One Federal Agency Spotlights a Big Problem
Older Americans’ Medical Debt Collection Problem

By Amy Acheson, Esq.

Published NAELA News Online July 2015

Background –Consumer Financial Protection Bureau’s Office for Older Americans
The Consumer Financial Protection Bureau (CFPB) was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. By the end of summer 2011, the consumer financial protection functions of seven other federal agencies were transferred to the CFPB. The Dodd-Frank Act required the creation of the Office of Financial Protection for Older Americans, which became active in 2012. Its purpose was to more effectively serve the consumer interests of the largest generation of retirees in our history including those who are now in their sixties.

The Office of Financial Protection for Older Americans is the first federal body with a focus of safeguarding the financial interests of seniors, and is tasked with improving the financial decision-making of seniors and preventing unfair, deceptive, and abusive practices targeted at seniors. As such, Elder Law practitioners should be familiar with its work, including its initiatives on debt collection activities concerning older consumers. Because elders often face complicated decisions about their finances, they are vulnerable to financial exploitation which includes improper attempts to collect debt and medical bills.

A Piece of the Puzzle – The Federal Complaint Database
The CFPB has statutory authority to make information about the markets for consumer financial products and services public. The CFPB’s Consumer Complaint Database is the mechanism for making complaints about consumer financial issues including improper debt collection. When a complaint is made, companies have 15 days to confirm that the consumer has identified the correct company. Then the complaint appears in the database. The company must respond substantively, in one of four ways: close the complaint 1) with monetary relief; 2) without monetary relief; 3) with an explanation; or 4) without relief or explanation. Regardless of the type of closure, the complaint and response remain accessible on the database. The consumer may dispute the response and the CFPB may review, investigate, and take further action. The Bureau prioritizes cases where the consumer disputes the response or where the company fails to respond in a timely manner.

The Complaint Database is accessible online and contains detailed information about all the complaints filed since the database’s inception in 2012. The data includes the type of complaint, the date of submission, the consumer’s zip code, and the company that the complaint concerns. The database also contains information about the actions taken on a complaint – whether the company’s response was timely, how the company responded, and whether the consumer disputed the company’s response. Personal or confidential consumer identifying information is not publicly accessible.

Older Americans’ Medical Debt Collection Problem
The Complaint Database confirmed what we would expect of consumer complaints made by older Americans — more than one-third relate to problems with debt collections. Strikingly, in 29 percent of those complaints, the older consumers were unaware of or did not recognize the debt being collected, and 10 percent of those complaints related to medical debt collections.

These complaints concern frequent and repeated attempts to collect medical bills that are covered by insurance. This is understandably frustrating when the consumer is simultaneously attempting to correct billing mistakes or waiting for providers and insurers to resolve disputes. Debt collectors sometimes threaten to garnish older consumers’ Social Security, Supplemental Security Income (SSI), or Veterans’ benefits, even though these funds ordinarily are only subject to garnishment for very limited categories of debt.1 This can be severely distressing because government benefits can be the only source of income.

Another problem is the effect of this kind of collection on credit availability. Most often the debt collection agencies are the ones contacting the elders. Unpaid medical bills can be reported to the nationwide credit reporting agencies (NCRAs) from two sources: 1) directly by the medical service provider (e.g., a doctor); or 2) by a third-party debt collector that has purchased the debt or been contracted to collect it. The vast majority of medical debt reported to the NCRAs – about 99.4 percent of accounts – is reported by third-party collection agencies. Once reported, the information about these medical collections is reflected on the consumer’s credit record maintained by the NCRAs, and used by credit scoring models, such as the FICO and VantageScore models. Credit scores can have a large impact on a consumer’s access to credit and usually scores do not differentiate between medical bill collections and other debt collections.

Thus far, the CFPB has limited authority to address debt collection by medical providers. Medical providers are not directly subject to the CFPB’s supervisory authority when collecting their own bills. When collecting its own medical bill, the provider is not generally subject to enforcement actions under the Dodd-Frank Act’s prohibitions on unfair, deceptive, or abusive acts or practices (UDAAPs). This is because medical bills usually do not involve an extension of credit by the medical provider to the patient-consumer, and because there is no extension of credit, the medical provider is not typically a “covered person” subject to the CFPB’s UDAAP authority under Dodd-Frank.2 In addition, when they are collecting their own medical bills, the medical provider is generally not subject to the Fair Debt Collection Practices Act (FDCPA). The FDCPA generally does not apply to first-party creditors collecting their own debts or to servicers when collecting debts that were current when servicing began.

Collection of medical debts, especially from older clients, is a problem that has come to the foreground at the CPFB’s Office of Older Americans. So far, there is no solution, but awareness has been raised about issues under current regulations. This is an ongoing process and will require legislation. Attorneys should keep abreast of upcoming regulatory developments.

About the Author
Amy Acheson, Esq., Pittsburgh, Pa., is a member of the NAELA News Editorial Board.

Citations
1 Many federal benefit payments like Social Security benefits, Supplemental Security Income (SSI) benefits, Veteran’s (VA) benefits, Railroad Retirement benefits, and benefits from the Office of Personnel Management are not subject to garnishment in most cases - which means that this money is exempt. See, e.g., 42 U.S.C. § 407(a); 42 U.S.C. § 1383(d)(1). There are exceptions, such as money owed in child support, spousal support, or for federal taxes. See, e.g., 38 U.S.C. § 5301.

2 See, e.g. 77 FR 65775 (Oct. 2012).