Melaleuca CEO Frank VanderSloot should be commended for his decision to put focus on aggressive, high-fee medical debt collection in Idaho, and for putting a chunk of his sizable fortune behind the idea.
Since learning of an employee’s struggles with Medical Recovery Services, VanderSloot has pledged a half-million dollars to defend people with medical debts from being subject to outrageous levels of attorney fees. And he’s pledged to push for legal reform.
VanderSloot could do some real good for the state, perhaps more than is immediately apparent. Beyond simply providing resources for particular individuals who can’t afford legal representation, this fund could disrupt the rubber-stamp litigation model that debt collectors employ.
As VanderSloot put it: “Society is built so that the big guys can shove the little guy around.”
That’s exactly right.
Debt collectors generally employ full-time attorneys. The people they sue often can’t afford lawyers. And a big part of the debt collection business model relies on that power imbalance.
A debt collector’s favorite two words are “default judgment.” A default judgment occurs when the debtor fails to contest the suit that’s been lodged against them. If nothing is contested, a judge will often give the debt collector everything they ask for, since there’s no opposing evidence or argument to weigh.
In courthouses around the country, there are days set aside solely to deal with such cases. The case is announced, the judge asks if the opposing party is present, and they almost never are, so the judge issues a default judgment. Next case.
Dozens of cases fly by this way in quick succession. It doesn’t feel like a courtroom. It feels like a workstation in a factory assembly line.
That isn’t to say that judges don’t sometimes push back. A few years ago, Magistrate Judge Michelle Mallard used her discretion to unilaterally write down the attorney fees attached to debts collected by Medical Recovery Services in several cases where the interest and fees the company tacked on resulted in total bills that were several times larger than the underlying debt.
Attorney Bryan Zollinger appealed first to the district court, where he lost, and then to the Idaho Supreme Court, where he lost unanimously.
Nonetheless, judges’ discretion is quite limited when the party being sued doesn’t answer the claims against them. If many of the people facing collections have some basic representation, which VanderSloot’s fund could enable, it will slow the process down and allow some legal deliberation about these important matters.
As important is VanderSloot’s pledge to push for legislative reform. That will be a tough fight because Medical Recovery Services has an inside man at the Legislature — Zollinger, who won election to the House in 2016, and has not, in our judgment, properly removed himself from conflicts of interest.
The first of these came in 2017 when Sen. Tony Potts sponsored a bill that would have effectively reversed the decision Zollinger lost in the Supreme Court.
In a striking breach of common practice at the Legislature, Potts had accepted maximum allowable campaign contributions from attorney Bryan Smith — a GOP party official and Zollinger’s boss — and his law firm ahead of the session. Potts then used those funds to pay his living expenses, including rent to Zollinger, Potts’ roommate.
Sen. Patti Anne Lodge asked Potts during a hearing who brought him the legislation, and he testified that he had worked with Zollinger.
Even after that scandal, there’s little indication that things have changed, as became clear when the House Business Committee was considering other legislation related to debt collection a month ago.
Rep. Rod Furniss indicated during a March 27 hearing that efforts had been made to adapt planned legislation to address Zollinger’s objections to it.
“Rep. Zollinger, who had some of the issues, we’ve spoken with him, and we’ve tried to make it so that it was palatable for him. And he agreed,” Furniss testified.
This indicates that Zollinger continues to be involved in behind-the-scenes negotiations involving legislation that will directly affect his own bottom line. That’s shocking but, unfortunately, not surprising.
If the Idaho Legislature had strong ethical rules (it doesn’t) and a serious means of enforcing them (it doesn’t) this is the type of thing that would lead to an immediate investigation, and likely be followed by sanctions.
With a powerful GOP donor set on changing the rules of the game, now would be a good time for lawmakers without such conflicts of interest to begin crafting legislation to reign in the debt collection process and prevent further abuses.