On June 8, the Consumer Financial Protection Bureau (CFPB) announced that it had entered a consent order against medical debt collector Phoenix Financial Services for alleged violations of the Fair Credit Reporting Act (FCRA) and Fair Debt Collection Practices Act (FDCPA).

According to the CFPB, Phoenix sent collection letters to consumers who had disputed the validity or accuracy of the debts without first conducting a reasonable investigation of the dispute or receiving verification of the debt. Specifically, the CFPB alleged that when investigating disputes, Phoenix typically did not have any documentation supporting the purported debt and did not obtain additional information after the dispute was submitted — whether in writing or verbally — to supplement the limited documentation received when the debt was initially placed for collection. According to the CFPB, Phoenix’s own policies instructed employees to only perform a cursory review of the limited data points already in its system to resolve a dispute. Specifically, Phoenix’s procedures directed employees and contractors to compare only the consumer’s name, social security number, and date of birth provided in the dispute to the data in Phoenix’s system of record when resolving disputes, which the CFPB determined would be insufficient in a number of factual scenarios.

The CFPB further alleged that Phoenix did not employ enough employees or contractors to handle the volume of disputes it received. In reaching that conclusion, the CFPB utilized the same mathematical approach it used when developing the meaningful attorney involvement standard: “For example, on one day in 2018, one [Phoenix] employee or contractor responded to 722 disputes, spending less than 30 seconds per dispute on average, and potentially as little as 10 seconds per dispute on average.”

Under the terms of the consent order, the collector agreed to:

  • Not make any representation that a consumer owes a debt or as to the amount owed, including by sending collection letters, unless it can substantiate the representation.
  • Establish and implement written policies and procedures to ensure that it conducts reasonable investigations of disputes about information furnished to consumer reporting agencies.
  • Refund any amounts consumers paid on an unverified debt.
  • Pay a penalty of $1,675,000 to the CFPB, which will be deposited in the victim’s relief fund.