On September 5, the CFPB issued its annual report on debt collection practices, detailing the Bureau’s efforts to enforce the Fair Debt Collection Practices Act (FDCPA). This year’s report focuses on improper practices in the collection of medical and rental debt.
Medical Debt Collection
The Bureau argues in its report that millions of consumers are targeted each year by debt collectors for unpaid medical bills. The report further notes that consumer complaints received by the Bureau regarding medical debt collection suggest many of the issues highlighted in last year's report have persisted into 2024.
The report identifies several concerning practices, including:
- Collection of Already Paid or Assistance-Eligible Medical Bills. Medical debt collectors frequently pursue payments for bills that have already been covered by non-profit hospitals' financial assistance programs or should have been. Poor communication between hospitals and debt collectors often leaves patients responsible for proving they do not owe the debt.
- Aggressive Collection for Medical Payment Products. The CFPB has received complaints about medical financing products offered by healthcare providers without first considering whether patients are eligible for financial assistance. Some non-profit hospitals use these products to bypass IRS regulations on collection practices, resulting in debt collectors pursuing payments for bills that patients should not owe. The Bureau also specifically highlighted this issue in its Summer 2024 Supervisory Highlights (previously discussed here).
Notably, this report follows the CFPB’s June 11 proposed rule, which would ban the inclusion of medical debt information in credit reports in many instances (previously discussed here).
Rental Debt Collection
The report also highlights issues with rental debt collection based on complaints received by the CFPB since August 2023. It points out the following practices:
- Engagement in Illegal Price-Fixing. Allegations suggest that rapid rent increases may be tied to illegal price-fixing by landlords and management companies using revenue management software. Debt collectors could violate the FDCPA if they collect inflated rental amounts resulting from these practices.
- Improper Addition of Rental Fees. Renters and landlords have raised concerns over rental “junk” fees, such as those imposed by payment processing services. These fees may not always be explicitly permitted under lease agreements or local laws, complicating their collection by debt collectors.
The report also mentions other improper practices, such as charging renters additional collection fees on top of unpaid rent and reporting rental debt to credit reporting agencies to coerce payments.
Putting It Into Practice: The report underscore’s the Bureau’s focus on what it calls the “financialization” of the health and rental sectors. In the healthcare space, the Bureau, along the Department of Health and Human Services, and other agencies issued an RFI in July 2023 seeking information about medical credit cards, loans, and other financial products used to pay for health care. These products were also highlighted in this summer’s Supervisory Highlights where the Bureau revealed issues with healthcare providers selling these products with misleading promotions or through pressure tactics during treatment (previously discussed here). In the rental sector, the Bureau seems interested in dedicated rental payment processing services, and financial companies that offer collection services for landlords to recover delinquent rent payments. Companies that offer products in these sectors should pay attention to the variety of risks they face, including UDAAP and FDCPA compliance risks.