The CFPB’s New Focus on Medical Debt Collection

Medical service providers who engage in medical billing, debt collection, and credit reporting are the focus of new regulations and regulatory enforcement efforts.  Civil litigation is sure to follow.  Under the direction of its new Director, Rohit Chopra, the Consumer Financial Protection Bureau “is working to stop unfair medical debt collection and coercive credit reporting practices that add to the strain on American families.” The Bureau has targeted that “$88 billion of outstanding medical bills are currently in collections – affecting one in five Americans.”  Id.  A federal consumer protection law, the “No Surprises Act,” came into force this year.  It provides billing and collection rights to medical patients, both insured and uninsured. The Bureau has issued a Bulletin, warning that the attempted collection of a medical debt that is barred by the No Surprises Act may violate federal consumer debt collection practice law.  A plethora and ever growing number of state laws also heavily regulate medical billing, collection, and credit reporting practices.

Recently, Director Chopra described the medical billing situation in America as one in which it is “all too common for patients and their families to be caught in a doom loop between their provider and their insurance company.”  Director Chopra expounded that “[e]ven when a patient tries to battle to get an accurate bill or an insurance claim paid, medical debt collectors have a weapon that is hard to fight against: the credit report.”  Id.  Director Chopra has stated his “concern[] that the credit reporting system is being weaponized as a tool of coercion to get people to pay medical bills they may not even owe.”  Id.  And he has characterized medical debt as being “hard to call . . . a real debt” because, he states, “[f]ew people choose to take on medical debt, and typically, patients have no idea how much they will be charged for a service or a procedure.  There’s no upfront disclosure or interest rate to compare.  Individuals and families must confront a billing and collections system that can be best described as error-plagued, confusing, and labyrinthine.”  Id.  Further evidencing his hostility to medical debt in general, Director Chopra, after observing that “58% of the debt that is in collections and on people’s credit stems from medical bills,” opined that:  “Having a medical debt collection mark on a credit record can make it harder to get credit, rent or buy a home, or find a job.  Families are pushed into bankruptcy by medical debts that they cannot pay.  Coercive credit reporting to obtain payments on medical debt can also deter families from seeking needed medical care.  Coercive credit reporting interferes with the relationship between patients and their doctors and can lead to worse medical outcomes.”  Id.  As a result, Director Chopra announced that the Bureau “will be closely scrutinizing the Big Three credit reporting agencies to ensure that they are not being used as a tool to coerce and extort patients on medical bills they may not even owe.”  Id.  The Bureau “will be assessing whether it is appropriate for unpaid medical billing data to be included on credit reports altogether.”  Id.  The Bureau “will partner with the Department of Health and Human Services to ensure patients are not charged and do not pay illegal surcharges for medical care [and will] investigate how best to facilitate patients’ access to financial assistance programs offered by medical providers.”  Id.

The Big Three credit reporting agencies announced as a result that they would each take measures that would result in nearly 70% of medical collection debt tradelines being removed from consumer credit reports altogether. “Effective July 1, 2022, paid medical collection debt will no longer be included on consumer credit reports. In addition, the time period before unpaid medical collection debt would appear on a consumer’s report will be increased from 6 months to one year, giving consumers more time to work with insurance and/or healthcare providers to address their debt before it is reported on their credit file.  In the first half of 2023,” the Big Three credit reporting agencies “will also no longer include medical collection debt under at least $500 on credit reports.”  Id.

Now is an opportune time for medical service providers to review their medical billing, collection, and credit reporting policies and procedures with legal counsel to protect themselves proactively from the aggressive regulatory oversight, enforcement, and civil litigation, that has begun.  With a long history of representing clients across the entire health care, life sciences and pharmaceutical ecosystems, and of representing financial services and business clients with their consumer credit billing, collection, and credit reporting regulatory, compliance, enforcement, and civil litigation, our team of highly skilled and experienced attorneys stand ready to assist.