Podcast - FTC and CFPB Focus on Medical, Rental Debt Collection Practices

Welcome to another podcast of "Clearly Conspicuous." As we've noticed in previous sessions, our goal in these podcasts is to make you succeed in this environment, make you aware of what's going on with the consumer protection agencies and give you practical tips for success. Again, it's a privilege to be with you today.

FTC and CFPB Report on Protecting Consumer in the Debt Collection Arena

Today we discuss the FTC and the CFPB's work in the debt collection industry. So let's start with the Federal Trade Commission. The FTC has provided the Consumer Financial Protection Bureau — the CFPB — with its annual summary of activities to protect consumers in the debt collection arena. The summary is used by the CFPB in this annual report to Congress on the activities of both agencies, which share a law enforcement responsibility in this area. In the summary, the commission highlights its debt collection work to protect individuals and small business consumers, including settlements or other completed trials and cases against two debt collection companies that, the FTC charged, used a variety of illegal tactics to target small businesses with threats about supposed debts; the halting of collections of millions of dollars in student debt that originated from illegal financing practices; bringing two cases against companies for using dark patterns to lock consumers in unwanted subscriptions that can add to their debt burdens; actions to combat unlawful practices that add to car debt, including the finalized CARS Rule and the law enforcement action against a car dealership group; and providing tens of millions of people with educational materials in both English and Spanish, informing them about their rights and educating debt collectors about their responsibilities under the Fair Debt Collection Practices Act and the FTC Act.

So now let's discuss the CFPB report, which highlights consumer protection issues in medical and rental debt collection. The CFPB recently issued its annual report on debt collection, which highlights aggressive and illegal practices in the collection of medical debt and rental debt. The report discusses how problems with real estate companies' revenue management software can result in improperly inflated rental debt amounts. The report also focuses on debt collectors' attempts to collect medical bills already satisfied by nonprofit hospital financial assistance programs, as well as the fact that many medical bills from low-income consumers do not get addressed by financial assistance in the first place.

Medical Debt Collection

So let's focus first on the medical debt collection. Tens of millions of people are pursued by debt collectors for purportedly unpaid medical bills every year. The report highlights consistent collection problems. Many of these problems have persisted since last year's report in 2023. And in 2023, consumer complaints about medical debt in collections made up over 10 percent of all collection complaints received by the CFPB. The complaints submitted by consumers — and the CFPB's own research — shows that debt collectors first attempt to collect already-paid medical bills or bills eligible for financial assistance. And second, aggressively pursue patients for bills arising from medical payment products. The CFPB continues to receive complaints about medical financing products, which are offered to patients by some nonprofit hospitals, as well as other healthcare providers, without considering whether patients may be eligible for financial assistance.

Rental Debt Collection

Let's now talk about rental debt collection. In August of 2023, the CFPB started accepting complaints about rental debt collection. From August 2023 to the end of the year, the CFPB received more than 1,700 rental debt complaints. In the United States rental debt is estimated to be more than $9 billion, with over 4.5 million households behind on rent payments. Rental debt collectors often charge renters collection fees in addition to the unpaid rent itself. As the CFPB has observed with medical debt, many debt collectors furnish rental debt to consumer reporting companies as a means to collecting debt through coercion. The complaints submitted by consumers and the CFPB's own research showed that the infusion of consumer financial products and services in the rental market raises risks for renters, including improper debt collection due to illegal price fixing and tacked-on rental fees.

CFPB Enforcement Actions

So looking into the CFPB actions, the CFPB is taking steps to ensure that debt collectors follow consumer financial protection laws, including the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. The CFPB supervisory program has found multiple issues with medical debt, including unlawful attempts to collect work-related medical debt from workers covered by state worker compensation laws. The CFPB has also brought enforcement actions against debt collectors for their efforts to collect on unsubstantiated debt, unlawfully threatening legal action against consumers and other violations. Additionally, the CFPB issued guidance to protect homeowners from illegal collection tactics on zombie mortgages. The agency also proposed a rule that, in many cases, would ban medical debt from credit reports. In 2023, the CFPB published reports focused on several topics, including trends in service member complaints, many of which are related to debt collection, and the impact of tuition payment plans on student loan debt, the effect of employer-driven debt and trends in debt collection trade lines on consumer credit reports.

Key Takeaway

So here is the key takeaway. The debt collection and accounts receivable industry is a clear target of the FTC and CFPB. It's a focus. Claims under the Fair Debt Collection Practices Act and the Fair Credit Reporting Act are a clear priority. So therefore, please stay tuned for further programs as we identify and address the key issues and developments and provide strategies for success. As always. I wish you continued success and a meaningful day.