ACA International Leads Advocacy Against NCLC Petition for Rulemaking on Medical Debt Credit Reporting

ACA logoThe NCLC petitioned the CFPB to create a rule banning medical debts from credit reports, which ACA pushed back on.

11/29/2022 1:45 P.M.

3.5 minute read

ACA International is pushing back on a petition from the National Consumer Law Center, which asks the Consumer Financial Protection Bureau for a rule banning medical debts from credit reports.

In its response, ACA focused on the fact that the bureau lacks the authority to issue rules in this area, rewriting the Fair Credit Reporting Act is not the job of a federal agency, and that the CFPB should not engage in any rulemaking until questions about its constitutional structure are resolved.

In its petition, the NCLC mistakenly contends that the CFPB has regulatory authority to unilaterally prohibit medical debts from appearing on credit reports, ACA CEO Scott Purcell said a letter to CFPB Director Rohit Chopra.

“If the CFPB was capable of unilaterally undertaking such sweeping action under the pretext of ‘treating consumers [just non-paying consumers] fairly and equitably,’ there would be no limit on the CFPB’s ability to write and rewrite any law or regulation,” Purcell said. “This, of course, is not constitutional.”

If the CFPB were allowed to engage in rulemaking here, it must do so in compliance with the Administrative Procedure Act and provide impacted entities with an opportunity to voice their concerns as well as follow the Regulatory Flexibility Act, which requires a cost-benefit analysis of proposed rules and collecting input from small businesses—all actions the bureau has skirted recently in other proposed rules.

Based on its now-pending appeal to the U.S. Supreme Court, the U.S. Court of Appeals for the 5th Circuit recently ruled in Community Financial Services Association of America Ltd. v. CFPB that the CFPB’s independent funding mechanism is unconstitutional.

“Given the holdings in the 5th Circuit case that the CFPB itself has said in its petition for cert to the Supreme Court creates ambiguity about its authority, it is imprudent for the CFPB to not engage in further rulemaking until the Community Financial case is finally resolved,” said Leah Dempsey, shareholder at Brownstein Hyatt Farber Schreck and ACA’s lobbyist. “If the CFPB were to move forward during this time of great uncertainty, significant judicial, consumer, and financial service market participant resources will be wasted, which is not beneficial to anyone.”

This is not to mention the policy concerns that will result if medical debt credit reporting is eliminated as proposed.

As the trade association for the financial services industry, ACA continues to advocate that the CFPB’s actions taken outside of the rulemaking process will have negative consequences for the industry.

A blanket removal of all medical debt records from consumers’ credit reports is not the answer to solving health care industry issues, and causes more harm than good for patients, consumers and lenders.

ACA believes that focusing on medical debt without input from stakeholders in the health care industry will ultimately harm patients.

Attention to these topics grew after the CRAs—Equifax, Experian and TransUnion—announced that effective March 30, 2023, they will no longer include medical debt that was under $500 at the time of furnishing on credit reports, among other changes.

Credit reports that do not account for financial obligations, including past-due medical bills, increase the chance of future credit grantors extending credit that a consumer cannot afford, ACA said in a letter to the CRAs.

“Treating medical debt as though it’s not real debt is a slippery slope,” Purcell said. “The CFPB came into existence because people had been given loans they couldn’t afford, and now making this debt invisible seems like it would cause a similar problem. The issue of medical debt is a complex one—and ACA agrees that it should be handled with many more stakeholders at the table to identify workable solutions that won’t bring about the risk of significant negative consequences.”

ACA International (ACA), the association of credit and collection professionals, is the largest membership organization in the credit and collection industry. Founded in 1939, ACA brings together third-party collection agencies, law firms, asset buying companies, creditors and vendor affiliates, representing tens of thousands of industry professionals. ACA produces a wide variety of products, services and publications, including educational and compliance-related information; and articulates the value of the credit and collection industry to businesses, policymakers and consumers.

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