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Financial Services Law Insights and Observations


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  • CFPB bans medical debt in credit reporting decisions

    Federal Issues

    On June 11, the CFPB released a proposed rule to ban obtaining or using medical information for credit eligibility determinations. Specifically, the proposed rule would amend the FCRA to remove the medical financial information exception and limit credit reporting of medical debt.

    In 2003, Congress amended the FCRA to restrict creditors’ use of medical information for purposes of making credit eligibility determinations, and it authorized the banking agencies to issue exemptions from the restriction through rulemaking. In 2005, the banking agencies issued a regulatory exception to permit creditors to obtain and use consumers’ medical financial information when making credit eligibility determinations if certain conditions were met. The CFPB’s proposed rule would roll back the 2005 exception, in addition to other changes. First, the proposed rule would remove the financial information exception that permits creditors to obtain and use medical and financial information (including regarding medical debt) in connection with credit eligibility decisions (with certain limited exceptions). Second, the proposed rule would limit consumer reporting agencies’ ability to furnish medical debt information to creditors.

    CFPB Director Rohit Chopra noted in prepared remarks that the proposed rule would eliminate the “loophole” that allowed lenders to access and use medical debt information, which he argued would align regulations with congressional intent. A fact sheet from the White House, published on behalf of Vice President Kamala Harris and Director Chopra, stated that this action builds on prior efforts by the Biden-Harris administration to reduce the burden of medical debt.

    As previously covered by InfoBytes, the Bureau announced this initiative in September 2023. The CFPB signaled its interest in proposing this rule when it threw its support behind Connecticut SB 395, which bans the inclusion of medical debt in consumer reports (covered by InfoBytes here). The proposed rule would go into effect 60 days following publication in the Federal Register.

    Federal Issues CFPB Medical Debt Credit Reporting FCRA

  • Connecticut becomes latest state to ban medical debts in credit reporting

    State Issues

    On May 9, the Governor of Connecticut approved SB 395 (the “Act”) banning health care providers from reporting medical debt to credit rating agencies. Further, the Act will prohibit hospitals and collection agents from reporting a patient to a credit rating agency, as well as initiating an action to foreclose a lien where the lien was filed to secure payment for health care (retroactive from October 1, 2022), and from garnishing wages for health care collections (also retroactive from October 1, 2022). The Act will go into effect on July 1. The CFPB wrote in favor of this bill’s enactment after the CFPB promulgated its NPRM to prohibit creditors from using medical bills in underwriting decisions, as covered by InfoBytes here.

    State Issues Connecticut State Legislation CFPB Medical Debt Credit Report

  • CFPB report finds 15 million Americans with medical debt on their credit reports

    Federal Issues

    On April 29, the CFPB released a report entitled “Recent Changes in Medical Collections on Consumer Credit Records” that showed that as of June 2023 some 15 million Americans (approximately five percent) still have medical bills on their credit reports. However, credit rating agencies’ changes have resulted in a decrease of approximately nine percentage points in the number of Americans that have medical debt on their credit report. Further, the report indicated that the CFPB’s efforts to combat medical debt collection issues (including, and as previously covered by InfoBytes, holding a hearing in July 2023 on medical billing and collections, highlighting the issue in their 2023 FDCPA report, and having its general counsel discuss the issue in April 2024) resulted in a greater expected decline in those with medical billing on their credit report. The CFPB attributed the difference between the forecasted decrease and the actual decrease to two factors: first, that the CFPB’s first report did not include the original date of delinquency; and second, there has been a trend towards reporting fewer medical collections, independent of collection reporting changes.

    This year’s report showed that some states saw much larger reductions than others, but indicated a 38 percent nationwide drop in the total balances of medical collections on credit reports, continuing the trend shown in last year’s report that found a 37 percent decline in medical collection tradelines on credit reports (covered by InfoBytes here). Of the 15 million Americans that continue to have medical bills on their credit reports, this year’s report also showed the average reported balance increased from $2,000 to over $3,100, most medical collections tradelines that were removed were below $500, and those living in lower-income communities in the South have the most medical bills in collections for the largest amounts. The CFPB stated that fixing the credit reporting market, including issues that involve the reporting of medical bills, will continue to be a priority.

