The Consumer Financial Protection Bureau is watching what it calls the “growing financialization” of American life, including in areas like healthcare and housing.

CFPB General Counsel Seth Frotman warned in a speech last week that companies involved in collecting medical debt and rental payments were subject to laws such as the Fair Debt Collection Practices Act and Fair Credit Reporting Act.

“There is no exception in the federal consumer financial protection laws, including the FDCPA and FCRA, for new market entrants or new technologies,” Frotman said at an event hosted by the National Consumer Law Center on April 11.

Banks and credit card companies have already faced pressure from the CFPB to cut down on junk fees, unnecessary charges that Frotman said were creeping into rental payments. In conjunction with the Biden administration, the bureau put penalties in place effective February for banks and credit unions with $10 billion or more in assets that charge customers for access to account information such as the interest rate on a loan or the balance of a deposit account. President Biden also called out credit card issuers for charging junk fees during a state of the union address last month.

The bureau has received about 15,000 complaints in the last two years concerning medical debt collectors according to Frotman, who is also a senior advisor to CFPB Director Rohit Chopra. Collectors may be seeking payments for the wrong amount or in cases where the patient does not actually owe anything, he said. The collectors then provide that information to credit reporting agencies in an effort to pressure patients to pay the bill to improve their credit score. Frotman called such a practice “a deliberate misuse of the credit reporting system.”

Those concerns led the bureau to start a rulemaking process that would remove medical debt from credit reports, Frotman said.

He also highlighted recent legislative efforts by states such as Colorado and New York that would “complement” the CFPB’s efforts. Both states enacted laws last year that prohibit consumer reports from including medical debt information. 

“I’ll be candid, state laws can provide relief for people on a timeline that is likely going to be faster than our federal efforts,” Frotman said. “Other states are considering such laws, and we encourage them to do so as being fully consistent with the CFPB’s work in this area.”

In another move related to medical payments, the CFPB this week also voiced its support for Connecticut legislation that would bar medical debt from being included in consumer credit reports.

In an April 11 letter to Connecticut State Senator Matt Lesser posted to the bureau’s website on Monday, CFPB Assistant Director Brian Shearer said the bureau supported passage of the bill. Medical debt should not be included in credit reports because it is “categorically different” from other kinds of debt, wrote Shearer, who is in the office of policy planning and strategy.

“CFPB research has found that medical debt is less predictive of future consumer credit performance than other tradelines,” Shearer said in the letter.

Patients also have faced concerning practices from hospitals seeking to exploit a potential Internal Revenue Service loophole, according to Frotman. The CFPB has received reports of non-profit hospitals nudging patients away from legally mandated financial assistance programs to medical payment products, such as “a new credit card or an exotic payment plan,” he said.

On the housing front, the bureau has seen an “explosion” of digital tenant-screening tools for landlords, Frotman said. “The determinations made by these companies are often opaque, inaccurate, difficult to challenge, or even discriminatory,” he said.

In fact, the CFPB and the Federal Trade Commission took legal action last year against a rental screening subsidiary of TransUnion, according to Frotman. TransUnion is a consumer credit reporting agency.

Once they have moved in, tenants may face junk fees in the form of charges for routine maintenance that the landlord should be responsible for, according to Frotman. Tenants may also face fees in order to expedite their rent payment through an online platform, he said. The CFPB has taken several actions, including filing amicus briefs, to deal with both kinds of issues, Frotman said.

By James Pothen on April 16, 2024
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