On June 18, the Consumer Financial Protection Bureau filed a consent order and announced an enforcement action against a company specializing in medical debt collection for mishandling consumer credit reporting disputes and preventing consumers from exercising important debt collection rights.  The CFPB is ordering the company to provide over $5.4 million in relief to harmed consumers, correct its business practices, and pay a $500,000 penalty.

According to the CFPB, these practices engaged in by Syndicated Office Systems, LLC, which does business as Central Financial Control, “potentially affected the credit scores of thousands of individuals” and “had the potential to harm thousands of consumers and in some cases, negatively impact their credit scores.”  In other words, the CFPB came down hard on a debt collector in the medical industry that furnishes information to the consumer reporting agencies without any concrete evidence that a single consumer’s credit score was actually harmed.

As we discussed in December 2014, the CFPB released a report and accompanying press release regarding the intersection of medical debt and credit reporting.  This report reveals the staggering impact that medical debt uniquely has on the credit reports of millions of Americans.  More than 43 million Americans have medical debt adversely affecting their credit reports, and more than half of all overdue debt on consumer credit reports is from medical debt.

A CFPB investigation uncovered that Syndicated Office Systems failed to send debt validation notices to thousands of consumers and that the company mishandled consumer credit reporting disputes by failing to investigate and respond to consumers within the 30-day timeframe required under the law.  As a result, the Bureau charged this company with FDCPA and FCRA violations, specifically:

  • Mishandling consumer credit reporting disputes: Syndicated Office Systems failed to respond to more than 13,000 consumer credit report disputes within the 30-day timeframe required by law.  On average, the company took more than 90 days to respond to consumers’ disputes and, in some cases, took over a year.  The CFPB found that the company had no policies or procedures in place to investigate these consumer credit report disputes.  Instead, the company treated consumer credit report disputes in the same way as other consumer complaints and had no deadline for responding.
  • Preventing consumers from exercising important debt collection rights: Syndicated Office Systems failed to send debt validation notices to more than 10,000 consumers.  During this time, the company continued to collect over $2 million from consumers who did not receive the notices.  According to the CFPB, these notices can be an especially important consumer safeguard with regard to medical debt, where issues like insurance reimbursements and medical billing processes are commonly fraught with complexity, confusion, and delay, and can lead to consumers being unsure of how much to pay or even whom to pay.

To address these violations, the CFPB is requiring Syndicated Office Systems to take the following actions:

  • Provide over $5 million in relief to harmed consumers: Syndicated Office Systems must identify all affected consumers and provide monetary relief.  Consumers who were never sent a debt validation notice and who made payments to the company will receive a full refund and have remaining account balances forgiven.  The company will pay $100 to consumers who were never sent a debt validation notice and did not make any payments to the company.  The company must also pay damages ranging from $100 to $1,000 to each consumer who did not receive a timely response to his or her credit report dispute.  The amount that each consumer receives will correspond to the duration of the company’s delay in responding to the consumer’s credit report dispute.  The company must submit a written plan to the CFPB for approval detailing how the company will identify affected consumers and provide relief.
  • Correct errors on credit reports: Syndicated Office Systems must identify all consumer accounts affected by its illegal business practices and fix any inaccuracies.  The company must also update the account information it has furnished to the credit reporting companies and notify all affected consumers of this update, to the extent it has not already done so.
  • End illegal credit reporting and debt collection practices: The company must cease its illegal business practices and develop new policies to comply with federal consumer credit reporting and debt collection laws.
  • Establish consumer safeguards: Syndicated Office Systems must change how it does business and establish safeguards to ensure it has the staffing, facilities, systems, and information necessary to timely and completely respond to consumer credit report disputes. It must also establish a strong oversight program to identify any systemic inaccuracies to ensure that it informs consumers of their right to validate and dispute inaccurate debts in collection.
  • Pay a civil monetary penalty of $500,000: Syndicated Office Systems will pay a $500,000 fine for the illegal actions.

Because of the CFPB’s increased interest in medical debt reporting, it has announced new requirements for consumer reporting agencies pertaining to medical debt.  We discussed these new requirements on the blog here.