    Federal Issues CFPB Medical Debt FDCPA Credit Report

  • CFPB supports Connecticut’s bill to ban medical debt on credit reports

    Federal Issues

    On April 15, the CFPB released a letter written by Brian Shearer, the Assistant Director within the Office of Policy Planning and Strategy, throwing the Bureau’s support behind Connecticut’s new bill to bar medical debt on credit reports. The proposed bill, SB 395, has passed its committee in the first chamber. This legislation would align Connecticut with similar legislation in Colorado and New York, and the CFPB noted that the “preemption of state law is narrow under both the [FDCPA] and the [FCRA], and states may… limit the inclusion of information about a person’s allegedly unpaid medical bills on consumer reports.” The CFPB announced in September 2023 its NPRM to prohibit creditors from using medical bills in underwriting decisions (as covered by InfoBytes here). According to the letter, “[m]edical debt is categorically different from most types of consumer tradelines that typically appear on consumer reports. Consumers frequently incur medical bills in unique circumstances that differ from other forms of credit extension, and CFPB research has found that medical debt is less predictive of future consumer credit performance than other tradelines.”

    Federal Issues State Legislation Connecticut CFPB Medical Debt Credit Report

  • CFPB’s Frotman speaks on medical debt collections and rental financial products

    Federal Issues

    On April 11, the General Counsel of the CFPB, Seth Frotman, delivered a speech at the National Consumer Law Center/National Association of Consumer Advocates Spring Training, highlighting how the FDCPA and the FCRA cover often-overlooked sectors of consumer finance, including medical collections and landlord-tenant debts. As to medical billing, collections, and credit reporting, Frotman noted that the CFPB has received more than 15,000 complaints in the past two years, as explained previously in the CFPB’s most recent FDCPA annual report (covered by InfoBytes here). These complaints led to the CFPB initiating a rulemaking process to “remove medical bills from credit reports.” Frotman highlighted that many states have taken similar initiatives: Colorado and New York both enacted laws prohibiting the reporting of medical debt, and the CFPB encouraged more states to follow their lead; Connecticut recently introduced legislation banning medical debt in SB 395. Of interest, Frotman noted that when the CFPB contacted debt collectors about suspected bills, they often closed the account – suggesting that these collectors “do not have confidence that this money [was] actually owed,” indicating that collectors could be seeking to collect an invalid medical debt from consumers.

    On rental collections and credit reporting, Frotman noted an increase in the “financialization” of the landlord and tenant relationship, such as products to finance security deposits or rent and offering rent-specific credit cards. Frotman also noted that corporate landlords, who have increased their share of the rental housing market, have increased the demand for “tenant screening” products that score prospective tenants. Frotman expressed concern that the algorithms relied on by these tenant screening products have been opaque and even discriminatory. The speech highlighted the CFPB’s focus on tenant screening as part of the Bureau’s increased attention toward debt collection and credit reporting companies generally in the rental industry. For instance, the CFPB noted that law firms that operate as “eviction mills” (i.e., firms that “rubber stamp” eviction actions without performing a meaningful review) could be held liable under the FDCPA.

    Federal Issues CFPB Medical Debt FDCPA FCRA

  • Washington State Attorney General wins two suits under medical billing practices

    State Issues

    On February 1, the Attorney General from Washington State successfully sued a large healthcare group to pay over $158 million for settlement of funds under the state’s Consumer Protection Act (CPA). The Washington AG stated that the healthcare group violated state law which requires hospital management to notify patients about financial assistance and to screen them for eligibility before trying to collect payment. The healthcare group has been ordered to pay $20.6 million in patient refunds and will forgive $137.2 million in medical debts; it will also pay $4.5 million to cover the attorney general’s costs. Among others, the consent decree includes several injunctions to be engaged in or refrained from for five years, including maintaining charity care policies, and not collecting payment for medical services unless presented with either of two stated stipulations. Lastly, the consent decree states that if the healthcare group violates a condition, it would have to pay up to $125,000 per violation. The defendants do not admit the allegations of the complaints filed in the first lawsuit from February 2022. 

    Similarly, on February 2 the Washington AG successfully entered into a motion for partial summary judgment against a medical debt collection agency working within the healthcare group for sending 82,729 debt collection notices under the Collection Agency Act (CAA). The court agreed with the AG’s finding that the agency’s debt collection notices failed to make the required disclosures under the CAA. Damages have not yet been awarded. 

