On October 1, 2024, the CFPB issued guidance to prevent families from being targeted by illegal medical debt collection tactics. The advisory opinion clarifies that debt collectors, which may include third-party “revenue cycle management” companies, are violating federal law when they collect on inaccurate or legally invalid medical debts.
CFPB Director Rohit Chopra said the following in a statement:
“Medical billing is often riddled with errors, including inflated or duplicative charges, fees for services the patient never received, or charges already paid. The CFPB is taking action to ensure that Americans are not unfairly chased by debt collectors over unsubstantiated or invalid medical bills.”
According to the CFPB, around 100 million Americans owe over $220 billion in medical debt, often due to confusing and error-prone bills. The CFPB has received complaints about collections for debts that aren't owed, have been paid, or should be covered by insurance or assistance programs. Hospitals increasingly outsource billing and collections to third-party firms, which may be subject to the Fair Debt Collection Practices Act.
The CFPB’s advisory opinion details how these companies violate federal law when they collect or attempt to collect on medical bills that are inaccurate, unsubstantiated, or invalid under the law. Specifically, the guidance details illegal practices including:
Double billing. Companies cannot collect on medical bills already paid by the consumer, insurance, or government programs like Medicare or Medicaid. This can pressure consumers into paying twice, resulting in significant financial harm.
Exceeding legal limits. Companies must not collect amounts exceeding federal or state caps, like those in the No Surprises Act. Violations can lead to unjust medical debts, burdening consumers and discouraging them from seeking future care.
Falsified or fake charges. Debt collectors must not collect on bills with "upcoded" or inflated services, or for services not received. This deceptive practice can significantly increase consumers' medical debts, potentially leading to long-term financial distress or bankruptcy.
Collecting unsubstantiated medical bills. Debt collectors must only collect substantiated medical debts, including documentation of payments or eligibility for financial assistance. Collecting unsubstantiated bills can lead to harassment for debts consumers do not owe or qualify for assistance.
Misrepresenting consumers’ rights to contest bills. Companies must not misrepresent that a debt is fully settled when the payment obligation is uncertain. This can pressure consumers into paying disputed or negotiable debts.
Read the CFPB’s press release here.
The full Advisory Opinion can be found here.