Most physicians and other medical providers have heard of the Fair Debt Collection Practices Act, (FDCPA). Medical providers that use medical collection agencies know that their collection agency must comply with this law. When evaluating your collection agency, or choosing a new one, your collection agency must have a compliance management system in place. In addition to the FDCPA, collection agencies also come under the umbrella of the Dodd-Frank Act.
The Dodd-Frank Act, or officially, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was brought about as a result of the financial crisis of 2007 – 2008. This legislation was enacted in part to promote US financial stability and to protect American Consumers from abusive financial services practices. Dodd-Frank increases scrutiny on banks, mortgage lenders and other financial services companies.
Title X of the Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB). The CFPB is an independent agency of the United States government. They are responsible for consumer protection in the financial sector. It is likely that you have heard of the CFPB in the news because of their enforcement actions against banks and other financial services companies. Collection agencies come under the enforcement authority of the CFPB.
Most medical providers and other original creditors are not aware that they too can fall under the purview and enforcement action of the CFPB. Generally, first-party debt collection1 practices are exempt from the FDCPA. For this reason, many medical providers and other creditors are unaware of the law and do not know whether their own internal collection practices are in compliance or not.
While compliance with the FDCPA may not be a primary consideration for many medical providers and other creditors, the CFPB has clearly indicated that first-party debt collection practices may be subject to similar standards as third party debt collection practices, including standards found in the FDCPA.
The CFPB has authority under Dodd-Frank to prevent unlawful, deceptive, and abusive acts and practices (UDAAPs) that are a result of first-party debt collection practices. The CFPB has taken the view that conduct prohibited by UDAAP is very similar to conduct prohibited by the FDCPA. The CFPB is already using its enforcement authority to compel creditors to comply with collection standards that mirror the FDCPA.
In 2013, the CFPB released bulletin 2013-07, which specifically mentions that original creditors involved in collecting debts related to consumer financial products or services are subject to the prohibition against UDAAPs in the Dodd-Frank Act. This bulletin states “UDAAP’s can cause significant financial injury to consumers, erode consumer confidence, and undermine fair competition in the financial marketplace. Original creditors and other covered persons and service providers under the Dodd-Frank Act involved in collecting debt related to any consumer financial product or service are subject to the prohibition against UDAAPs in the Dodd-Frank Act.”
Even though the original creditor may not be subjected directly to the FDCPA, it is clear that the CFPB has similar debt collection conduct expectations for both collection agencies as well as the original creditor. Therefore, a violation of the FDCPA could constitute a UDAAP as well.
When the CFPB takes enforcement action against a first-party debt collector, they use UDAAP authority to prohibit specific collection practices. Many of these claims involve conduct prohibited by the FDCPA. It is becoming evident that compliance with the FDCPA is prudent for the original creditor.
Through its enforcement actions, the CFPB is demonstrating that the original creditor will be held to many of the same collection standards contained in the FDCPA. For this reason we are recommending that medical providers or any other creditor for that matter, review and update their collection policies and procedures, specifically relating to communication with consumers, third party communications, representation regarding consumer reports, handling payments, proposing settlement offers and threats of litigation.
When developing these policies and procedures, the original creditor can rely on the CFPB’s exam manual and UDAAPs bulletin for guidance. In addition to these federal laws and regulations, many states have collection practices laws that apply specifically to the original creditor.i
1In this article, the term original creditor and first party debt collector are interchangeable
iAndrew Pavlik, “Me, Too?,” COLLECTOR, 07.15, 31-33