Complaints About Medical Debt Collection On the Rise

Larry Klein

In the third quarter of 2014, consumer complaints about medical debt collection practices rose sharply as overall collection complaints fell.

Overall in the third quarter, consumers logged 9,579 complaints about debt collection with the Consumer Financial Protection Bureau, a 6.5 percent decline from both the second and first quarters when some 10,200 complaints were published in each.

The CFPB’s Consumer Response complaints database only lists complaints submitted to the Bureau that companies have had an opportunity to respond to, and does not include complaints referred to other regulatory agencies, complaints found to be incomplete, or complaints that are pending with the consumer or the CFPB.

The CFPB’s complaints wizard steps consumers through the submission process with standardized fields on each screen.

First, consumers must choose which type of debt led to the collection complaint. The most common debt type in the third quarter was “Other,” as it has been since launch. The “Other” category covers debts stemming from telecom, health club memberships, cable service and other similar accounts.

Complaints concerning credit card accounts and those deemed “Unclassified” were the second and third most common debt types in the third quarter, comprising 21.5 and 21.4 percent of all collection complaints respectively.

Next on the list were complaints related to medical accounts. This category saw the largest change of any other, up or down. In the third quarter of 2014, 13 percent of collection complaints were related to medical debt, compared to 10.3 percent in Q2 and just 9.5 percent in Q1.

Within the quarter, there were even larger spikes, with 14.1 percent of all collection complaints in August being related to medical debt.

It’s a trend worth monitoring, especially for those who specialize in healthcare receivables. And others are taking note.

The National Consumer Law Center in September published a report calling for the CFPB to supervise larger collection agencies that focus on medical accounts, effectively challenging a conclusion the Bureau had already reached with regard to healthcare debt.

The CFPB excludes revenue from medical debt collection from its calculation of revenue that triggers supervision under its Larger Market Participant rule. The NCLC, and other consumer groups, want that changed. At the very least, they said, medical debt collection requires more scrutiny.

The CFPB underscored that point recently with its study and action on medical debt in collection as it relates to credit reporting.

So the ARM industry should expect an increasing regulatory eye on medical debt collection in the very near future. It remains to be seen if healthcare accounts will be mentioned in the CFPB’s rule proposals for debt collection, but agencies with a concentration of medical debt should start preparing now regardless.

Larry Klein is Director of Market Planning for the of LexisNexis receivables management portfolio of solutions. His responsibilities include strategy development and strategic partnerships.

This article originally appeared in the latest issue of Know Your Debtor, a free quarterly newsletter focused on the U.S. consumer environment. Make sure you’re registered to receive insideARM’s newsletters on your User Profile page.