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06/22/2023 1:50 P.M.
10 minute read
Accounts receivable management industry issues including medical debt credit reporting, regulations on “junk fees,” and overall regulatory processes, rang through in two congressional hearings with Consumer Financial Protection Bureau Director Rohit Chopra last week.
Chopra testified before the Senate Committee on Banking, Housing and Urban Affairs and the House Financial Services Committee to present the bureau’s semiannual report to Congress. He faced questions on these topics as well as a data breach related to a “rogue employee” at the bureau and its proposed rule on small business lending data collection.
ACA International submitted a letter (PDF) to both committees outlining our advocacy on these topics as well as concerns for Congress to address.
“The CFPB continues to target the work of the ARM industry in several ways,” ACA CEO Scott Purcell said in the letter, which addresses medical debt credit reporting, a potential CFPB rulemaking under the Fair Credit Reporting Act and the bureau’s interpretive rule issued last year as an advisory opinion on “junk fees” in the debt collection market.
“The CFPB recently announced that it is planning to engage in a rulemaking under FCRA related to medical debt. The CFPB does not have jurisdictional authority over many issues related to medical debt and has limited authority under the FCRA to engage in rulemaking in this area,” Purcell said. “Yet, it appears adamant to get involved in medical debt issues, including an apparent objective to make material changes to the basic premise of the Affordable Care Act without going through Congress. The health care industry is too complex to look at one-off changes in a vacuum.”
These discussions on Capitol Hill with the CFPB exemplify why advocacy and the bureau’s engagement with industry stakeholders is important to ensure all voices are heard in the bureau’s rulemaking processes.
To learn more about ACA’s advocacy, visit our online Advocacy Resource Center, Policymakers website with letters and comments, or email [email protected].
Here is an overview of key topics discussed in both hearings.
CFPB Rulemaking
During the Senate committee hearing, Ranking Member Tim Scott, R-S.C., asked if the CFPB will follow proper Administrative Procedure Act (APA) rulemaking procedures, noting that he is concerned that not doing so circumvents Congress and prevents the public and industry stakeholders from providing feedback.
Chopra said the CFPB already adheres to APA requirements, adding that issuing advisory opinions and other guidance does not create any new obligations; instead, it restates and clarifies existing law.
A similar discussion occurred at the House Financial Services Committee with U.S. Rep. Blaine Luetkemeyer, R-Mo., seeking clarification on whether the bureau’s public statements and guidance are legally binding for regulated entities.
Chopra responded that institutions are required to look to statutes and regulations, which are binding, and that the guidance and advisory opinions are to continue the actions of former Director Kathy Kraninger.
Further, Chopra was asked about the bureau’s requirement to follow the Small Business Regulatory Enforcement Act and convene a small business review panel and why it has not used that process for proposed rules to require certain nonbank entities to have registries and to implement a rule for entities that use form contracts and arbitration agreements.
In his opening statement at the hearing, U.S. Rep. Andy Barr, R-Ky., said the compliance bulletins “sow doubt and confusion in the marketplace.”
“We completely comply with all of it, and in fact, we published the analysis and we have solicited comment[s] on the analysis,” Chopra said, adding that all the bureau’s work is “reviewable under the Administrative Procedure Act.”
Medical Debt
In the Senate, U.S. Sen. Sherrod Brown, D-Ohio., committee chair, asked if the CFPB would consider a rulemaking process to remove all medical debt from credit reports and eliminate deferred interest on medical credit cards. Chopra said the CFPB is looking at all aspects of the FCRA to see if it is appropriate for a credit report to be used as a “tool to coerce individuals to pay debts they do not owe.”
He said the CFPB is examining ways to restrict some of the information on credit reports that may be false and inaccurate. U.S. Sen. Katie Britt, R-Ark., asked if excluding accurate information on consumers’ ability to repay, such as, medical debt could have detrimental impacts on banks’ decision to offer credit? Chopra said analyses show that medical debt is not predictive of consumers’ credit.
“It could have a detrimental, downstream, effect if you were to remove an entire source of information from a bank,” Britt said. “We’ve got to make sure we are putting people in the best possible position to succeed, but eliminating an entire group with regard to medical debt completely, what would someone’s incentive be to pay that debt if it was completely removed.?
Chopra stressed they are focused on accurate credit reports.
“I take that very seriously and I think the accuracy issue is what I think is the lodestar,” he said.
U.S. Sen. Catherine Cortez Masto, D-Nev., asked Chopra to detail efforts to ensure accurate credit reporting for medical debt. Chopra said patients can receive multiple deductibles for the same service, and it is put on their credit report. He added that this pressures consumers to pay for services they never received due to the threat of a lower credit score.
In the House and in discussion with U.S. Rep. Rashida Tlaib, D-Mich., about medical debt credit reporting, Chopra said he believed the bureau would be releasing more “safeguards” for medical debt on consumers’ credit reports.
Focusing on medical debt, the FCRA and the Fair Debt Collection Practices Act, U.S. Rep. Ralph Norman, R-S.C., asked Chopra about the CFPB’s authority in the FCRA to “encourage furnishers to report inaccurate information about legally owed legitimate debt.”
“The FDCPA and FCRA are basically silent on the treatment of medical debt and if that differs from any other debt,” Norman said. “The CFPB has drastically altered the collection of unpaid medical debt.”
