On October 1, the CFPB issued an advisory opinion highlighting that debt collectors engaging in certain practices with respect to the collection of medical debts are strictly liable under the FDCPA and Regulation F.

The Bureau’s advisory opinion states that medical debts disproportionately impact groups like young adults, low-income individuals, Black and Hispanic people, veterans, and the elderly. The Bureau states that consumers often accumulate medical debt due to emergencies or acute care situations, which can limit their opportunity to compare prices among providers. Moreover, because the costs for medical services are often not presented upfront, medical billing practices can be confusing. According to the CFPB, this results in many consumers facing higher than normal charges, or for being billed for services they may not have received or for which they should have been eligible for financial assistance. 

Relatedly, in an October 1 press release, the CFPB explained that non-profit hospitals in particular may endanger their tax-exempt status with the IRS should they charge patients for medical services before the patients have been evaluated for eligibility for financial assistance.

Guidance from the Advisory Opinion

The guidance explains that companies will incur liability under federal and state laws for engaging in the following practices when collecting on medical bills:

• Collecting Payments for Debts Already Paid. This includes instances where the consumer’s bill has been fully or partially paid by insurance or a government payer. Since payments toward a debt can be made at any time, debt collectors must take the steps necessary to ensure they are seeking the correct amount owed with each collection attempt.
• Collecting Amounts Federal or State Laws Deem not Owed. This applies when certain laws, like state workers’ compensation programs or the Nursing Home Reform Act, shift responsibility for payment away from the consumer and onto employers or insurers. Debt collectors must ensure they do not attempt to collect debts that consumers do not legally owe under applicable state and federal laws.
• Collecting Amounts Exceeding what Federal or State Laws Permit. This includes collecting more than is allowed under federal laws such as the No Surprises Act. Many states have also enacted laws which provide additional protections beyond federal law requirements. Additionally, state contract or common law may also provide further limitations on the amount that a medical provider may bill a consumer in certain circumstances. Debt collectors are responsible for ensuring they do not attempt to collect amounts exceeding the limits imposed under applicable federal and state laws.
• Collecting Amounts for Services not Provided. This includes billing for more expensive or complex services than were actually rendered, a practice known as “upcoding.” 
• Misrepresenting Legal Payment Obligations. This targets the practice of portraying uncertain or disputed balances owing as if the payment obligation is certain and fully settled. Debt collectors who attempt to collect amounts not explicitly outlined in an express agreement risk violating the FDCPA by misleading consumers about their legal payment obligations.
• Collecting Unsubstantiated Medical Debt. Debt collectors must have a reasonable basis to confirm that the debts they are collecting are valid and the amounts accurate. To meet this requirement, they should gather relevant information to support their claims while respecting patient privacy. This may include payment records (including insurance payments), evidence of a hospital’s adherence to financial assistance policies, executed contracts, or in cases where no formal contract exists, documentation demonstrating the creditor can make a prima facie claim for the amount owing under state law (for example, that the amount is “reasonable” or reflects “market rates”).

Putting It Into Practice: The release of this guidance is the most recent in a flurry CFPB publications warning against improper practices in the collection of medical debt (a trend we previously discussed here and here). The Bureau’s emphasis on medical debt collection in its recent rulemaking and guidance indicates an increased likelihood of enforcement actions against institutions that ignore these guidelines.

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