CFPB Considers Rules to Remove Medical Debt from Credit Reports: What Does This Mean for Medical and Dental Providers? | JD Supra

Last month, the Consumer Financial Protection Bureau (CFPB) began a rulemaking process that, if enacted, would reshape the credit reporting and debt collection landscape and could have a detrimental effect on financial results of medical and dental providers.

As we noted previously, the CFPB, led by Rohit Chopra, continues to make medical financing and debt collection a priority on the agency’s agenda. In prepared remarks during a call with Vice President Kamala Harris, Director Chopra noted that 58% of all third-party debt collection business lines are for medical debt, making medical debt the business line most common debt collection method on credit reports in 2021. The problem, according to the CFPB, is that billing and insurance adjustment errors can lead to inaccurate reporting, and medical billing data is less predictive of future repayment than traditional credit obligations.

Currently, the Fair Credit Reporting Act limits the inclusion of medical information in credit reports and only allows a creditor to use medical information in a manner and to an extent no less favorable than it would use information not comparable medical conditions. See 15 USC § 1681b(g)(1)(C) (noting in relevant part that creditors may provide “information… relating to debts arising from the receipt of medical services… when such information… does not provide sufficient information to infer, the supplier or the nature of these services). See also 12 CFR § 1022.30(d)(1)(ii) (“Regulation V”) (providing that the creditor may “use[] medical information in a manner and to an extent that is no less favorable than using comparable information that is not medical information in a credit transaction).

The CFPB, led by Director Chopra, seeks to go further by suggesting that medical debt collectors “weaponize the credit reporting system.” In its recent overview, the CFPB considers proposing to: (1) revise Regulation V such that creditors are prohibited from obtaining or using debt collection medical information to determine eligibility to the credit of a consumer; and (2) prohibit consumer reporting agencies from including commercial medical debt collection lines in consumer reports provided to creditors for purposes of determining credit eligibility.

Although the CFPB’s proposal was applauded by consumer groups, it could have unintended consequences that could impact small medical and dental practices and patient access to health care in small markets. Medical providers submit information about unpaid medical bills to credit reporting agencies, which encourages patients to pay their medical debt, by virtue of the patient’s desire to avoid the negative impact of having medical bills and unpaid dental bills on their credit reports. If the CFPB’s proposal were to come to fruition, it could result in lower returns on medical providers’ receivables and increased expenses due to the reliance on more costly collection methods, such as employing additional internal staff and more collection disputes. Additionally, removing medical business lines could result in medical providers not serving areas where they cannot charge upfront payment, which could lead to higher costs and less access to care for all patients. .

Currently, the CFPB recognizes that “[n]o the entity will be required to comply with any of the proposals…before a final rule is published and the implementation period between the final rule’s publication date and its compliance date ends. Pursuant to the Small Business Regulatory Enforcement Act of 1996 (SBREFA), the CFPB will consult with small entities that may be subject to the proposed regulations. In this regard, the CFPB is seeking to know, among other things, what alternative collection methods medical debt collectors will employ and the extent to which creditors use medical debt collection information when making medical debt eligibility decisions. credit.

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