The Consumer Financial Protection Bureau yesterday announced its first enforcement action in the area of medical collections, fining a medical debt collector $1.675 million for continuing to attempt to collect on debts that were not substantiated after the consumers filed disputes and for furnishing information abut the debts to the credit reporting agencies.
A copy of the enforcement action against Phoenix Financial Services can be accessed by clicking here.
During the period in question — from January 2017 through December 2020 — the collector worked approximately 54 million accounts. The collector relied on data points supplied by its creditor-clients when investigating disputes filed by consumers, according to the CFPB, which the collector had not verified as being accurate. Its policies and procedures required employees to compare the consumer’s name, Social Security number, and date of birth in its system of record to ensure the information matched what was sent to the consumer. This, according to the CFPB, did not meet the standard for a reasonable investigation under the Fair Credit Reporting Act, because it is a “circular” inquiry that assumes the accuracy of information in the collector’s records. The information would not help, for example, if a consumer alleged that a debt did not belong to him or her. “If the consumer who submitted such dispute was mistaken for a different consumer with the same first and last name who, in fact, owed the alleged debt, Respondent’s system of record might contain the personally identifiable information of the consumer who submitted the dispute precisely because they were mistaken for the correct consumer,” according to the CFPB. The same would be true if the consumer alleged the debt belonged to his or her former spouse.
The employees were also instructed to treat each dispute independently, which, according to the CFPB, removed the ability to identify patterns.
The company also failed to have a policy or procedure for auditing its direct and indirect dispute handling process, and even after it created those documents, it “did not address the reasonableness of employees’ dispute investigations, thereby making the audits insufficient for identifying practices or activities that could compromise the accuracy or integrity of furnished information,” the CFPB concluded.
The company also failed to report the results of 83% of its direct dispute investigations to consumers while also sending “hundreds” of collection letters to consumers within 30 days of receiving a written dispute and before sending verification of the debt or a copy of a judgment to the consumer.
Along with paying the $1.675 million fine and making restitution to consumers, the company is also required to cease unlawful credit reporting practices and cooperate with CFPB examinations.
