever. But there were no national or state-level statistics, so I had to find ways to fill that void.
For a U.S. estimate, I approached the payroll services provider ADP, which agreed to perform a study. Their results, released in 2014, estimated that 4 million Americans had their wages garnished over a consumer debt in 2013. They also showed that people earning between $25,000 and $40,000 annually had the highest garnishment rate, followed by those earning between $15,000 and $25,000.
The ADP study still left many questions, mainly: Who was doing all this suing? For that, I needed court data – by which I mean, a line-by-line dataset showing details for each lawsuit. Such cases are typically filed over relatively small amounts (often below $3,000) in lower level local or state courts. The problem here is that there is a huge variance in what data is available from these courts. Some states have state-level data sets, and in some states it’s only available on the county level. And, in many places, it’s just not available at all.
So I simply tried to obtain data from as many different states and large, urban counties as possible.
Having done this, I can provide some pointers: If the state or county that you’re reporting on has a reasonably functional website that allows for searching case data, then this data exists and the court administration department can provide it to you. Whether they will provide it to you, however, is a different matter.
Some places have a formal process for requesting this data, which is generally not subject to freedom of information laws, and some places don’t. Some places charge to provide this data, and some places don’t. The prices vary quite a bit, but if you are looking for data from a relatively circumscribed period of time such as one or two years, it likely won’t cost more than $1,000.
Once I had the data, it took some time to clean it and categorize the plaintiffs. All that work bore fruit and was the basis for a series of stories.
An important lesson I learned was that the situation varies quite a bit from state to state and even from county to county. This is particularly true of suits over medical debt. For instance, together with NPR’s Chris Arnold I wrote a story in 2014 focusing on one nonprofit hospital in Missouri that had been filing far more suits than any other hospital in the state. There was no obvious reason why this hospital should be such an outlier since it was in a very small city, but it jumped right out of the data. The same was true for a public hospital in southern Alabama.
And that brings us to Nebraska. It was no secret to consumer attorneys in the state that there were quite a few debt collection lawsuits, but the scale of it was not obvious. Neither was it apparent that what happened in Nebraska courts was unusual when compared to other states. Having looked at data from several states, I was shocked by both the quantity of lawsuits and the size of the debts, which often were just a couple hundred dollars.
One wrinkle was that the suits were filed by collection agencies and, while I could see from the data which agency had filed a suit, I couldn’t see the underlying debt. So I pulled 100 cases – easy enough to do with Nebraska’s online system – and looked at the complaints. Almost all of the debts were medical in nature – from hospitals, clinics, specialists, and a range of other providers. Garnishment forms filed in the cases showed the financial characteristics of the debtors, most of whom earned less than $30,000 a year.
The story seems to have drawn some needed scrutiny in Nebraska to a debt collection tactic that generally receives too little attention, and I hope other reporters will examine what’s happening in their area. You don’t know until you look.
Paul Kiel is a reporter covering consumer finance at ProPublica. His stories have looked at the role of nonprofit hospitals and others serving poorer patients, race and debt, payday loans and the foreclosure crisis. He is also the author of the e-book, The Great American Foreclosure Story.