Debt collectors attempted to collect on disputed debts using unlawful collection letters and misrepresentations

The Consumer Financial Protection Bureau (CFPB) took action against medical debt collector Phoenix Financial Services (Phoenix) for numerous debt collection and credit reporting violations. In at least thousands of cases, Phoenix continued to attempt to collect on a debt that was not substantiated after a consumer disputed the validity of the debt. Today’s order requires Phoenix to pay redress to affected consumers, and pay a $1.675 million penalty to the CFPB’s victims relief fund.

“With medical debt looming over so many American families, we are taking action against companies seeking to illegally profit off patients,” said CFPB Director Rohit Chopra. “Given widespread inaccuracies in medical billing and credit reporting, the CFPB will be working to ensure that patients are not coerced into paying debts that they do not owe.”

Phoenix is a third-party debt collector with its principal place of business in Indianapolis, Indiana. Phoenix collects primarily past-due medical debts, and furnishes information about consumers to consumer reporting companies. Between January 2017 and December 2020, Phoenix received approximately 54.4 million accounts with allegedly outstanding and owed debts from its clients for collection.

In a report published last year, the CFPB found that 43 million consumers had medical bills on their credit reports and that, all together, American families owed around $88 billion in medical bills. Medical debt affects people’s ability to access affordable credit, find quality housing, or even obtain a job. One of the findings from the CFPB’s research is that many consumers report that the medical tradelines on their credit reports are not accurate. When inaccurate or false information is furnished to consumer reporting companies, it can be a form of coercing patients and their families into paying medical bills and debts they do not owe.

The CFPB’s investigation found that Phoenix sent collection letters to consumers who had disputed the validity or accuracy of their purported debts, even though Phoenix had not obtained substantiation for the debts. Debt collectors are required to have a reasonable basis for asserting that a consumer owes a purported debt if a dispute is submitted.

Phoenix’s sending of unlawful debt collection letters risked harming consumers by pressuring or inducing them to pay debts they did not owe. In addition to sending the debt collection letters, Phoenix also furnished debt information to consumer reporting companies. Phoenix’s failure to conduct reasonable investigations of disputes likely resulted in many inaccuracies remaining on consumers’ credit reports, and harmed consumers in a number of ways, such as making credit more expensive or inaccessible.

Enforcement Action

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating federal consumer financial protection laws, including the Fair Credit Reporting Act and Fair Debt Collection Practices Act. The CFPB found Phoenix violated the Fair Credit Reporting Act and its implementing Regulation V by not conducting reasonable investigations of consumer disputes or having reasonable written policies and procedures regarding the accuracy and integrity of the information it furnished to consumer reporting companies. Phoenix also violated the Fair Debt Collection Practices Act by using false and deceptive means to collect debts, and by not ceasing collection of a debt upon notification by the consumer of a disputed debt collection claim.

The order requires Phoenix to:  

Cease unlawful collection and credit reporting practices: Phoenix is prohibited from making any representation that a consumer owes a debt unless Phoenix can substantiate the debt claim at the time of the representation. Phoenix must also establish and implement written policies and procedures to ensure that it conducts reasonable investigations of disputes about information furnished to consumer reporting companies, including written policies and procedures related to the handling of consumer disputes.Cooperate with CFPB examinations: Phoenix will be subject to the CFPB’s supervisory authority for the duration of the order. Conducting supervisory reviews is one of the CFPB’s key tools to ensure that entities comply with the law.Provide redress to consumers: Phoenix must provide redress to consumers who received an unlawful debt collection letter from Phoenix after disputing the validity of an alleged debt. The company must refund any amounts consumers paid to Phoenix on an unverified debt after receiving the unlawful letter.Pay $1.675 million in penalties: Phoenix is required to pay a $1.675 million penalty to the CFPB, which will be deposited into the CFPB’s victims relief fund.

Read today’s order.

To find out about the CFPB’s debt collection resources, visit the CFPB’s website.

Consumers can submit complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

Employees of companies who believe their company has violated federal consumer financial laws are encouraged to send information about what they know to whistleblower@cfpb.gov.