The CFPB and Medical Collections: Unknown Territory in the Face of Sweeping Regulatory Change

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1 The CFPB and Medical Collections: Unknown Territory in the Face of Sweeping Regulatory Change Agenda What is the CFPB? Brief chronology of the CFPB CFPB investigations and examinations; the cost of non-compliance CFPB Advanced Notice of Proposed Rulemaking (ANPR) in the debt collection industry CFPB and medical collections What hospitals and providers can do now to get ahead of the regulatory curve 1

2 What is the Consumer Financial Protection Bureau? Created in 2010 by President Obama pursuant to the Dodd-Frank Wall Street Reform Act & Consumer Protection Act Our mission is to make markets for consumer financial products and services work for Americans whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products. UDAAP-Unfair or Deceptive Acts or Practices What is the Consumer Financial Protection Bureau? Independent Federal Agency with broad powers including: Rulemaking 18 Regulations including TILA, FDCPA, FCRA, ECOA Supervision Examinations and Audits Enforcement Consent Orders Fees and Penalties have exceeded $787 million Litigation Similar to FTC Enforcement Education and Public Outreach 2

3 Industries Currently Regulated Bank & Non-Bank Financial Entities Mortgage Industry Banks and Financial Institutions Debt Collection Agencies Pay Day Lenders Debt Relief Services Credit Bureaus Auto Lenders Key Language is consumer product or service as defined by the Dodd-Frank Act 3

4 Brief History of the CFPB 2008 Elizabeth Warren and the Ideology Behind the CFPB; Harvard Magazine- Making Credit Safer But for a growing number of families steered into overpriced credit products and misleading insurance plans, trust in a creditor proves costly. And for families tangled up with truly dangerous financial products, the result can be wipedout savings, lost homes, costlier car insurance, job rejections, troubled marriages, bleak retirements, and broken lives. The effective deregulation of interest rates, coupled with innovations in credit charges including teaser rates, negative amortization, increased use of fees, cross-default clauses, and penalty interest rates have turned ordinary credit transactions into devilishly complex undertakings. Brief History of the CFPB 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act Proposed by Obama Administration in June 2009; Signed into law July 2010 Created the CFPB, Office of Financial Research (OFR) Known as the most comprehensive financial regulatory reform measures taken since the great depression 4

5 Brief History of the CFPB 2011 Fall 2011-releasing first bulletins regarding enforcement, requests for information July 21, Complaint Portal Released Public database administered by the CFPB Pertains to first party and third party consumer related activity Includes complaints related to medical/patient accounts Consumers include their desired resolution which includes Closed with Monetary Relief 5

6 CFPB Complaints by Type 14,328 complaints from July February ,381 complaints were related to medical accounts; more than mortgage and payday loan combined 9.6% of complaints from Texas consumers 6

7 Brief History of the CFPB 2012 Brief History of the CFPB 2012 January Richard Cordray appointed Director of CFPB by President Obama Previously served as Ohio Attorney General Brought suit against AIG, Bank of America and Fannie Mae while AG 7

8 CFPB Supervisory Authority CFPB exams range from 6-8 weeks and cover several modules to determine compliance Onsite auditors review all processes and procedures Reviews company s Compliance Management System ( CMS ) CFPB attempts to identify UDAAP violations Unfair, deceptive, or abusive acts or practices in connection with financial products or services Very broad and abstract Expands potential for practice violations More than $70 million in remediation in non-public examinations CFPB Enforcement Authority Initiated by a Civil Investigative Demand ( CID ) targeting a specific act or practice Must produce millions of documents in incredibly expedited timeframe Interrogatories similar to litigation Investigational hearing similar to deposition; no objections Ending a CFPB Investigation Public Consent Order, litigation, no action 8

9 Cost of a CFPB Investigation Both financial and public relations concerns Third Party Environment - Before and After Before Audits conducted yearly Minimal oversight from clients Agency Guide and FDCPA up to agency to interpret and oversee Financial performance key driver of incentive and relationship status Inadvertent encouragement of UDAAP issues and violations Inconsistency between issuer verticals Marketing based on handshakes and reputation and very little due diligence, in comparison. After Audits conducted as frequently as 7 a year Multi level, microscopic, and in depth Extreme client oversight Scripting Account movement and coding Constant playing field modifications and changing Risk Management, Brand Protection, Customer Experience, and Financial Performance key drivers to incentive and relationship status, respectively. Zero tolerance for UDAAP issues or violations (PPA Example) Consolidation of issuer verticals RFI/RFP due diligence process; opportunistic rate reductions Marketing now keenly based on all of the above Opportunity for organizations that are ahead of the curve and who have embraced the change 9

10 CFPB Compliance Priorities For Debt Collection/Non-Bank Lenders FCRA/Credit Reporting* Validation of Debt (VOD) Time barred debt UDAAP (Unfair Deceptive Acts and Practices) CMS- Compliance Management System Complaint handling procedures Vendor oversight* Executive board review of compliance matters Audits/Remediation CFPB ANPR The CFPB is currently exercising it s rulemaking authority and will soon be issuing new rules in relation to debt collection November 2013: CFPB Released the ANPR 114 Pages, 164 detailed questions Response Deadline: February 28, 2014 Industry does not expect any new rules until Q or Q Covers full gambit of consumer activities 10

11 CFPB ANPR CFPB ANPR 11

12 CFPB ANPR CFPB ANPR 12

13 Jurisdiction over Medical Debt: Unknown Territory Jurisdiction over Medical Debt: Unknown Territory 13

14 Jurisdiction over Medical Debt: Unknown Territory American Hospital Association stated in response to CFPB: CFPB Readiness Be Ahead of the Curve 14

15 CFPB Enforcement In Healthcare Recent FTC/CFPB Releases: Foreshadowing Regulatory Change 15

16 CFPB Study On Medical Debt & Credit Reporting What Steps Can I Take Now? 1. Look at your internal billing processes and procedures Do you assess interests/fees? Do you have a procedure in place if a patient disputes his bill with the hospital/provider? Are there processes to guarantee all billing codes are entered accurately? Is insurance coverage explained to the patient? 2. Review in-house debt collection practices Do you have a compliance management system in place? What quality control procedures are used? Do you audit your practices? Address patient complaints? 16

17 What Steps Can I Take Now? 3. Assess your third-party debt collection vendors What is your vetting process for vendors? Do you involve your Board of Directors? What audit procedures are in place? What kind of certifications do you require from your vendors? Proof of compliance is key. SSAE-16 ACA PPMS Certification Audited Financials General Counsel/Compliance Team Complaint Procedures Insurance requirements? Questions? 17

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