By: Christopher A. Parrella, Esq., CPC, CHC, CPCO Parrella Health Law, Boston, Ma. A Health Care Provider Defense and Compliance Firm

In a significant move, the Consumer Financial Protection Bureau (CFPB) issued an advisory opinion on October 1, 2024, targeting abusive medical debt collection practices that exploit consumers and inflate healthcare costs. The advisory is a clear warning to debt collection firms, including third-party revenue cycle management companies commonly engaged by hospitals, that they must adhere strictly to federal and state rules governing debt collection. These regulations are meant to protect consumers from undue financial burdens tied to questionable billing practices.

The CFPB highlighted several concerning practices that violate consumer protection laws:

• 1. Collection on Non-Existent or Inflated Charges: The advisory underscores that collecting debt on bills containing “upcoded” or inflated charges for services never rendered, or charging for services not aligned with federal and state limits like those in the No Surprises Act, is illegal.
• 2. Double Billing and Unsubstantiated Claims: Debt collectors were warned against pursuing payment on debts that consumers have already paid or that insurance has covered. Collecting unsubstantiated bills—those without a clear basis in actual medical records or insurance claims—violates the Fair Debt Collection Practices Act (FDCPA).
• 3. Misrepresentation of Consumer Rights: Debt collectors are also prohibited from misleading consumers about their rights to contest bills or making deceptive statements regarding the nature of the debt itself. The advisory points out that consumers have reported receiving collection notices for debts they either do not owe, have already paid or were eligible for coverage under financial assistance policies.

The CFPB’s advisory represents a concerted effort to curb unlawful medical debt collection practices, especially in light of the mounting medical debt burden, which now impacts millions of Americans. Earlier this year, the CFPB proposed a rule to require the removal of medical debt information from credit reports, aiming to prevent debt collectors from using consumer credit reports as leverage to secure payment for inaccurate medical bills.

Health systems and third-party debt collectors should take note of the CFPB’s rigorous stance on medical debt collection. Ensuring compliance with federal and state debt collection laws is critical—not only to avoid legal consequences but to uphold ethical standards in patient care and financial responsibility.

If your collection agency or health care facility is struggling to understand your compliance obligations under the new advisory opinion, Parrella Health Law is here to offer guidance on navigating these complex issues. Contact Parrella Health Law at 857-328-0382 or reach out directly to Chris at cparrella@parrellahealthlaw.com for assistance.