CFPB Report Highlights Consumer Protection Issues in Medical Debt Collection
Annual report on the Fair Debt Collection Practices Act also describes the CFPB's and states' efforts to end the collection of inaccurate medical bills that consumers may not even owe
Today, the Consumer Financial Protection Bureau (CFPB) issued a report highlighting the challenges American families face when debt collectors pursue allegedly unpaid medical bills. Discussing the 8,500 complaints submitted in 2022 by servicemembers, older adults, and other consumers relating to medical debt collections, the CFPB’s annual report to Congress on the Fair Debt Collection Practices Act describes how the CFPB and states have worked to stop the collections of medical bills that are inaccurate or not even owed at all. The report also provides updates on the debt collection market more broadly and summarizes activities by the CFPB and other federal agencies relating to debt collection, including the Federal Trade Commission (FTC) and its actions under the FTC Act to protect small businesses from unfair and deceptive debt collection practices.
Tens of millions of people are pursued by debt collectors for medical bills, and today’s report highlights the problem of the collection of medical bills that are inaccurate or not owed. The CFPB has previously described the significant evidence, including reports from consumers themselves, that the collection, furnishing, and reporting of medical bills is plagued by inaccuracies.
In 2022, the CFPB received thousands of consumer complaints about medical debt collection. The issues raised by consumer complaints include that the pursued medical bills had already been paid, were not owed by the patient or family, or were for inaccurate amounts; collections of medical bills began long after services were provided – with some being collected decades after care; and collectors placed medical bills on consumers' credit reports without first contacting consumers. Among those who reached out to the CFPB about problematic experiences with medical debt collections were servicemembers and older adults, despite generally having insurance coverage and access to free or reduced cost care.
In response to the problems raised by consumers and the CFPB’s own research, today’s report makes clear:
Medical debt collectors may violate federal law when they attempt to collect bills that are not actually owed or are the wrong amount: Collecting debts that are actually not owed or collecting wrong amounts may violate the Fair Debt Collection Practices Act or the Consumer Financial Protection Act’s prohibition on unfair, deceptive, or abusive acts or practices. This includes instances in which a collector is collecting charges for services the patients never received, collecting for more expensive versions of services than what were actually provided – often called “upcoding” – or collecting amounts based on rates that are inconsistent with applicable state law.
States can generally enforce their own debt collection laws to protect consumers: Many states have proposed or enacted laws in recent years providing significant consumer protections with respect to the collection and reporting of medical bills. Preemption of state law is narrow under both the Fair Debt Collection Practices Act and Fair Credit Reporting Act, and preemption would generally not apply to state restrictions on the collection, furnishing and reporting of medical bills. Additionally, inaccuracies in the collection, furnishing, and reporting of medical bills are common, so state restrictions on these practices are unlikely to result in less accurate or robust collections or credit reporting.
The CFPB is taking steps to ensure that medical debt collectors follow the law, including the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. These steps include:
Supervision and enforcement efforts: Recent examinations of debt collectors found numerous violations, including harassing individuals with allegedly unpaid medical bills and telling others that they were responsible for debts that were incurred due to identity theft. Where appropriate, the CFPB took enforcement actions against debt collectors.
Reminding entities about their obligations: The CFPB has taken action to protect consumers, including by issuing a bulletin reminding debt collectors and credit reporting companies of their legal obligations under the No Surprises Act. The CFPB issued a circular confirming that debt collectors may be violating the law when they attempt to collect unlawful nursing facility debts. The CFPB also issued an advisory opinion that debt collectors often cannot charge pay-to-pay or “convenience” fees.
Support for state-level actions: In addition to enforcing their own state-level laws, states can enforce the Fair Debt Collection Practices Act and the Fair Credit Reporting Act against persons covered by the Consumer Financial Protection Act. States can also enforce other federal consumer financial laws, including the Consumer Financial Protection Act’s prohibition on unfair, deceptive, or abusive acts or practices.
Education and outreach activities: Among many consumer resources, the CFPB offers consumers five sample letters when they interact with debt collectors. These include letters for when consumers need more information about a debt, want to dispute their debt, want to restrict how and when a debt collector contacts them, want to stop all communication from a debt collector, or want to direct further debt collector communications to a consumer’s attorney.
Read the report, Fair Debt Collection Practices Act CFPB Annual Report 2023.