Over the summer the Consumer Financial Protection Bureau (CFPB) released an outline of proposals for much stricter debt collection regulations. The proposed rulemaking was announced in conjunction with the publication of a “Study of Third-Party Debt Collection Operations” report, which analyzed survey data from agencies regarding the operational costs of debt collection. While this proposal is not a final interpretation and is not binding, it provides a first look into a long-awaited rulemaking that “would drastically overhaul the debt collection market,” according to CFPB Director Richard Cordray.
While these changes would affect debt collection in all industries, it could have far-reaching impacts within the healthcare arena. The proposals are broken down into four primary areas:
The aim of these proposals is to ensure that the correct debt is being collected. Debt collectors would be required to have a “reasonable basis” for claiming the patient owes a debt. Reasonable basis includes:
- Obtaining "fundamental information” about the debt: Before beginning any collection efforts each file would need to be scrubbed for fundamental information including: full name, last known address and phone number, account number, date of default, amount owed at default, and the date and amount of any payment or credit applied after default.
- No “warning signs” on review of account information: These warning signs could include a portfolio with a high rate of disputes or the inability to obtain fundamental documents.
- Obtaining representation of accuracy from the debt owner: If the patient disputes the debt in any way, all collection efforts would need to be paused until the necessary documentation was re-reviewed.
These new regulations would place higher standards upon hospital and medical practice billing staffs to provide up-to-date patient and payment, as well as to fulfill a request for supporting documentation as soon as collection efforts begin. This change in process could slow down initial collection efforts if your agency is not already equipped to review every file in this manner.
Collector Communication Practices
The proposed regulations also seek to limit excessive or disruptive communications to the patient. They propose separate caps for consumer contacts and location contacts, and the threshold would vary depending on whether “confirmed consumer contact” has been made. Additionally, if the patient wanted to stop specific means of being contacted - for example on a particular phone number, while at work, or during certain hours - the new rules would make it easier for them to do so.
Consumer Understanding Initiatives
The proposal also aims to make debt details clear and disputes easy. Agencies would be required to include more specific information in their first contact with a patient, including a specific Initial Validation Notice and Statement of Rights. The proposed regulations further clarify what consumer rights under the Fair Debt Collection Practices Act (FDCPA) must be included in the initial notice, including whether the debt is time-barred (too old to file a suit), and whether the debt may be credit reported. Many agencies already include this information, but for those that do not these proposed regulations would make it a requirement.
Initial notices may also need to include a tear-off portion that consumers could send back to easily dispute the debt, with options for why they think the demand is wrong. The tear-off portion would also allow them to pay the debt. Should the tear-off portion be returned within 30 days of the initial notice, the agency would then have to provide a debt report – written information substantiating the debt – back to the patient and could not pursue the debt until it was provided.
Review and Transfer of Information
Finally, the proposed regulations on the transfer of a debt from one agency to another would require more detailed information be provided with the transfer of debt. Subsequent collectors would need to be aware of previous disputes, language preferences, and inconvenient times to call from past account activity. If your organization reassigns accounts this higher standard could create a whole new set of tasks for your billing office to handle.
What Does This Mean For You?
The CFPB’s proposed rulemaking could potentially mean increased costs for your healthcare organization. If your agency is not already in compliance with these proposals, and many are not, changing policies and procedures for every account and ensuring compliance with each of these new, and voluminous, proposed regulations may result in higher risk and overhead for your third-party medical debt collection agency, and that could be reflected in the cost to you. It could also create volumes of paperwork for your billing office staffs. Additionally, new dispute processes and waiting periods would allow the debt to age while the agency is unable to work it, resulting in lower recovery.
At this time the proposed rulemaking only addresses third-party collection practices, however the CFPB has indicated that it intends to address first-party collectors and creditors on a separate track at a later date. Additionally, a federal appeals court recent ruled the structure of the Consumer Financial Protection Bureau unconstitutionalas a result of the concentration of rulemaking power left to one individual, Director Richard Cordray. It is unclear how this ruling will affect the proposed rulemaking but one thing is clear: further debt collection regulation is coming.
It is highly recommended that you work with your current agency to understand how they will handle this rulemaking should it become law, or to prepare for another one like it, and what it could mean for your healthcare organization’s bottom line.
For the full language of the proposals, click here.
At AR Logix, we are already prepared to follow these proposed regulations. To learn more about what we are doing, and how we have helped to assist with the impact to our clients, contact us today.
Written by Ali Bechtel, Digital Marketing Manager
This information is not intended to be legal advice and may not be used as legal advice. Legal advice must be tailored to the specific circumstances of each case. Every effort has been made to assure this information is up-to-date as of the date of publication. It is not intended to be a full and exhaustive explanation of the law in any area, nor should it be used to replace the advice of your own legal counsel.