If there has been any doubt in any debt collector’s mind about the interest by the CFPB in the collection practices of medical debt collectors, the consent agreement the Bureau signed on June 18, 2015 with a medical debt collection firm with offices in California and Texas should erase that doubt. Some industry members assert the CFPB would not focus on medical debt collectors due to the fact the CFPB excludes medical collections revenue from its Large Market Participant calculation related to debt collectors it would target for supervision. The reality is any debt collector is subject to enforcement action by the CFPB.
In this consent agreement, the CFPB said it found 13,713 instances in which the collection agency did not respond to direct disputes from consumers within the 30-day time period required by the Fair Credit Reporting Act. In some instances, responses took months, and sometimes up to a year. Direct disputes are written disputes by consumers related to accounts which have been furnished to credit reporting agencies. The time frame applicable in this order was a 34-month period from the beginning of 2011 to the third quarter of 2013.
In addition, the CFPB identified more than 4,000 instances in which consumers who were represented by attorneys were not sent a debt validation notice within five days of the company’s initial communication with the consumer, in violation of section 809(a) of the Fair Debt Collection Practices Act. Further, in more than 6,000 instances, consumers were not sent validation notices as the result of human error or problems with computer system logic. The CFPB asserted the company collected more than $2.3 million on these accounts.
To remedy the impact on consumers, the company was ordered to correct any errors that prevented the sending of validation notices and to refrain from collecting any payments from consumers who had not been sent a validation notice. In addition, the company was required to update information it had furnished to credit reporting agencies, and to provide sufficient staffing, facilities, and systems necessary to respond to direct disputes from consumers, and to develop a compliance plan to ensure compliance in the future.
The CFPB ordered the company to create a $5.13 million redress fund to benefit consumers, refund any payments made by consumers who were not sent validation notices, and forgive any remaining balance on the debts. In addition, they had to pay consumers who did not receive a response to their direct dispute an amount between $100 and $1,000 each, depending on the duration of the company’s delay in response. Additionally, they had to pay $100 to each consumer who was subject to collection efforts, did not pay their debt, and had not been sent an initial notice. Finally, the company was ordered to pay a $500,000 civil money penalty to the CFPB.
In 2013, the CFPB issued several bulletins related to credit reporting by debt collectors. One of the bulletins outlined the CFPB’s position related to handling direct disputes and emphasized that compliance with the Data Furnisher’s Rule (Subpart E of Regulation V, 12 C.F.R. §1022.43) required reasonable investigation of disputes and a written response to consumers. The bulletin identified that the Bureau had observed some data furnishers merely instructed consumer reporting agencies to remove a tradeline upon receipt of a dispute. It emphasized that such a deletion did not substitute for a reasonable investigation. While this practice does not appear to an underlying issue in this consent order, it is another example of the CFPB’s position that credit reporting has the potential for consumer harm. The lessons learned from this enforcement action are broad and meaningful to debt collectors operating in the medical vertical and those whose clients are outside this vertical as well.
(Administrative Proceeding In the Matter of: Syndicated Office Systems, LLC, d/b/a Central Financial Control, File No. 2015- CFPB-0012, June 18, 2015)
Debra Ciskey is the Compliance Officer at Wakefield & Associates. Inc. She is a member of the board of directors and a certified instructor for ACA International.