On September 5, 2024, the Consumer Financial Protection Bureau (CFPB) released its annual report on debt collection, and it’s a must-read for anyone in the industry. The report calls out “aggressive” and “illegal” practices in both medical and rental debt collection, warning that these persistent issues are causing serious harm to consumers. According to the CFPB, these problems have remained unchecked since last year’s report, raising concerns about regulatory compliance and consumer protection.
The CFPB highlights the growing "financialization" of medical and rental debt collection, where third parties are stepping in with new payment products and services. Financial institutions, fintech companies, and other service providers offering these solutions need to sit up and take notice. The report shines a spotlight on practices that could spell trouble, so if you're in this space, it's time to make sure you're following the rules and protecting consumers.
Key Highlights
Medical Debt Collection
Medical debt complaints made up about 11% of all collection complaints in 2023. A big issue? Collecting on debts that consumers didn’t owe—like bills already paid off, debts covered by insurance, or charges showing up on credit reports that consumers never even knew existed. The CFPB warns that these practices could violate laws like the Fair Debt Collection Practices Act (FDCPA) and the Consumer Financial Protection Act.
Quality of Information is Key
Consumers also reported a lot of confusion about their medical debts, often because of poor communication between healthcare providers, insurers, and collectors. Inconsistent billing, unclear notices, and attempts to collect on debts that weren’t owed were all common complaints. This lack of transparency is fueling consumer frustration and adding to the harm caused by faulty collection practices.
Medical Payment Products: Buyer Beware
The CFPB also highlighted the rise of medical payment products and services, where consumers are offered financing without knowing they could have qualified for financial assistance from nonprofit hospitals. These products come with high interest rates and aggressive collection tactics, often leaving consumers in debt they should never have incurred.
Rental Debt Collection: A Growing Problem
Since August 2023, the CFPB has started accepting complaints about rental debt—and they’ve already received over 1,700. With over $9 billion in rental debt across the U.S., and millions of households behind on rent, the issue is growing fast. Landlords and rental debt collectors are facing complaints about improperly charged fees, inflated amounts, and other questionable practices.
‘Financialization’ of the Rental Market
Much like in the medical debt market, financial products are flooding the rental space. New payment services, rewards programs, and collection services are adding fees and risks for consumers. The CFPB is keeping a close eye on these practices, particularly when tenants are being charged for debts they may not actually owe.
Debt Verification and Data Issues
Many consumers reported problems with debt verification. Some collectors ignored requests for proof of debt, while others sent debts straight to credit agencies without proper verification. The CFPB also noted that landlords’ handling of tenant information is leading to inaccurate collections and reporting errors, leaving tenants in a lurch over debts they don’t owe.
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