As 2014 came to a close there was a CFPB field hearing in Oklahoma City on December 11, 2014. The main purpose of this hearing was to address medical debt collection practices and the relationship between medical debt collection practices and consumer credit reporting.
CFPB Director Richard Cordray 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. Offering an explanation on how having a reported collections item or a severe delinquency can potentially increase that patient or consumer’s interest rate, and affect their ability to borrow money.
What caught my attention, was that Cordray 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 report
- 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
It appears to me from these comments that the CFPB has medical collections in their cross hairs and that agencies doing business in this space should take notice.
Knowledge is power and the better educated you are on the subject the better prepared you can be to meet the challenges.
Here are a few steps you can take to better educate yourself and prepare your business for what looks to be on the horizon:
- If you collect medical debt for nonprofit hospitals, make sure you are up to speed on the IRS’s 501(r) requirements for nonprofit, tax-exempt hospitals. The final rules are now available.
- Check the State code in the states you collect in to be sure you are up to date on reporting requirements.
- If you report medical debt, make sure you are registered with the credit reporting agencies as a medical debt data furnisher.
- If you report medical debt, make sure you reconcile direct payments to the medical providers for whom you collect debt on a daily basis.
- Audit your dispute investigation workflow immediately.
- Make sure your collectors are not negotiating the removal of a medical debt from a consumer’s credit report in exchange for payment.
*Written by Lex Patterson who joined the DAKCS team in 1988. In 2006, he was named President and has worked to cultivate new markets, enhance product offerings, connect people, cut costs, and further DAKCS’ legacy of delivering astonishing customer service. He has a deep interest in technology and the ARM business, but understands that the relationships developed through interaction with people are really how business gets done. An avid fly fisherman, photographer and motorcycle enthusiast, Lex enjoys the great Utah outdoors.