By Andrew A. Turner, J.D.
The latest salvo from the Consumer Financial Protection Bureau on medical debt collection comes in the form of an enforcement action ordering Syndicated Office Systems to pay over $5.4 million to consumers and pay a $500,000 penalty based on findings the company had no policies or procedures in place to investigate consumer credit report disputes. The mishandling of disputes by a debt collection agency that primarily collects medical debt on behalf of hospitals, doctors, and other healthcare providers constituted a violation of the Fair Credit Reporting Act, according to the CFPB.
In a consent order, Syndicated Office Systems neither admitted nor denied the CFPB’s findings which also included violations of the Fair Debt Collection Practices Act for failing to send debt validation notices that prevented consumers from exercising their rights and correcting errors. Commenting on the settlement, CFPB Director Richard Cordray had strong words, saying that the violations were "particularly egregious given the challenges many consumers already face who are attempting to navigate the medical debt maze."
Judging from the remedy for the violations, a primary concern of the CFPB is the need for medical debt collectors to have policies in place to comply with credit reporting and debt collection requirements. Besides the monetary relief, Syndicated Office Systems was ordered to change business practices and establish consumer safeguards.
During the past two years, there has been a string of CFPB activity touching on medical debt issues. A May 2014 research report found that medical debt can overly penalize consumer credit scores. The Bureau expressed concern that the complex processes by which medical bills are incurred, collected by a wide range of debt collectors, and reported to credit reporting agencies can create unique challenges for consumers.
A December 2014 medical debt study found medical debt has a significant impact on consumer credit, as 43 million Americans have overdue medical debt on their credit reports. At that time, the CFPB announced that the major consumer reporting agencies will be required to provide regular reports to the Bureau on how disputes from consumers are being handled. Commenting on the action to improve credit report accuracy, Cordray said "getting medical care should not make your credit report sick."
The CFPB is also in the process of developing proposed rules concerning debt collection after receiving more than 23,000 comments in response to an Advanced Notice of Proposed Rulemaking. Consumer groups and industry groups have staked out opposing views. The American Hospital Association (AHA), an organization that represents nearly 5,000 member hospitals, health systems, and other health care organizations, requested that the CFPB consider "the unique attributes of medical debt in the hospital setting" when issuing future regulations. On the other hand, the National Consumer Law Center urges the CFPB to examine the larger medical debt collection agencies, as well as taking other regulatory actions.
As to what the CFPB will do next to address concerns over medical debt collection practices, stay tuned.
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