InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
CFPB supports Connecticut’s bill to ban medical debt on credit reports
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.”
CFPB’s Frotman speaks on medical debt collections and rental financial products
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.
Washington State Attorney General wins two suits under medical billing practices
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.
New York Governor highlights NYDFS in 2024 State of the State proposal
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.
NY enacts the Fair Medical Debt Reporting Act
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.
CFPB report on FDCPA highlights medical debt collection 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.
Minnesota amends health care provision in extensive new law
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.
CFPB shares concerns and actions regarding medical debt collection
On October 4, Seth Froman, the CFPB’s General Counsel and senior advisor to Director Chopra, delivered remarks at the New Jersey Citizen Action Education Fund’s Financial Justice Summit. He heralded the work and mission of the CFPB, and focused on the impact of medical debt. He emphasized the CFPB’s concerns that families are being “saddled with medical bills they should not – or do not – owe,” and mentioned a recent enforcement action ordering a medical debt collector to pay more than a million dollars in penalties and redress “because the collector continued to collect on debts without verifying that they were valid after consumers disputed them.” He further discussed the impact of medical bills on consumer credit, such that consumers have a “strong incentive to pay the medical bill, even when they think it’s not the right amount or don’t owe it at all.”
CFPB announces consumer reporting rulemaking
On September 21, the CFPB announced the beginning of its anticipated rulemaking regarding consumer reporting, including a proposal to remove medical bills from credit reports. This announcement builds upon a hearing the CFPB held in July 2023 on medical billing and collections, highlighting its range of negative impact on marginalized communities (covered by InfoBytes here). In the CFPB’s announcement, Director Rohit Chopra emphasized the inconsequential “predictive value” of medical bills in credit reports despite their prevalence in American households, thus the agency's goal is to alleviate the burden on individuals facing medical debt. The Bureau’s press release highlighted components to its outline of proposals and alternatives under consideration, such as (i) prohibiting consumer reporting companies from including medical bills in consumers’ credit reports; (ii) prohibiting creditors from relying on medical bills for underwriting decisions; and (iii) prohibiting debt collectors from leveraging the credit reporting system to pressure consumers into paying their debts. The rule would not prevent creditors from accessing medical bill information, such as validating need for medical forbearances, or evaluating loan applications for paying medical debt.
In addition to the proposed removal of medical debt from consumer reports, the Bureau’s outline includes other notable proposals regarding consumer reports. The Bureau’s proposals include:
- As previously covered by InfoBytes, applying the FCRA to data brokers by altering the FCRA definitions of “consumer report” and “consumer reporting agency”, to “address whether and how the FCRA applies to newer actors and practices in the credit reporting marketplace, including questions such as coverage of data brokers and certain consumer reposting agency practices regarding marketing and advertising.” In particular, the Bureau is also considering a proposal that would provide that data brokers selling “consumer reports” containing consumers’ payment history, income, and criminal records would be considered a consumer reporting agency. The Bureau is also exploring clarifications on when data brokers qualify as consumer reporting agencies and furnish consumer reports.
- Clarifying whether “credit header data” qualifies as a consumer report, which could limit the disclosure or sale of credit header data without valid reasoning.
- Clarifying that certain targeted marketing activities that do not directly share information with a third party nevertheless are subject to the FCRA.
- Proposing a definition of the terms “assembling” and “evaluating” to include intermediaries or vendors that “transmit consumer data electronically between data sources and users.”
- Clarifying whether and when aggregated or anonymized consumer report information constitutes or does not constitute a consumer report. Specifically, the Bureau contemplates providing that a data broker’s sale of particular data points such as “payment history, income, and criminal records” would “generally be a consumer reports, regardless of the purpose for which the data was actually used or collected, or the expectations of that data broker
- Establishing the steps that a company must take to obtain a consumer’s written instructions to a obtain a consumer report.
- Addressing a consumer reporting agency’s obligation under the FCRA to protect consumer reports from a data breach or unauthorized access.
California AG advocates for medical payment reforms
California Attorney General Rob Bonta submitted a letter to federal agencies urging the federal government to adopt regulations and statutory protections to help protect patients who may need to use medical credit cards and installment loans to pay for healthcare-related bills.
The letter notes that medical payment products exacerbate health disparities, that patients seeking medical care may not be in an appropriate position to make complex financial decisions, and offers California’s protections against medical payment products as a model framework.
In the letter, which is addressed to the U.S. Department of Health and Human Services, Centers for Medicare & Medicaid Services, the CFPB, and the Treasury, Bonta recommends (i) designating medical credit card debt as medical debt and not consumer debt; (ii) ensuring providers properly screen patients for financial aid and charity care before offering a medical payment product; (iii) limiting enrollment when patients may be distressed or under the influence of medication; (iv) providing written notice of financial assistance and potential eligibility for charity care; (v) making reasonable efforts to notify patients about the level of insurance coverage of medical expenses; and (vi) reducing patient cost-sharing responsibilities.