CFPB Report Highlights Consumer Protection Issues in Medical and Rental Debt Collection

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today issued its annual report on debt collection, which highlights aggressive and illegal practices in the collection of medical debt and rental debt. The report discusses how problems with real estate companies’ “revenue management software” can result in improperly inflated rental debt amounts. The report also focuses on debt collectors’ attempts to collect medical bills already satisfied by non-profit hospitals’ financial assistance programs, as well as the fact that many medical bills from low-income consumers do not get addressed by financial assistance in the first place.

Medical Debt Collection

Tens of millions of people are pursued by debt collectors for purportedly unpaid medical bills every year. Today’s report highlights consistent collections problems. Many of the problems have persisted since last year’s report. In 2023, consumer complaints about medical debt in collections made up about 11% of all collections complaints received by the CFPB.

The complaints submitted by consumers and the CFPB’s own research show that debt collectors:

• Attempt to collect already paid medical bills or bills eligible for financial assistance: Medical debt collectors often attempt to collect bills that have already been satisfied by non-profit hospitals’ financial assistance programs. Additionally, non-profit hospitals fail to properly address medical bills from low-income patients that should receive financial assistance and instead send the bills to debt collectors. Many consumers describe poor communication and information-sharing between the debt collector and the hospital, so the burden often falls on the patient to prove that they do not owe the debt.
• Aggressively pursue patients for bills arising from medical payment products: The CFPB continues to receive complaints about medical financing products, which are offered to patients by some non-profit hospitals as well as other healthcare providers, without considering whether the patients may be eligible for financial assistance. Non-profit hospitals might partner with financial institutions to offer medical financing products because they perceive that enrolling patients in these products enables them to get compensated for bills via collections practices that would otherwise be prohibited by Internal Revenue Service regulations. As a result, debt collectors end up pursuing patients for these bills even when the bills should never have been incurred in the first place.

Rental Debt Collection

In August 2023, the CFPB started accepting complaints about rental debt collection. From August 2023 to the end of that year, the CFPB received more than 1,700 rental debt complaints. In the United States, rental debt is estimated to be more than $9 billion, with over 4.5 million households behind on rent payments. Rental debt collectors often charge renters collection fees in addition to the unpaid rent itself. As the CFPB has observed with medical debt, many debt collectors furnish rental debt to credit reporting companies as a means of collecting debt through coercion.

The complaints submitted by consumers and the CFPB’s own research show that the infusion of consumer financial products and services into the rental market raises risks for renters, including improper debt collection due to:

• Illegal price-fixing: Law enforcement officials in several states as well as individual renters have alleged that rapid increases in rent have been driven by illegal price-fixing. Landlords and management companies may have used “revenue management software” to collect improper amounts that ultimately end up in debt collection. Debt collectors collecting on bills that are inflated due to illegal price-fixing may be violating the Fair Debt Collection Practices Act.
• Tacked on rental fees: Renters, as well as landlords, have complained to the CFPB about rental junk fees, including fees from rental payment processing servicers added onto and required as a condition for rent payment. It is often not clear whether these fees are allowed under the lease agreement or local law, and, thus, able to be targeted by debt collectors.

CFPB Actions

The CFPB is taking steps to ensure that debt collectors follow consumer financial protection laws, including the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. The CFPB’s supervisory program has found multiple issues with medical debt, including unlawful attempts to collect work-related medical debt from workers covered by state worker compensation laws. The CFPB also has brought enforcement actions against debt collectors for their efforts to collect on unsubstantiated debt, unlawfully threatening legal action against consumers, and other violations.

Additionally, the CFPB issued guidance to protect homeowners from illegal collection tactics on zombie mortgages. The agency also proposed a rule that, in many cases, would ban medical debt from credit reports. In 2023, the CFPB published reports focused on several topics including trends in servicemember complaints – many of which are related to debt collection, the impact of tuition payment plans on student loan debt, the effects of employer-driven debt, and trends in debt collections tradelines on consumer credit reports.

Read today’s report.

Learn more about the CFPB’s work in the area of medical debt.

Learn more about the CFPB’s work in the area of rental debt.

Read consumer complaints about medical debt.

Read consumer complaints about rental debt.

Access the CFPB’s sample letters that consumers can use when they interact with debt collectors.

Consumers can submit complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

Employees who believe their company has violated federal consumer financial protection laws are encouraged to send information about what they know to whistleblower@cfpb.gov.