CFPB issues Annual Report on FDCPA: Blasts Medical and Rental Debt Collection Practices

Hospitals, insurance companies, and debt collectors need to step up their communication efforts to prevent the illegal collection of medical debts that have been previously paid or covered by providers’ charity care programs, according to the CFPB in its report to Congress on the status of the FDCPA, issued on September 5, 2024.  Communication to consumers from debt collectors should provide more specific information about debts to enable consumers to identify the accounts on which collectors seek payment, as well. The resulting harm to consumers—the medical debt appearing on the consumer’s credit report—puts the consumer in an untenable situation that could have been avoided if more information were shared, and if the hospitals did not set such a high bar for eligibility for their financial assistance programs. 

The CFPB takes issue with the “financialization in the healthcare sector” in which some non-profit hospitals as well as other healthcare providers market medical payment products to consumers. It cites continued complaints about high interest rates, retroactive application of interest after a period of deferment, negative credit reporting and aggressive collection tactics.  The report indicates that once a consumer has enrolled in such a product, they are then subject to collection practices that could not be employed if the hospital themselves were pursuing the balances. 

The CFPB report explains that the CFPB commenced accepting complaints regarding rental debt in August 2023. Complaints regularly expose the addition of fees, including convenience fees, not owed in accordance with the rental agreement, and improper collection of past due rent inflated by illegal price-fixing.  When debt collectors close these accounts back to the original creditor rather than conducting investigations related to consumer disputes, this indicates to the CFPB that debt collectors lack confidence in the efficacy of the debts placed with them for collection. The report noted that complaints about debt collectors who are non-responsive to disputes and requests for validation of debts furnished to credit reporting agencies persist.  

The report offers data on complaint trends and details on four enforcement actions it finalized with debt collectors in 2023.  The entire report can be accessed here.

What impact will this report have on the ARM Industry in the next year? The CFPB has been increasingly vocal about its position that investigations of disputed debts are often insufficient. While the CFPB lays the blame on debt collectors, industry members continue to have conversations with their clients—medical and non-medical alike—about taking the responsibility to only place accounts which can be substantiated, and, better yet, to provide substantiation upon placement instead of piecing it together when a dispute comes in. Communication with consumers would improve and complaints will decrease. Because the CFPB only has complaint data and narratives from which to draw conclusions about the compliance performance of debt collectors, a measurable reduction in consumer complaints would be a step in the right direction.