Washington, D.C. — The Consumer Financial Protection Bureau (CFPB) has issued a stringent advisory targeting the practices of medical debt collectors, emphasizing the prohibition of collecting charges that are erroneous or legally nonviable. The advisory reinforces the federal stance against deceptive and unfair practices in medical billing, a critical move as the nation grapples with soaring medical debt levels.
Rohit Chopra, Director of the CFPB, in a recent statement highlighted the frequent billing inaccuracies, such as exaggerated charges or billing for unprovided services, that plague patient invoices. “The CFPB is committed to ensuring that no American is unduly pursued by debt collectors on the basis of unsubstantiated or illegitimate medical bills,” Chopra asserted.
The advisory arrives amidst troubling statistics revealing that over 100 million Americans are burdened with collective medical debts surpassing $220 billion. This underscores a widespread issue linked to complex billing processes managed by third-party firms, as per recent findings by the Urban Institute.
Such third-party entities, including those specializing in revenue cycle management, are reminded of their legal responsibilities under the Fair Debt Collection Practices Act. The CFPB’s advisories aim to clear ambiguities concerning the scope of legally permissible debt collection practices.
A notable point in the guidance identifies the problem of ‘double billing’ where debts paid by insurers, government schemes like Medicare or directly by consumers are still pursued. Another part of the advisory condemns the collection of charges exceeding legal boundaries set by regulations, such as the No Surprises Act, which aims to shield patients from exorbitant medical debt.
Additionally, the agency clamped down on the collection of fabricated debts, where charges for undelivered services or excessively inflated service levels are billed, referred to in the industry as “upcoding.” Further emphasis was placed on ensuring debt collectors do not mislead patients about their rights to contest or negotiate medical debts, which could prevent patients from seeking correct debt resolution.
The complexities of medical debt collection and its significant impact on healthcare access and equity were underlined by the CFPB’s rigorous reinforcement of consumer protection laws. Patients facing large medical bills often delay immediate payments, especially as charges escalate, a reality supported by a February 2024 Kodiak Solutions study showing decreased likelihood of full payment as charge amounts increase.
As medical debt continues to rise as a major socioeconomic issue, the CFPB’s enforcement of clear, fair debt collection practices intends to provide a counterbalance to the pressures faced by consumers, ensuring that the health system works equitably. The bureau asserts that both collectors and patients must be fully informed of and compliant with established consumer rights and protections to foster a fair financial environment in healthcare. This move not only addresses immediate financial injustices but also heralds a significant step toward broader healthcare reform related to patient financial engagement and responsibility.