ACA International Responds To CFPB Analysis On Third-Party Debt Collection Credit Reporting

The report examines debt collection credit reporting and medical debt reporting from 2018-2022 through a narrow lens and overlooks multiple factors influencing credit reporting.

The Consumer Financial Protection Bureau has released an updated report on credit reporting trends from 2018-2022.

The report comes ahead of the next round of changes to medical debt collections from credit reporting agencies (CRAs) taking effect in March.

ACA International represents approximately 1,800 members, including credit grantors, third-party collection agencies, asset buyers, attorneys, and vendor affiliates in an industry that employs more than 125,000 people worldwide. Most ACA member debt collection companies, however, are small businesses.

ACA members play a critical role in protecting both consumers and lenders. ACA members work with consumers to resolve their debts, which in turn saves every American household, on average, more than $700, year after year. The accounts receivable management (ARM) industry is instrumental in keeping America’s credit-based economy functioning with access to credit at the lowest possible cost. For example, in 2018 the ARM industry returned over $90 billion to creditors for goods and services they had provided to their customers. And in turn, the ARM industry’s collections benefit all consumers by lowering the costs of goods and services—especially when rising prices are impacting consumers’ quality of life throughout the country.

In a press release on its credit reporting trend analysis, the CFPB reports that from the first quarter of 2018 to the first quarter of 2022, total collections tradelines on credit reports declined by 33%.

In an analysis accompanying the report, John McNamara, the CFPB’s principal assistant director of markets, says the declines in medical debt collection tradelines “may be partly explained by structural dysfunctions in medical billing and collections, which increase the risk that debt collectors will not meet their legal obligations.”

McNamara, in “Credit Reports Remove Some Old Medical Debt” (Personal Journal, July 12), published in The Wall Street Journal, is reported as saying that debt collectors will delete medical debts when consumers question them because they have little faith in their accuracy.

That isn’t true, ACA responded in a letter to the editor also published in The Wall Street Journal. Collection agencies work with reputable health care providers to ensure accurate billing. ACA members use comprehensive compliance programs to ensure that only legally owed debts are reported. We acknowledge health care’s complexity, including complicated insurance. ACA members have strong controls to respond to legitimate disputes and mitigate errors.

The CFPB’s past claims that inaccurate amounts are reported as a coercive measure is, again, false. The CFPB hasn’t provided any data supporting this allegation. The free market has no incentive for such illegal behavior. If this were common practice, health care providers would stop working with collection agencies, and we’d incur significant legal liability. There’s no evidence either has come to pass.

Arbitrary changes hurt patients. Delaying reporting to one year enables insurance companies to deny claims for untimely filing. This, and not reporting debts under $500, negatively affect health care providers’ revenue, resulting in reduced access to care for the low-income consumers as providers move to more upfront payments. Congress didn’t provide for unelected CFPB staff to make healthcare-policy decisions; it’s a slippery slope. Americans deserve greater access to affordable health care, not less.

The bureau’s research overlooks multiple factors, including the COVID-19 pandemic, which occurred during the report’s timeframe and resulted in millions of dollars infused into the health care marketplace from the federal government.

The timeframe of the report, from 2018 to 2022, is also mostly before the credit reporting changes from the CRAs took effect in July 2022.

The CFPB cites itself as the source in the report on several occasions, pointing to even more outdated reports from the bureau that only include a small sliver of the market.

For example, the CFPB said in the report (PDF), “Despite being less predictive of future loan repayment than other types of financial tradelines, medical collections continue to be the most common collection tradeline on consumer credit reports.”

This statement cites a 2014 report from the bureau, “Data Point: Medical Debt and Credit Reports” (PDF.)

“The CFPB’s research continues to not seem to grasp the existing infrastructure related to medical debt that has strong safeguards for consumers to dispute any amounts that are in question or that they feel they don’t owe. If a consumer disputes a bill, there are procedures in place to ensure credit reporting is paused while the issue is being resolved,” said ACA International CEO Scott Purcell. “There are also controls in the communication of the debt well in advance of any credit reporting through Regulation F and other laws and statutes.”

Like in previous reports, Purcell said “the CFPB needs to tell the whole story in connection with this report and research the practices of insurance companies just the same as researching the work of health care providers and debt collectors.”

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