Peter Skopec, WISPIRG Director
Consumer Bureau a resource for Wisconsinites faced with abusive collection practices
MADISON – A new report released today by the Wisconsin Public Interest Research Group (WISPIRG) finds that medical debt collectors often employ aggressive tactics and attempt to collect debt from the wrong customers – putting consumers’ credit records at risk. The report, “Medical Debt Malpractice,” is the ninth in a series that reviews complaints to the federal Consumer Financial Protection Bureau (CFPB). It also stresses the importance of defending the CFPB from partisan and special interest attacks.
“These findings are troubling,” said Peter Skopec, WISPIRG Director. “Medical debt items on credit reports are often wrong or about the wrong consumer, yet they play a big role in whether someone can get a loan or a job.”
Medical debt accounts for more than half of all collection items that appear on consumer credit reports. Recognizing that medical debt is both often mistaken and not a good indicator of future creditworthiness, leading credit score companies have begun to remove it from credit scores, but medical debt still appears in credit reports. Complaints submitted to the CFPB suggest that many consumers contacted about medical debt should not have been contacted in the first place, and that many contacts involve aggressive or inappropriate tactics.
Last year, the Wisconsin legislature made it easier for debt buyers and collectors to take advantage of consumers by lowering the burden of proof for filing collection lawsuits against Wisconsinites. Debt buyer companies purchase old debt for pennies on the dollar and then aggressively work to collect those obligations, including in court, often without accurate information about whether they are collecting the right debt from the right person.
“Consumers deserve protection from unfair, aggressive, and illegal medical debt collection,” added Skopec. “Fortunately, we found that the Consumer Bureau is working hard to make that happen. This is particularly important for consumers in Wisconsin, where protections from abusive debt collection practices were recently rolled back.”
Based on survey results from a January 2017 CFPB study, more than 40 million Americans – nearly one in eight – are contacted about debt related to medical expenses each year. The survey found that 53 percent of consumers that had been contacted about any kind of debt in the past year believed they either did not owe the debt, were being contacted about the wrong amount, or were being contacted about a family member’s debt.
Key findings of the report, which was co-authored by the WISPIRG Foundation and the Frontier Group, include:
- Nearly two-thirds (63 percent) of 17,701 complaints about medical debt collection reviewed in the report assert either that the debt was never owed in the first place, it was already paid or discharged in bankruptcy, or it was not verified as the consumer’s debt.
- Many complaints document inappropriate and aggressive tactics including frequent or repeated calls, calls harassing friends and family, threats of legal action, or the use of abusive language.
- Although impacts on credit reports are not categorized by the CFPB, they appear to be a significant source of complaints: 1,810 complaint narratives, or 35 percent of all medical complaint narratives submitted, contain the text “credit report.”
“Medical debt collection is a system run amok,” said Gideon Weissman of Frontier Group, report co-author. “Our analysis of CFPB complaint data suggests that many of the consumers facing harassment and damaged credit due to medical debt never owed any money in the first place.”
Congressional opponents of the Consumer Bureau, including Wisconsin Senator Ron Johnson and Representatives Sean Duffy and Mike Gallagher, have sponsored legislation to remove its director, eliminate its independent funding or restrict its powers to protect consumers. Powerful special interests continue to spend billions – $2 billion on lobbying and campaign donations in 2015-2016 alone, according to Americans for Financial Reform – to weaken the CFPB and Wall Street reforms enacted in 2010.
The report recommends:
- Stopping debt collectors and buyers from collecting debts without proper information and documentation about the debt and records of prior communications with the consumer.
- Stopping debt collectors from bringing robo-signed cases in court.
- Cracking down on widespread use of threats, harassment and embarrassment in debt collection, and making it easier for the consumer to demand a stop to unwanted communications.
- Protecting servicemembers by strictly limiting contact with their commanders to verifications of address.
“The CFPB is working hard to stop unfair medical debt collection practices that harm innocent consumers, so why are some on Capitol Hill backing efforts to kill or weaken the CFPB?” asked Skopec. “This report provides strong, concrete evidence that CFPB Director Richard Cordray and the CFPB’s oversight are effective in protecting consumers.”
You can read the full report here.
The Wisconsin Public Interest Research Group (WISPIRG) is a state-wide, non-partisan advocate for the public interest. WISPIRG works to protect consumers and promote good government. We investigate problems, craft solutions, educate the public, and offer meaningful opportunities for civic participation.
The Frontier Group provides information and ideas to help citizens build a cleaner, healthier, fairer and more democratic America. We address issues that will define our nation’s course in the 21st century – from fracking to solar energy, global warming to transportation, clean water to clean elections. Our experts and writers deliver timely research and analysis that is accessible to the public, applying insights gleaned from a variety of disciplines to arrive at new ideas for solving pressing problems.