Illegal Medical Debt Collection Tactics

The Consumer Financial Protection Bureau (CFPB) has issued a critical consumer advisory aimed at safeguarding families from illegal medical debt collection practices. These practices, the CFPB notes, are often in violation of federal law, and the bureau is stepping in to help consumers better understand their rights when dealing with medical debt collectors.

In its advisory, the CFPB highlighted several illegal tactics employed by debt collectors, including:

• Double billing for services covered by insurance.
• Collecting amounts that exceed federal or state-imposed caps.
• Falsifying or exaggerating charges.
• Collecting on unsubstantiated bills.
• Misrepresenting payment obligations and misleading consumers about their rights to contest bills.

CFPB Director Rohit Chopra underscored the frequency of medical billing errors, which can include inflated or duplicate charges, fees for services never rendered, or charges that were already paid. Chopra's statement emphasizes the urgent need for better protection, as medical debt remains one of the most common forms of debt on credit reports.

Earlier this year, the Biden administration took a bold step in addressing this issue by banning medical debt from being included on credit reports. This move, widely praised by medical debt advocacy groups like Undue Medical Debt, recognizes the fundamental differences between medical debt and other forms of debt. Unlike car loans or student loans, medical debt is often incurred unexpectedly, and it does not reflect a person’s financial behavior or creditworthiness.

The CFPB’s guidance offers a roadmap for consumers who are targeted by medical debt collectors:

1. Request a detailed list of charges, often referred to as a “superbill.”
2. Negotiate the amount owed when appropriate.
3. File a complaint with the CFPB if debt collectors use illegal tactics.
4. Take legal action against collectors who violate federal laws.

The advisory also highlights a growing trend: hospitals and healthcare providers are increasingly outsourcing billing and collection activities to third-party firms known as "revenue cycle management" companies. These firms may be subject to the Fair Debt Collection Practices Act (FDCPA), which imposes strict legal obligations on how debt can be collected.
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As medical debt continues to weigh heavily on American families, this advisory is a reminder that consumers have rights and should not be preyed upon by illegal collection tactics. Through its ongoing efforts, the CFPB aims to level the playing field and bring accountability to debt collection in the healthcare sector.