On December 11, 2014, the CFPB conducted a field hearing in Oklahoma City on medical debt collection practices and the relationship between medical debt collection practices and consumer credit reporting in general. From my vantage point, the meeting was nothing short of a crystal ball regarding the future of medical debt collection. But for reasons that escape me, it is a one that has gone largely unnoticed by the industry.
Let’s review some of the hearing’s most important takeaways:
CFPB Director Richard Cordray once again shared the Bureau’s position that problems with debt collection are magnified when the debt collector reports a debt as a collections trade line to the national credit reporting companies. He characterized a collections trade line as a black mark – more like a scarlet letter − on any consumer or patient’s credit report, and explained how having a reported collections item or a severe delinquency can increase that patient or consumer’s interest rate, and affect their ability to borrow money. He further highlighted some particularly startling statistics from the CFPB’s recent study on credit reporting practices with regard to medical debt:
- One in five consumers with a credit report has a medical collections item on their credit
- More than 1.3 billion trade lines are actively reported and about half of the overall debt
collection trade lines are from medical bills
- Fifteen million consumers have medical debt collections items as the only collections
items on their credit reports and many of them have no other seriously delinquent accounts
Cordray’s prepared remarks should be a wakeup call to any medical debt collection agency owner. It should be noted first that the Director opened the hearing reiterating how debt collection practices have long been a source of frustration for many consumers, making it clear debt collection continues to be a top source of consumer complaints to the Consumer Bureau and to its sister agency, the Federal Trade Commission.
According to Cordray, those sentiments have resulted in a major new development: He explained how as part of the CFPB’s ongoing effort to improve the nation’s credit reporting system, the Bureau will now require the largest credit reporting companies to provide it with regular, standardized accuracy reports, specifying the number of times consumers dispute information on their credit reports during a reporting period, along with furnishers with the most disputes, industries with the most disputes, and furnishers with particularly high dispute rates relative to their peers.