The Consumer Financial Protection Bureau (CFPB) has issued a warning about the illegal tactics used by medical debt collectors, including third-party revenue cycle management companies.
These collectors often violate federal law by pursuing inaccurate or legally invalid medical debts. Some of the illegal practices identified include:
The CFPB aims to protect consumers from these predatory practices, as approximately 100 million Americans are burdened by over $220 billion in medical debt. The agency has received numerous complaints from individuals who have received collection notices for debts they do not owe, debts that have already been settled, or debts that should have been covered by insurance or government assistance programs.
The CFPB's initiative highlights the urgent need for regulatory oversight in the medical debt collection industry.
One concerning practice highlighted by the CFPB is double billing, where companies attempt to collect on medical bills that have already been paid. This can cause significant financial strain for consumers. Debt collectors are also prohibited from pursuing amounts that exceed federal or state caps, such as those established by the No Surprises Act.
Violations of these regulations can result in consumers facing unjustifiably high medical debts, which can deter them from seeking necessary medical care in the future. Debt collectors must also not attempt to collect on bills that include charges for exaggerated or non-existent services. Such deceptive practices can inflate medical debts and lead to long-term financial distress or bankruptcy for consumers.
Debt collectors are required to substantiate any medical debts they pursue by providing documentation of payments or eligibility for financial assistance. Collecting unsubstantiated debts can result in consumers being wrongfully pursued for amounts they do not owe.
Another issue raised by the CFPB is the misrepresentation of debt status by collectors. Companies must not falsely claim that a debt is fully settled when the payment obligation remains uncertain. This misrepresentation can pressure consumers into paying disputed or negotiable debts, further complicating their financial situations.
The CFPB has published a consumer advisory to empower individuals who receive collection notices for medical bills, providing them with practical steps to understand their rights and take appropriate action.
In a broader context, the CFPB has proposed a rule to remove medical bills from most credit reports. This proposal aims to enhance privacy protections and potentially improve credit scores and loan approvals. The agency's previous reports have shown that medical debts are less predictive of creditworthiness compared to other types of debts, prompting a reevaluation of how these debts are reported and their impact on consumers' financial lives.
Despite voluntary changes by major credit reporting agencies to limit the impact of medical debts on credit scores, millions of Americans still face challenges due to outstanding medical bills in collections. The CFPB has noted that the complex nature of medical billing, insurance coverage, and collections often leads to inaccuracies and inflated debts being reported. This ongoing issue highlights the need for continued vigilance and reform in the medical debt collection landscape to protect consumers from unfair practices.
The CFPB's efforts to regulate medical debt collection practices aim to create a fairer and more transparent system, benefiting millions of Americans struggling with medical debt.