In Part one, we examined three of the requirements the CFPB’s Advisory Opinion on the Deceptive and Unfair Collection of Medical Debt imposed on debt collectors. Since that article was published, ACA International, the Association for Credit and Collection Professionals, filed a lawsuit in the U.S. District Court for the District of Columbia, asking the court for relief, in short, because the CFPB did not follow the constructs for issuing rulemaking required under the federal Administrative Procedure Act. Further, the rule contradicts the FDCPA by requiring certain actions by debt collectors that the law does not require. The complaint, filed on November 1, 2024, can be found here.
In this part, we’ll look at the three other broad areas discussed in the Advisory Opinion.
Collecting amounts for services not received
The CFPB spends several pages on a practice described as upcoding, which occurs when medical billers use a billing code that results in a higher charge for services provided to the patient and indicates that a different procedure than that actually performed was received by the patient. The CFPB cites an article written by Commissioner William Hsiao of the California Heath and Human Services department, which in its first paragraph advocates a single payer healthcare system which would “vastly reduce fraud and abuse in claims by leveraging a uniform data system.” (last accessed 11/5/2024: Fraud and Abuse in Healthcare Claims)
We won’t discuss the pros and cons of a single payer healthcare system in this article, but the point is that debt collectors do not know and cannot know whether the charges reported to them by their healthcare clients are generated by the right codes or the wrong codes. There are more than 11,163 CPT codes currently in use. Debt collectors currently are not required to know the codes or check the coding, and often do not receive paperwork from their clients upon placement that even contain CPT codes. Some providers would consider these codes as outside the information necessary to collect a debt. Yet the CFPB wants to hold debt collectors accountable for the billing practices of their clients. As I said in part one, the FDCPA does not require debt substantiation prior to notifying consumers about their debts, and it contains a process for providing validation to consumers who have disputed their debts. The advisory opinion undercuts this process.
Misrepresenting the nature of legal obligations
Does the presentation of an amount due to a consumer by a debt collector rise to the level of a misrepresentation of a legal obligation if it turns out that the consumer may owe less? The CFPB contends in its advisory opinion that “the least sophisticated consumer presented with a demand for payment may believe that the full demanded amount is legally owed”, and it cites cases involving time barred debts and debts which may be subject to bankruptcy protection. Both of these cases were decided in the pre-Regulation F era. The CFPB-designed Model Validation Notice used by debt collectors today who want to invoke safe harbor for their initial validation notice, and even those who don’t use it but comply with Regulation F by using a notice that is substantially similar, makes it abundantly clear that consumers have the right to dispute their debt and provides a vehicle for doing so that could not be easier to implement. Unlike consumers of the late 20th century who had to rely naively on what the debt collector told them, 21st century consumers, even the least sophisticated ones, have tools in their back pocket or even in hand that can be used to immediately look up the meaning of any communication they receive from a debt collector if they need to. Countless sites and content creators answer the question, “how should I deal with a debt collector?” A simple statement of dispute can get them the information they need/want the debt collector to provide. The assumption that the CFPB seems to be making related to medical debt is that “every balance is always wrong.”
Substantiation of medical debts
The inherent problem that the Advisory Opinion seems to seek to resolve is the fact that the cost of medical care has spiraled out of control, and the plethora of medical providers, medical systems, medical practitioners, manufacturers of medical devices and even the medicines that many of us take every day of our lives is regulated haphazardly, even unfairly. Putting all of those problems on the backs of debt collectors by requiring them to substantiate every amount they seek to collect for their clients is not going to solve the problem. In 2022, Americans spent about $12,600 per person on healthcare, more than $4000 per year more than people in countries like Switzerland and Germany, yet life expectancy for Americans is 4.5 years lower than the Germans and the Swiss, according to Investopedia.com. While the CFPB might be praised for trying to reduce costs for Americans, it seems that putting that burden on debt collectors is misplaced. Medical billing practices are confusing—we can all agree on that. Unfortunately, the CFPB does not have jurisdiction over medical providers and their billing practices. Forcing debt collectors to fix it from the caboose end of the train won’t work.
To take us back to my original assertion—that trying to comply with this rule will be like trying to make turducken without a recipe—the analogy is valid. It’s going to taste bad; it’s going to fall apart in the roasting, and somebody is going to get sick in the end. Making turducken requires planning, study, practice, and a good team of sous chefs behind the scenes to make sure the ingredients are handled properly and are added at the correct portion at the correct time. That is what the development of this rule lacked.