The Consumer Financial Protection Bureau recently announced a consent order with a medical debt collection company for mishandling consumer credit reporting disputes and preventing consumers from exercising their debt collection rights. The move is significant as it is the first time a medical debt collector has been subject to a Bureau enforcement action. The consent order can be found here.
The consent order states that Syndicated Office Systems, LLC (SOS) mishandled consumer credit disputes. The CFPB alleges that SOS failed to respond to more than 13,000 consumer credit report disputes within the 30-day time frame required by law. On average, the company took more than 90 days to respond to consumers’ disputes and, in some cases, took more than a year. In addition, SOS failed to send debt validation notices to more than 10,000 consumers. The CFPB alleges that SOS has no real debt collection policies or procedures in place. According to the consent order, SOS agrees to provide more than $5.4 million in relief to harmed consumers, correct its business practices, and pay a $500,000 penalty.
The most interesting aspect of this consent order is that it involves a medical debt collector. The CFPB currently has supervisory authority over any collection agency with annual revenues above $10 million. Such collectors are known as “Larger Market Participants” (LMP). Significantly, the LMP rule specifically excludes medical debt from the $10 million threshold, meaning that smaller medical debt collectors are subject to CFPB regulation. The lack of policies and procedures at SOS suggest that the company was under the mistaken belief that the CFPB did not have any authority to review or regulate them. However, the CFPB does indeed have jurisdiction to enforce the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA) against smaller medical debt collectors.
There is a specific provision in the consent order that should be noted. Amid the now familiar CFPB boilerplate language, the SOS order contains a specific assertion. “While the Respondent neither admits nor denies the findings of fact or conclusions of law in the Consent Order, except that Respondent admits the fact necessary to establish the Bureau’s jurisdiction over Respondent and the subject matter of this action.” That stipulation comes on the heels of much recent CFPB interest in medical debt. During the past year, the Bureau has released a report on medical debt collection, conducted field hearings on the topic and made medical debt the focus of a Consumer Advisory Board meeting.