The Consumer Financial Protection Bureau yesterday released its annual report on debt collection, focusing on two critical areas: medical and rental debt. The report sheds light on what the CFPB describes as the “aggressive and illegal” practices undertaken by collectors, such as attempting to collect on debts that have already been satisfied by financial assistance programs.
Why it matters: The report underscores the intensifying focus that the CFPB is placing on medical debts, which now seems to expand beyond its proposed rule regarding medical debt credit reporting. The Bureau recently posted a job opening for a medical debt collection expert, which is another indicator that its interest in that part of the industry is not going away anytime soon. The CFPB also highlighted issues with software used by landlords to set prices for their rental units — is it a coincidence that the Department of Justice just filed a lawsuit against one of the largest providers of that type of software, accusing the company of allowing landlords to engage in price fixing?
By the numbers:
- In 2023, the CFPB received more than 68,000 consumer complaints about debt collection, with 11% of those related to medical debt.
- More than 1,700 rental debt complaints were filed after the CFPB began accepting them in August 2023.
The big picture: Many of the issues raised by the CFPB in its report, such as miscommunication between hospitals and collectors to inflated rental debt due to revenue management software, provides a roadmap for where the CFPB is likely to focus future enforcement.
- Medical Debt: The report highlights that collectors often attempt to recover medical debts that have already been paid or should be covered by financial assistance programs. In many cases, patients are left to prove that they do not owe the debt, putting undue pressure on already vulnerable individuals.
- “More than half of the medical debt complaints submitted in 2023 were about attempts to collect debt that was not owed,” the report notes, calling into question the information quality available to debt collectors.
- Rental Debt: The integration of financial products and services into the rental market poses risks for tenants. The report highlights several cases where revenue management software used by landlords resulted in inflated rents, which were subsequently pursued by debt collectors. Additionally, complaints about excessive rental fees, such as convenience fees and junk charges, are becoming more prevalent.
What they’re saying: “When non-profit hospitals partner with financial institutions in the offering of medical payment products, the hospitals get compensated for bills when patients are enrolled in products that are collected on via practices that would be prohibited by IRS regulations if engaged in by the hospitals themselves,” the CFPB states in the report.
