On November 1, ACA International, LLC and Collection Bureau Services, Inc. filed a lawsuit against the Consumer Financial Protection Bureau (CFPB or Bureau) and Director Rohit Chopra, challenging the CFPB’s recent advisory opinion on medical debt collection practices. The lawsuit, filed in the U.S. District Court for the District of Columbia, challenges the CFPB’s authority and the procedural validity of the advisory opinion. The plaintiffs are seeking an order vacating the advisory opinion and a stay of the effective date pending the conclusion of the case.

In a prior post, we discussed how the October 1 advisory opinion was aimed at debt collectors and emphasized their obligations under the Fair Debt Collection Practices Act (FDCPA) and Regulation F. The opinion specifically emphasized the prohibitions on false, deceptive, or misleading representations, and unfair or unconscionable means to collect or attempt to collect medical debts. According to the Bureau, debt collectors would be strictly liable under the FDCPA and Regulation F for engaging in the following practices when collecting medical bills: collection of amounts not owed because they were already paid; collection of amounts that consumers were not legally obligated to pay; collection of amounts above federal or state permitted limits; collection of amounts for services not received; and misrepresentation of the legal status of the debt. The Bureau also emphasized that debt collectors must have a reasonable basis for asserting that the debt is owed, including obtaining appropriate documentation to substantiate the debt.

The lawsuit challenges the CFPB’s advisory opinion on several grounds.

• The CFPB lacks the statutory authority to issue the advisory opinion, and that it constitutes an overreach of the Bureau’s regulatory powers.
• The CFPB bypassed the Administrative Procedure Act by not engaging in the required notice-and-comment rulemaking process.
• The advisory opinion imposes undue burdens on debt collectors, requiring them to perform extensive validations and audits of medical debts, which are impractical and costly.
• The CFPB’s funding mechanism is unconstitutional, and the advisory opinion should be set aside on this basis.

The plaintiffs highlight several specific issues with the CFPB’s advisory opinion. The advisory opinion requires debt collectors to review account-level documents before sending a validation notice, which the plaintiffs argue is a new and burdensome requirement not supported by the FDCPA. The advisory opinion also introduces a new standard requiring debt collectors to determine the reasonableness of medical debt amounts, which the plaintiffs contend is beyond the scope of the FDCPA and imposes impractical obligations on debt collectors. Additionally, the advisory opinion redefines when a medical debt is considered in default, which the plaintiffs argue is inconsistent with existing law and would significantly alter debt collection practices. Furthermore, the advisory opinion requires debt collectors to audit medical procedures to ensure accuracy, which the plaintiffs claim is an unreasonable and costly requirement that exceeds the CFPB’s authority.

We will continue to monitor developments in this litigation and provide updates.