CFPB and Medical Collections The Sweeping Regulatory Change Ahead Presented by: Cindy Gagne
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What is the CFPB? - brief chronology - The Cost of Non-Compliance CFPB Investigations & Examinations Advance Notice of Proposed Rule Making - Debt Collection - Medical Collections What Hospitals & Providers can do now to get ahead of the Regulatory curve
What is the Consumer Financial Protection Bureau? Created in 2010 by President Obama pursuant to the Dodd-Frank Wall Street Reform Act and 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
What is the Consumer Financial Protection Bureau? Independent Federal Agency with broad powers Rulemaking 18 Regulations including TILA, FDCPA, FCRA, ECOA Supervision Examinations and Audits Enforcement Consent Orders (Fees & Penalties have exceed $787 M) Litigation Similar to FTC Enforcement Education and Public Outreach
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
Senators Ask CFPB to Address Medical Debt Reporting WASHINGTON, DC Oregon s Senator Jeff Merkley, along with Senators Chuck Schumer (D-NY), Robert Menendez (D-NJ) and Sherrod Brown (D-OH), asked Consumer Financial Protection Bureau (CFPB) Director Richard Cordray to begin addressing the harmful impact of medical debt collections and reporting on consumer credit.
Medical Debt Could be Next for the Consumer Financial Protection Bureau ACA International comments in Politico article examining the Consumer Financial Protection Bureau s likeliness to develop and implement rules related to healthcare debt. As the Consumer Financial Protection Bureau continues to gather information about the debt collection industry for use in its upcoming rulemaking, Politico speculates that the bureau is likely to make implementation of federal rules governing medical debt collection an increasing priority.
CFPB Takes Action Against Deferred- Interest Medical Credit Card CFPB has taken action against medical credit card company, CareCredit. The CFPB ordered CareCredit to refund up to $34.1 million to more than one million patients who were deceptively enrolled for the medical credit card.
Brief History of the CFPB 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 Dodd-Frank Wall Street Reform Consumer Protection Act Proposed by Obama Administration - Signed into Law 2010 Created the CFPB, Office of Financial Research (OFR) Known as the Most comprehensive financial regulatory reform measures taken since the great depression
Brief History of the CFPB Released First Bulletins Regarding Enforcement & RFI s PUBLIC database administered by CFPB Includes complaints related to medical/patient accounts Consumers include their desired resolution which includes Closed with Monetary Relief
CFPB Complaints by Type For 2014 there were 39,130 complaints If there was any definitive trend in debt types leading to complaints, it was the steady rise in Medical debt collection complaints
Brief History of the CFPB CFPB First Public Enforcement Action with Order GE Capital Retail Bank (CareCredit) to refund $34.1 million to more than 1 million patients who were deceptively enrolled for medical credit card
Brief History of the CFPB President Obama appoints Richard Cordray Director Previously served as Ohio Attorney General Brought suit against AIG, Bank of America and Fannie Mae while Attorney General
Overview - History of the CFPB
CFPB Supervisory Authority Examinations and Audits CFPB exams range from 6 to 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
Friday - April 17, 2015 Tom Pahl describes the CFPB s debt collection rulemaking process as a triathlon. CFPB is focusing on the following subsets of debt collection-related topics for the rulemaking: 1. Communication issues. 2. Data integrity and information issues. 3. Informed consumer issues. 4. Whether or not first-party collections should be regulated.
Friday - April 17, 2015 Pahl described how the CFPB is working on getting data from consumers to inform the rulemaking. For example, the CFPB sent out a survey to 11,000 consumers in an effort to get a sense of their experience with debt collectors and what consumers would like debt collection to look like. As previously reported, ACA International believes this survey is conceptually flawed and submitted comments opposing the bureau moving forward with the proposed survey given its substantial negative bias.
The CFPB operates under the Federal Reserve and is unaccountable to Congress What?
Georgia Senator Presents Budget Amendment for CFPB March 12, 2015 The amendment would ensure the CFPB is subject to the congressional appropriations process. U.S. Sen. David Perdue (R-Georgia) introduced an amendment to the Senate s 2015 Budget Resolution regarding the Consumer Financial Protection Bureau on March 19. According to a news release from Perdue, his budget amendment will provide critical congressional oversight of the CFPB. The reckless Consumer Finance Protection Bureau was spawned from the disastrous Dodd-Frank financial regulation law, Perdue said. Right now, the CFPB is a rogue agency that dishes out malicious financial policy and creates new rules and regulations without any oversight from Congress. On top of that, the agency itself has failed to operate within its own budget and proven it is more concerned with preserving its own power than protecting the public. Ultimately, I believe the CFPB should be dismantled, but an important first step is bringing it into the light for the American people to see its harmful effects on consumers.
CFPB Enforcement Authority Consent Orders, Litigation 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
COST of a CFPB Investigation Both financial and public relations concerns Financial: Onsite auditors requests from staff Your legal council Public Relations: Accusations may be unwarranted Press reports
Third Party Environment Before Audits conducted yearly After Audits conducted as frequently as 7x a year Multi level, microscopic, and in depth Minimal oversight from clients Agency Guide and FDCPA up to agency to interpret and oversee Extreme Client oversight Scripting Account movement and coding Constant playing field modifications and changing
Third Party Environment Before Financial performance key driver of incentive and relationship status Inadvertent encouragement of UDAAP issues and violations After Risk Management, Brand Protection, Customer Experience, and Financial Performance key drivers to incentive and relationship status, respectively Zero tolerance for UDAAP issues or violations
Third Party Environment Before Inconsistency between issuer verticals Marketing based on handshakes and reputation and very little due diligence, in comparison After 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
CFPB Compliance Priorities for Debt Collection 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 Advance Notice of Proposed Rulemaking The CFPB is currently exercising it s rulemaking authority and will soon be issuing new rules in relation to debt collection CFPB Released the ANPR 114 Pages, 164 detailed questions Covers full gambit of consumer activities
CFPB Study on Medical Debt & Credit Reporting CFPB Study Finds Medical Debt Overly Penalizes Consumer Credit Scores According to a study by the Federal Reserve board, over half of all collections on credit reports are associated with medical bills. The vast majority of medical debt reflected on credit records is reported by third-party collection agencies. Medical debt can result from an event that is unpredictable and costly. Sometimes the debt is caused by billing issues with medical providers or insurers. Complaints to the CFPB indicate that many consumers do not even know they have a medical debt in collections until they get a call from the collections agency or they discover the debt on their credit report.
So What Do We Do Now?
What Steps Can Providers Take Now? 1. Look at your internal billing processes & procedures Do you assess interest / fees? Do you have a procedure in place if a patient disputes their bill with the hospital or provider? Are there processes to guarantee all billing codes are entered accurately? Is insurance coverage explained to the patient?
What Steps Can Providers Take Now? 2. Review in-house 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?
What Steps Can Providers 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? Insurance requirements?