It’s the end of the third quarter. Here are three critical trends Collections & Recovery execs need to be aware of:
The Changing Landscape of Medical Debt
If you’ve been reading Collections & Recovery, and even if you haven’t, it should be clear to you that medical debt is currently the CFPB’s favorite target. To be fair, the CFPB’s assertion that “the lack of transparency and understanding among consumers regarding medical debt and payment products is a significant concern,” is true.
But the CFPB’s intention is one thing, and its execution is another.
In a July 11 hearing, the CFPB invited several consumer advocacy groups to discuss their plan for protecting vulnerable consumers, and according to Ari Derman & Joann Needleman at Clark Hill, it includes:
1 - Banning credit reporting of all medical debt: Panelist Mona Shah, a Senior Director of Policy and Strategy at Community Catalyst, along with nearly all the panelists, advocated for the outright elimination of credit reporting for medical debt, implying the CFPB’s recent efforts in restricting such reporting was an incomplete solution.
2 - Eliminating deferred interest: Panelist Chi Chi Wu, a Senior Attorney at the Consumer Law Center, emphasized the importance of banning deferred interest outright. She suggested that the CFPB should close the existing loophole in the Card Act and restrict this exploitative practice once and for all.
3 - Strengthening Financial Assistance Programs: Panelist Jennifer Holloway of Tzedek DC and nearly all others stressed the importance of improving and simplifying Financial Assistance Programs processes, making them more accessible and user-friendly for individuals in need.
4 - Enhancing provider education….and enforcement(?): Director Chopra speculated that healthcare providers may not be aware of the technical practices in the medical loan industry and the true financial impact on patients, but believes they have an obligation to understand this. He and the other panelists emphasized that the providers must be better educated about the implications and consequences of medical credit products and even stated that the Bureau will strategize to see how to make that a reality. Chopra wants providers to prioritize genuine financial assistance rather than steering patients towards high-interest and costly payment options. He indicated that this may be an area of focus for the Bureau in the near future.
So what can healthcare providers and their collections partners do?
Read more about the changing medical debt landscape in Speaking in into Existence: A Deeper Dive into the CFPB Hearing on Medical Billing and Payment Products by Ari Derman, Senior Counsel and Joann Needleman, Member at Clark Hill, and learn more about how to prepare for the CFPB’s plan for medical debt.
Earlier this year, the credit bureaus agreed to remove any medical debt under $500 from consumer credit reports, and during the July 11 hearing, it became clear that banning credit reporting of all medical debt is on their agenda.
What wasn’t clear during that hearing was whether their agenda would extend to other types of debt. And then, in September, the CFPB released an outline of their plans for changing the Fair Credit Reporting Act. While the press surrounding the outline focused on “a rule barring medical debt collections through the credit reporting system,” according to Stefanie Jackman, Partner at Ballard Spahr, there are other, farther-reaching impacts of their proposed changes, including:
1 – An expanded definition of who qualifies as a “consumer reporting agency (CRA),” with broad implications for how data brokers and aggregators can sell and use consumer data.
Data brokers and aggregators are critical not only to the consumer credit cycle, but also to the consumer experience. “Use of data for product improvement and identity verification to access an online account, for example, would be prohibited absent the consumer’s written authorization,” according to the Troutman Pepper team.
2 – The ability for consumers to file not only disputes for themselves, but also on behalf of whole groups of consumers. CRAs and furnishers would then be obligated to investigate the dispute and respond to the entire group.
Credit report dispute responses are already cumbersome; adding the ability to file “class action” disputes will be resource-prohibitive for many furnishers.
3 – CRAs and furnishers would have to evaluate legal issues raised within a consumer dispute.
Currently, CRAs and furnishers are only required to investigate “factual disputes about the completeness or accuracy of data.” Under the proposed rulemaking, attorneys could be required to determine if there are “legal” issues that must be resolved in the dispute.
Additional scrutiny from regulators and reduced cash flow for consumers means collecting debt is more expensive and riskier than ever. Collections & recovery professionals would be wise to invest in digital-first collections.
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