Medical Debt Malpractice

Consumer Complaints About Medical Debt Collectors, And How The Consumer Financial Protection Bureau Can Help

A report by U.S. PIRG Education Fund and Frontier Group
Ed Mierzwinski, U.S. PIRG Education Fund
Mike Litt, U.S. PIRG Education Fund

Every year, debt collectors contact Americans because of debt related to medical expenses. Medical debt collectors often use aggressive tactics, and even attempt to collect debt from the wrong people — putting consumers’ credit score at risk. The Consumer Financial Protection Bureau (CFPB) aims to protect consumers against these unfair, deceptive, and abusive collection practices and take action against companies that break the law.

Medical debt collection affects millions of Americans.

Based on survey results from a January 2017 Consumer Bureau study, more than 40 million Americans are contacted about debt related to medical expenses each year. That amounts to nearly one in eight Americans. For consumers that do owe money for medical procedures, these contacts may be stressful and time consuming.

But medical debt collection doesn't only affect consumers with legitmate debt. A 2017 Consumer Bureau survey found that 53 percent of consumers contacted about debt in the past year believed they either did not owe the debt, were being contacted about the wrong amount, or were being contacted about a family member's debt.

Some debt collectors use aggressive tactics including threats and job disruption.

Tactics employed by debt collectors include incessant calling, posing as someone else, including police, lawyers, or hospital staff, contacting places of business or family members, or filing lawsuits against consumers whose debts are not verifiable or enforceable.

Most harassment and aggressive tactics are banned under the 1977 Fair Debt Collection Practices Act (FDCPA), however, debt collection companies are routinely found to be violating debt collection law. As of February 2017, 139 debt collectors had been banned from further debt collection by the Federal Trade Commission.

Inaccurate and unfair credit reporting can harm consumers’ financial well-being.

More than 40 million Americans have medical debt on their credit reports. But often, this debt is inaccurate, and may not be a fair assessment of credit worthiness.

The Fair Isaac Corporation (FICO), owner of the most widely used method for calculating credit scores, reported that the appearance of any debt greater than $100 on a credit report will reduce a credit score of 680 by more than 40 points and a score of 780 by more than 100 points.

The Consumer Bureau protects consumers from abusive medical debt collection.

The Consumer Bureau was created to “protect consumers from unfair, deceptive, or abusive practices and take action against companies that break the law.”

In June 2015, the Consumer Bureau took action against the medical debt collection company Syndicated Office Systems for “for mishandling consumer credit reporting disputes and preventing consumers from exercising important debt collection rights.” The Consumer Bureau ordered the company to provide $5.4 million in relief to harmed consumers and pay a $500,000 penalty, along with correcting its business.

The Consumer Bureau is currently engaged in a rulemaking process to protect consumers from exploitative debt collection practices, including rules to limit excessive communications and to require straightforward debt collection mailings for easier dispute fillings and payments.

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