    State Issues Medical Debt FDCPA Washington State Attorney General

  • New York Governor highlights NYDFS in 2024 State of the State proposal

    State Issues

    On January 2, New York Governor Kathy Hochul revealed a proposed plan focused on consumer protection and affordability as the initial part of the Governor’s 2024 State of the State address. The plan includes changes to New York’s consumer protection laws, regulations for buy now pay later products, increased paid medical and disability leave benefits, measures to eliminate co-pays for insulin in specific insurance plans, and legislation addressing medical debt.

    Changes to consumer protection laws would give the Attorney General more power to enforce the laws and help the state to address unfair and abusive business practices. Additionally, proposed legislation would require buy now pay later providers to obtain licenses and introduce regulations focusing on disclosure, dispute resolution, credit standards, fee limits, data privacy, and preventing excessive debt.

    NYDFS also detailed Governor Hochul’s plan to update and broaden New York’s hospital financial assistance law to provide increased protection against medical debt. The proposed legislation aims to limit hospitals’ ability to sue low-income patients (earning less than 400 percent of the Federal Poverty Level) for medical debt and expand financial assistance programs. It also seeks to cap monthly payments and interest rates on medical debt while enhancing access to financial aid. This consumer protection and affordability plan builds on Governor Hochul and her administration’s efforts to make New York more affordable and livable.

    State Issues NYDFS New York Consumer Protection Medical Debt Consumer Finance Buy Now Pay Later Unfair

  • NY enacts the Fair Medical Debt Reporting Act

    State Issues

    On December 13, the New York governor signed into law S4907A, or the Fair Medical Debt Reporting Act (the “Act”), a medical debt credit reporting bill that will bar credit reporting agencies from directly or indirectly incorporating medical debt into consumer credit reports. The Act specifically prohibits hospitals, health care professionals, and ambulances from reporting medical debt to credit agencies. The Act defines medical debt as any amount owed or claimed by a consumer “related to the receipt of health care services, products, or devices provided to a person” by a hospital, health care professional, or ambulance service. Notably, obligations charged to a credit card are excluded from medical debts unless the card is specifically designated for health care expenses under an open-ended or closed-end plan. 

    State Issues State Legislation New York Medical Debt Credit Reporting Agency Credit Report Consumer Protection Consumer Finance

  • CFPB report on FDCPA highlights medical debt collection issues

    Federal Issues

    On November 16, the CFPB released its annual Fair Debt Collection Practices Act report, which highlighted challenges specific to medical debt collection. For example, 8,500 complaints were submitted in 2022 related to medical debt collection and described problems such as collectors billing for services never received, collecting the wrong amounts, miscommunication with insurance companies or financial assistance programs, or placing bills on credit reports without prior consumer contact. The report emphasized collectors may violate federal law when they pursue inaccurate medical bills and stressed the need for medical debt collectors to comply with the Fair Debt Collection Practices Act, the No Surprises Act, and the Fair Credit Reporting Act.

    The report also includes developments in state law regarding medical debt collection, including recent legislation in Colorado, New York, Maine, and Nevada. Additionally, the report contains sections related to supervision of debt collection activities, enforcement actions, education and outreach initiatives, rulemaking, and research and policy initiatives. 

    Federal Issues CFPB Medical Debt FDCPA Consumer Protection FCRA

  • Minnesota amends health care provision in extensive new law

    Privacy, Cyber Risk & Data Security

    On November 9, the State of Minnesota enacted Chapter 70--S.F.No. 2995, a large bill to amend certain sections of its current health care provisions. The bill covers extensive changes to healthcare provisions, from prescription contraceptives, hearing aids, mental health, long COVID, and childcare, among many others.

    One of the significant new laws requires a hospital to first check if a patient’s bill is eligible for charity care before sending it off to a third-party collection agency. Further, the bill places new requirements on hospitals collecting on a medical debt before it can “garnish wages or bank accounts” of an individual. The Minnesota law also outlines how a hospital wishing to use a third-party collection agency, must first complete an affidavit attesting that it has checked if the patient is eligible for charity care, confirmed proper billing, given the patient the opportunity to apply for charity care, and, under certain circumstances, if the patient is unable to pay in one lump sum, offered a reasonable payment plan instead.

    Privacy Privacy, Cyber Risk & Data Security Minnesota Health Care Medical Debt Debt Collection


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