Debt collection agency in Pennsylvania called out for shady business practices
The Consumer Financial Protection Bureau (CFPB) has slammed a debt collection agency based in Dickson, Pennsylvania for failing to properly investigate disputed debts and attempting to collect on questionable debts without justification, all in violation of the Fair Credit Reporting Act and Fair Debt Collection Practices Act.
They were ordered to close shop immediately and were banned from participating in debt collection, purchasing or selling debts, and reporting consumer information. Pennsylvania was also instructed to inform all consumer reporting agencies to delete all debt collection accounts for consumers they provided information on.
To top it off, the company was fined $95,000 by the CFPB's Victims Compensation Fund. The debt collection agency did not respond to CNN Business' request for comment.
CFPB and multiple states aim to remove doctor bills from credit reports
In September, the CFPB announced its intentions to remove doctor bills completely from credit reports. This week they shared that they expected to propose a specific regulation aimed at achieving this goal next year.
Should a regulation be implemented, it would be illegal for credit bureaus across the nation to include medical debt or collection information in reports used for credit decisions.
CFPB Director Rohit Chopra stated in September that research shows that doctor bills have little predictive power for credit decisions, yet millions of American households list medical debt in their credit reports. "When someone gets sick, they should be able to focus on getting better, not fighting off debt collectors trying to extract payments for bills they may not even owe."
Already, two states – New York and Colorado – have taken the lead on this matter.
Earlier this week, New York Governor Kathy Hochul signed a bill prohibiting credit bureaus from pursuing medical debt or including it in credit reports. Colorado recently passed a similar ban.
The company in question may want to reconsider its business strategy, making sure it focuses on longevity and success by eschewing the practice that drew criticism from the CFPB.
Collaboration between the state and the CFPB could help achieve this by overlooking existing regulations regarding credit reports with regards to medical debt and implementing a new exemption for medical debt collection and reporting information, thereby improving the prospects of credit reporting businesses.
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Additional Insight: The Fair Debt Collection Practices Act (FDCPA) governs debt collectors, outlining consequences for noncompliance such as:
- Strict Liability for Violations: Debt collectors may be held strictly liable for violations involving improper bills, incurring significant fines and penalties.
- Government Enforcement Actions: The CFPB is authorized to investigate, enforce, and penalize FDCPA violations, including lawsuits, injunctions, and civil penalties.
- Private Lawsuits and Damages: Consumers affected by FDCPA violations can sue debt collectors for actual damages, statutory damages up to $1,000 per violation, and attorney's fees and costs.
- Reputational Damage and License Revocation: Violations can tarnish a debt collection agency's reputation and lead to customer losses, potentially resulting in license revocation by state regulators.
- Specific Prohibitions: Debt collectors are barred from engaging in abusive, deceptive, and unfair practices, including harassment, profanity, threats, misleading statements, and unauthorized contact.
- Recent Enforcement Actions: The CFPB has taken action against companies violating consumer financial protection laws, including penalizing a student loan debt relief company and a national student loan servicer for deceptive practices.
These consequences underscore the rigorous regulations and enforcement mechanisms intended to protect consumers from abusive debt collection practices.
