CFPB Says Debt Collectors Using Illegal Tactics

The Consumer Financial Protection Bureau (CFPB) has found that debt collectors are using illegal tactics, and it is taking steps to ensure they follow consumer financial protection laws.

The regulator said this in a Thursday (Sept. 5) press release announcing findings from its annual report on debt collection, which it said highlights illegal practices in the collection of medical debt and rental debt.

Consumer complaints about medical debt collection accounted for 11% of all collection complaints received by the CFPB in 2023, according to the release.

One consistent problem identified by both the consumer complaints and the regulator’s own research involves attempts to collect medical bills that have already been paid or that are eligible for financial assistance, the release said.

“Many consumers describe poor communication and information-sharing between the debt collector and the hospital, so the burden often falls on the patient to prove that they do not owe the debt,” the CFPB said in the release.

Another common problem involves non-profit hospitals and other healthcare providers offering medical financing products to patients, without considering whether the patients may be eligible for financial assistance, per the release.

“As a result, debt collectors end up pursuing patients for these bills even when the bills should never have been incurred in the first place,” the regulator said in the release.

The CFPB began accepting consumer complaints about rental debt collection in August 2023 and received more than 1,700 such complaints from that time to the end of 2023, according to the release.

Both renters and law enforcement officials in several states have alleged that rents have been driven up by illegal price-fixing, which may be aided by “revenue management software,” the release said.

“Debt collectors collecting on bills that are inflated due to illegal price-fixing may be violating the Fair Debt Collection Practices Act,” the CFPB said in the release.

Another common complaint about rental debt collection centers on fees from rental payment processing servers. Both renters and landlords have complained about these fees, per the release.

“It is often not clear whether these fees are allowed under the lease agreement or local law, and, thus, able to be targeted by debt collectors,” the regulator said in the release.

To combat illegal practices, the CFPB has brought enforcement actions against debt collectors and proposed a rule that, in many cases, would ban medical debt from credit reports.

When announcing the proposed rule in June, CFPB Director Rohit Chopra said in a press release: “Medical bills on credit reports too often are inaccurate and have little to no predictive value when it comes to repaying other loans.”