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Fun, Games and High Finance

Ransoming Children and Other Hip Debt Collection Strategies

by CHRISTOPHER BRAUCHLI

[I]dealism in our time has been shoved aside, and we are paying the penalty for it.

Alfred North Whitehead, Dialogues of Alfred North Whitehead, Prologue

It’s time for an update on activities occurring in the world of high finance. Several newsworthy events have occurred.

In June 2012 ING, a unit of ING Groep, one of the largest banks in the Netherlands, agreed to pay penalties of $619 million dollars for using the U.S. banking system to transfer billions of dollars for the benefit of Cuban and Iranian customers in violation of U.S. imposed sanctions.  Eager not to be outdone by its competitor, Standard Chartered Bank agreed in early August to pay $340 million to the state of New York to settle allegations that for seven years ending in 2007 it helped Iran launder $250 billion.  Although the amount laundered is substantial,  the fine is not, when compared with the fine imposed on ING.

In February five major banks agreed to a $26 billion settlement of claims filed by 49 attorneys general and the District of Columbia as penance for the abuses perpetrated by them during the foreclosure crisis, one of the hallmarks of which was the notorious practice of robo-signing documents filed with the courts to obtain court orders approving foreclosures.  The $26 billion comprised a $5 billion fine and the rest involved such things as reducing principal mortgage balances on one million underwater homes, simplifying foreclosure relief, cash payments to some people who lost their homes and assorted other provisions.

Inspired by the big banks, credit card companies have gone down the path pioneered by them.  A story in the New York Times reports that in their zeal to collect what they would like to think they are owed in a perfect world, the credit card companies are relying on “erroneous documents, incomplete records and generic testimony from witnesses,” a term that suggests the witness’s testimony had more to do with establishing a debt than establishing the truth.  A judge in Brooklyn who handles up to 100 credit card collections a day estimates that 90% of the credit card collection cases he hears are flawed but since the debtor makes no court appearance the judge has no choice but to rule in favor of the creditor.   Since the investigation in this practice is ongoing, it is too early to say what, if any, fines and penalties may be imposed on the miscreants.

For creativity, none of the activities described above can hold a candle to a debt collection company with the singularly appropriate name of Accretive Health that has just agreed to pay $2.5 million for its amazingly creative debt collection activities. (The definition of “accretive” is “growth or increase in size by gradual addition.”  In the case of Accretive the corporate emphasis is on “addition” rather than “gradual” and has nothing to do with health.)

Accretive specializes in collecting medical debt and is among the largest companies with that specialty.  Among its clients are two hospitals in Minnesota along with some of the largest hospital systems in the country.  In April 2012 the attorney general for Minnesota released documents that described Accretive’s collection practices.  According to a report in the New York Times,  Accretive’s employees can be found anywhere from the emergency room to the obstetrics department. Representatives of the collection company  have told incoming patients that they cannot receive treatment without settling outstanding accounts or, in some cases, paying in advance for services they hope to receive. Patients who were contacted said they were surprised to learn that people in the emergency room they assumed were hospital employees were in fact collection agents.

In July the attorney general announced a settlement that, among other things barred Accretive from doing business in that Minnesota for two years.  In announcing the settlement she described some of  the tactics that were used by Accretive in order to convince patients that they should pay their medical debts.  A mother was told she could not see her daughter who was being treated for a drug overdose until she had given the representative her credit card.  A new mother was told she could not take her newborn baby home unless she produced a credit card and paid $800, a sum it turned out she did not owe. Having ransomed the child, it took her months to get her money back from Accretive.  In announcing the settlement with Accretive that includes a fine of $2.5 million the Minnesota Attorney General said: “A hospital emergency room is a place of medical trauma and emotional suffering for patients and their families.  It should be a solemn place, not a place for a financial shakedown.” Accretive may well be surprised by that harsh rhetoric.  It has probably liked the symmetry of a collection agency being made whole at the same time a person in need of emergency care seeks to be made whole. It may well think a system that doesn’t appreciate such symmetry is flawed.  Others may think Accretive is flawed.  Readers may decide for themselves who’s right.

Christopher Brauchli is an attorney living in Boulder, Colorado. He can be emailed at brauchli.56@post.harvard.edu