Chopra said the bureau’s focus is on accuracy and reasonable procedures to ensure accurate reports under the FCRA and that the statute is for Congress to change.
“When it comes to accuracy of furnishing credit reports, that is an incredibly important responsibility for the enforcement agencies, the states and others. We do not want the credit report to be a way to coerce people to pay [for] something they already paid or didn’t owe in the first place,” Chopra said, adding that the bureau cannot rewrite the statute, it is only trying to administer the FCRA and enforce the law.
Last year, John McNamara, principal assistant director, markets, at the CFPB was quoted in The Wall Street Journal (“Credit Reports Remove Some Old Medical Debt,” Personal Journal, July 12, 2022), as saying that debt collectors will delete medical debts when consumers question them because they have little faith in their accuracy, ACA previously reported. This isn’t true. Collection agencies work with reputable health care providers to ensure accurate billing.
The Wall Street Journal published a letter to the editor from ACA in response to the CFPB’s comments, notably that the CFPB hasn’t provided any data supporting Chopra’s claim during the hearing that inaccurate amounts are reported as a coercive measure.
CFPB Funding
In the Senate, Brown asked about the impact on the mortgage market if the CFPB functioned without an independent funding structure, which is currently the subject of a pending U.S. Supreme Court decision in Community Financial Services Association of America Ltd. v. CFPB.
The court granted the CFPB’s petition (PDF) for certiorari to review the decision, requesting that the court address whether the 5th Circuit Court of Appeals erred in its ruling that the bureau’s funding structure through the Federal Reserve rather than the congressional appropriations process violates the U.S. Constitution’s separation of powers.
Chopra said that if the 5th Circuit Court of Appeals’ ruling is sustained, it would cause major uncertainty in the mortgage markets. U.S. Sen. Bob Menendez, D-N.J., asked what agency would take over the CFPB’s directive to protect consumers from abuse if the funding structure was found unconstitutional. Chopra said he does not believe another agency would adequately protect consumers.
The case is slated to be heard as part of the Supreme Court’s next term, which begins in October 2023, ACA previously reported.
Brown and 144 current and former members of Congress filed an amicus brief in the Supreme Court supporting the CFPB in the case, according to a press release.
Junk Fees
In July 2022, the CFPB issued an advisory opinion on debt collectors’ collection of pay-to-pay fees, which interprets language in the Fair Debt Collection Practices Act to only allow debt collectors to charge credit card convenience fees in those situations when state law explicitly authorizes the collection of such fees.
Several members on both committees discussed this topic.
Sen. Britt asked if Chopra would commit to closely examining the nearly 60,000 comments on its junk fee rule and to detail the potential timeline. Chopra said the CFPB will carefully review all of the comments but did not have a specific timeline. He said the CFPB is trying to be rigorous and move at a reasonable pace.
U.S. Sen. Raphael Warnock, D-Ga., asked if financial institutions have shifted efforts elsewhere due to the CFPB’s actions on junk fees. Chopra said the CFPB’s analysis found that financial institutions have not created additional fees on a large scale, but it is something the bureau continues to monitor. Scott asked how the CFPB views the costs associated with its credit card fee rulemaking. Chopra said the proposal does not seek to eliminate fees and allows for the recovery of costs.
“By promulgating the convenience fee rule, the CFPB is attempting to subvert the nationwide debate over FDCPA text in favor of its preferred policy,” Purcell said. “Most troubling, it is demanding this change in law with a mere ‘interpretive rule,’ which did not include a notice and comment rulemaking. Multiple courts have grappled with whether a credit card convenience fee elected by the borrower to cover the debt collector’s credit card merchant interchange fees (which are set by a Federal Reserve regulation) is permissible under this FDCPA provision.”
Complaint Database and Credit Repair Scams
In questioning with Chopra, U.S. Rep. Josh Gottheimer, D-N.J., revisited concerns about the CFPB’s Consumer Complaint Database. He said the database may be a “breeding ground” for consumer misinformation because competing businesses may file complaints against their competitors.
He asked about the bureau’s vetting process for false complaints before they are posted publicly.
Chopra explained that companies enrolled in the database can determine if the filing is from a customer before its posted and after a complaint is filed, it almost immediately goes to the company.
Turning to the U.S. Supreme Court’s pending decision on the constitutionality of the CFPB’s funding structure, Gottheimer asked if Congress should prepare now to address a “potentially unfavorable outcome.”
Chopra said right now the bureau is focused on the litigation and an amicus brief filed with the Supreme Court seeking reversal of the case, ACA previously reported.
Finally, U.S. Rep. Brad Sherman, D-Calif., inquired on the bureau’s actions to stop credit repair scams.
Chopra said the bureau has filed several enforcement actions in partnership with the Federal Trade Commission and state attorneys general and is focused on finding a way for consumers to know how they can dispute accurate information.
To watch the House Financial Service Committee hearing, click here, and the Senate Banking Committee hearing is available here.
What’s Next?
In May, the committee also advanced a bill package on CFPB reform, ACA previously reported.
The bill package (PDF), H.R. 2798, brings together several proposals on CFPB reform into one piece of legislation focused on changing the funding and leadership structure of the bureau and requiring all proposed rules to consider the impact on small businesses, among other items.
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