Questions to Consider as Regulators Increase Scrutiny of Medical Debt

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Over the last year and a half, the Consumer Financial Protection Bureau (CFPB) has become increasingly interested in the origination, servicing, and collection of medical debt. The CFPB alone has published several pieces of industry guidance, 13 press releases concerning medical debt, and 12 reports concerning aspects of medical debt. Moreover, the CFPB is not acting alone, and has partnered with traditional healthcare regulators, including the Department of Health and Human Services (HHS) and the Centers for Medicate & Medicaid Services (CMS), to solicit information regarding medical debt payment products.

Given the recent regulatory focus on medical debt, participants in the medical industry — including providers, lenders, billing companies, and debt collectors — should take a careful look at their policies, procedures, and practices. To that end, industry participants may want to start with some simple questions that could yield surprising answers.

Am I a Creditor/Lender?

Companies often believe they are not a creditor or lender as long as they are not collecting interest. However, there are many definitions of creditor/lender under federal and state law, and some of those definitions are surprisingly broad. For example, the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B, define a creditor as “a person who, in the ordinary course of business, regularly participates in a credit decision, including setting the terms of the credit” and defines credit as “the right granted by a creditor to an applicant to defer payment of a debt, incur debt and defer its payment, or purchase property or services and defer payment therefor.” Regulation B goes on to state, “[u]nder Regulation B, a transaction is credit if there is a right to defer payment of a debt – regardless of whether the credit is for personal or commercial purposes, the number of installments required for repayment, or whether the transaction is subject to a finance charge.” While there is a carve-out that exempts providers of incidental credit (e.g., hospitals, doctors, lawyers, etc. offering payment plans that meet certain criteria) from complying with limited portions of ECOA and Regulation B, significant portions of ECOA and Regulation B often apply to a healthcare provider’s operations.

Am I a Debt Collector?

As with the definition of creditor, the federal and state definitions of debt collector are often broader than many companies realize. The Fair Debt Collection Practices Act (FDCPA) and its implementing regulation, Regulation F, generally define debt collector to include anyone who regularly collects or attempts to collect debts on behalf of another when the debt was in default at the time the person obtained it. As a result, medical billing companies, depending on the exact nature of their operations, may meet the federal definition of debt collector. Some states, such as California, have even broader definitions of debt collector that can apply to the company that originates the debt (e.g.,a medical provider who provides payment plans).

Am I a Furnisher?

The Fair Credit Reporting Act’s (FCRA) implementing regulation, Regulation V, defines a furnisher as “an entity that furnishes information relating to consumers to one or more consumer reporting agencies for inclusion in a consumer report.” Essentially, if you provide information about a consumer to a consumer reporting agency such as Experian, Equifax, or Transunion, you are a furnisher and are subject to a duty to ensure the information you provide is accurate. The CFPB has repeatedly expressed concerns about the accuracy of information concerning medical debts and the damaging effect of inaccurate information on a consumer’s credit profile. Credit reporting is a powerful tool to aid in collection of past due medical debt, but debt collectors, furnishers, and providers who supply the credit information should expect thorough reviews of any credit reporting concerning medical debt.

In the coming months, we plan to publish a series of posts taking a deeper dive into the questions set forth above, as well as other consumer compliance issues associated with originating, servicing, and collecting on medical debts.