The U.S. Consumer Financial Protection Bureau (CFPB) sounded a warning Tuesday for third-party collectors that rely on illegal practices, such as double-dipping, when pursuing medical debts.
The government’s consumer watchdog issued new guidance specifying that these companies are violating federal law when collecting or attempting to collect any medical bills that are “inaccurate, unsubstantiated or invalid under the law.” Such practices harm consumers and lead to inflated healthcare costs, the agency said.
“Medical billing is often riddled with errors, including inflated or duplicative charges, fees for services the patient never received or charges already paid,” said CFPB Director Rohit Chopra. “The CFPB is taking action to ensure that Americans are not unfairly chased by debt collectors over unsubstantiated or invalid medical bills.”
The CFPB said it has been receiving complaints from consumers who have been targeted by these medical debt collection practices. Medical debts tend to disproportionately impact the young, the elderly, the poor and certain minorities, the agency noted, with total medical debts owed by all Americans estimated to be $220 billion.
The CFPB specified that the consequences outlined in its advisory opinion would apply to revenue cycle management firms, to whom hospitals and other healthcare providers “are increasingly outsourcing medical billing and collection activities,” the CFPB wrote.
These and other third-party debt collectors are more likely to collect amounts that are not owed because they may not have timely access to the provider’s billing and payment information, as is the case when a firm attempts to collect for a bill that has already been paid.
Specific illegal medical debt collection practices outlined in the guidance include:
- Double billing, or collections on bills that have already been paid by insurance
- Collecting amounts in circumstances when federal or state law prohibits patient obligation
- Exceeding caps on bills, such as those set in the No Surprises Act
- Falsified or fake charges, such as bills for services that were not received or were exaggerated
- Unsubstantiated collections, or attempts to collect without necessary documentation
- Misrepresenting a consumer’s right to contest their bill
The CFPB said it has and would continue to bring enforcement actions against debt collectors engaging in these actions.
With much of the country holding some amount of medical debt, the issue has become a political focus.
Just this week bipartisan representatives introduced a bill that would require credit reporting agencies to view payments on medical debt as a positive factor in an individual’s credit score. Earlier in the year the Biden administration took steps to remove medical debt from credit scores wholesale.
Conversely, a working paper published earlier this year threw some cold water on the growing practice of forgiving medical debt when it found near-negligible changes in credit, no improvements in financial well-being and even signs of worsened mental health among those with the most debts.