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CFPB Cracks Down on Medical Debt Collector Over Alleged FCRA and FDCPA Violations
On June 18, the CFPB announced an enforcement action against a third-party medical debt collection company for allegedly failing to issue debt validation notices to customers, mishandling consumer credit reporting disputes, and preventing customers from exercising certain debt collection rights. According to the Bureau, from 2011 through 2013, the company failed to properly investigate consumers’ complaints with respect to information furnished to credit reporting agencies, and lacked internal policies and procedures on how to handle and respond to the complaints, resulting in a violation of the Fair Credit Reporting Act (FCRA). In addition, the Bureau contends that the company did not properly inform consumers of the amount of medical debt owed before commencing efforts to obtain payment on the debt, subsequently violating the Fair Debt Collection Practices Act (FDCPA). The CFPB ordered the medical debt collector to, among other things, (i) provide over $5 million in restitution to affected consumers, (ii) correct errors in consumer credit reports, (iii) pay a $500,000 civil money penalty, and (iv) improve its business practices.
New York AG Announces Settlement with Three National Credit Reporting Agencies
On March 9, New York AG Eric Schneiderman announced a settlement agreement with three national credit reporting agencies. Schneiderman noted that inaccuracies in credit reports, such as the collection of debts not owed, misrepresentations of medical debt, identity theft or fraud, and identity mistakes on behalf of the agencies, continue to negatively affect consumers, most notably preventing minority and low-income individuals from gaining access to jobs and housing. The agencies fully cooperated with the NY AG’s office to find solutions to the credit report issues and, per the terms of the agreement, will (i) hire specially trained employees to review consumer documentation concerning identity theft or fraud and mixed files; (ii) review all disputes and supporting documentation submitted via the automated dispute resolution system; (iii) put into effect a 180-day waiting period before reporting any medical debts; (iv) increase the visibility of consumers’ right to access one free annual credit report via annualcreditreport.com; and (v) develop a National Credit Reporting Working Group to put in place a set of best practices and policies that will strengthen furnisher monitoring and data reporting. The full version of the settlement agreement provides additional requirements that the agencies must observe to increase fairness and effectiveness within credit reporting system.
Illinois Federal Court Allows FCRA Lawsuit Against Credit Reporting Company to Move Forward
On February 5, the U.S. District Court for the Northern District of Illinois denied a credit reporting company’s motion to compel arbitration in a putative class action which alleged that the company sold credit scores to consumers that differed from the scores the company provided to lenders due to contrasting credit scoring models. The plaintiff alleged this practice violated provisions of the Fair Credit Reporting Act, Illinois Consumer Fraud and Deceptive Business Practices Act, and Missouri Merchandizing Practices Act, and that the credit reporting company was negligent in failing to inform consumers of the conflicting scores. The credit reporting company sought to compel arbitration on the basis of arbitration terms embedded in language in an online purchase agreement. As part of the purchase process, the consumer had to click on an “I Agree” button after reading agreement language in a window with a scrolling text box. The court found clicking “I Agree” did not constitute assent to the language in the text box because there was a paragraph placed between the text box and the “I Agree” button authorizing the credit reporting company to access the consumer’s personal information. Here, the authorization language was “so explicit that it was reasonable for users to assume that their click merely constituted their assent to the authorization,” not to the terms in the scrollable text box. Because of the confusion about whether the consumer provided consent to the authorization language or to the online purchase agreement’s terms, the court found the arbitration clause unenforceable and allowed the lawsuit against the credit reporting company to move forward.