The Consumer Financial Protection Bureau today issued an advisory opinion “to remind debt collectors” that they are prohibited from collecting “inaccurate or legally invalid medical debts” and that they cannot use false or misleading tactics. The advisory is part of a broader push by the Biden administration on the issue, which includes a separate, proposed CFPB rule to prohibit credit reporting agencies from sharing information about medical debts with lenders.
According to the CFPB, medical debt collection falls under the Fair Debt Collection Practices Act. Illegal practices under the FDCPA include double-dipping to get paid for services already covered by insurance, hounding consumers to pay fake or exaggerated charges, misrepresenting consumers’ rights to contest bills, and collecting on debts without documentation that the amount is owed, the agency said in a statement.
The CFPB also issued a separate advisory on a consumer’s rights when approached by medical debt collectors. The advisory encourages consumers to negotiate the amount they owe and submit complaints with the bureau if they believe collectors are violating federal law.
The CFPB in June issued a rule that not only prevents credit reporting agencies from sharing medical debt information with lenders, but prohibits the use of medical debt when making lending decisions. The American Bankers Association has raised several concerns about the rule, noting there is good reason to believe that medical debt is predictive of credit risk. It also said the agency did not adequately consider how the proposed rule would directly and materially harm banks and consumers.
