Today, we’re announcing that we filed a lawsuit against a robo-call debt collection operation, including its ringleaders, their companies, and service providers. The debt collectors allegedly sent millions of robo-calls to threaten, harass, and deceive consumers to collect debt that consumers do not owe, or were not owed to the debt collectors themselves. The complaint alleges that the scheme depended on the participation of the telemarketing company that sent the robo-calls and the payment processors that allowed the collectors to access consumers’ bank accounts.
Look for warning signs
If you don’t recognize a debt from a debt collector, ask the caller for their name, company, address, telephone number, and professional license number. If a caller is unable to provide you information about his company, or can’t verify information, do not give money to the caller or company. Learn more about warning signs that could signal a debt collection scam.
Today we, along with the Attorneys General of Virginia and North Carolina, announced an enforcement action against a chain of stores doing business outside military bases across the United States. Under the terms of a proposed consent order, Freedom Stores, Inc., Freedom Acceptance Corporation, and Military Credit Services LLC, as well as their owners and chief executives will be required to provide over $2.5 million in consumer redress and penalties for unfair and abusive debt-collection practices, including illegal lawsuits, unauthorized withdrawals from third-party accounts, and calls to servicemembers’ commanding officers.
Our investigation found that the companies illegally filed thousands of lawsuits in Virginia against consumers who didn’t live or purchase goods there: over 3,500 lawsuits in Norfolk, Virginia in two-plus years, almost all resulting in default judgments against consumers, some of whom didn’t even know they’d been sued until they discovered their bank accounts had been garnished.
The companies also buried a clause in the fine print of their contracts that supposedly gave the companies permission to contact the servicemember’s commanding officer. Freedom Acceptance and Military Credit Services then went on to tell servicemember’s chain-of-command about the debts, effectively pressuring the servicemember into paying the companies. These are unfair practices against military personnel, who are afraid of losing rank, pay, or even a security clearance if their commanding officer feels they are not living up to their financial obligations. We’ve heard from a number of servicemembers that they even paid a debt they knew they didn’t owe, just to avoid getting in trouble with their commander.
Like many companies dealing with servicemembers, Freedom Acceptance and Military Credit Services used the military allotment system as a quick and convenient way to get paid. But the companies also required customers to provide them with a back-up payment source in case the allotment didn’t go through for some reason. And if the companies’ allotment processor predicted that a servicemember’s allotment might fail, they went ahead and charged the back-up account without waiting to see if the allotment went through or not. So those servicemembers, when their allotment payment did go through after all, ended up making double payments, without their advance knowledge or consent, leading to overdraft fees, insufficient funds charges and problems paying their other bills.
Additionally, the companies’ debt collectors would sometimes simply take money from checking or credit accounts they had on file of family members or friends who had previously made a payment on the servicemembers’ behalf. These debits were made without notifying the family member or friend or getting consent for the charges – simply taking the cash because the companies had the account access numbers on file from a previous transaction.
We get more complaints about debt collection from servicemembers, veterans and their families than any other issue. This case is a perfect illustration of bad practices that are perpetrated against military personnel who owe a debt.
Our military families deserve better than the treatment they received from Freedom, and I applaud the action taken today by both the CFPB and state authorities to call Freedom Stores and its affiliates and owners to account.
If you are a commanding officer who is receiving calls from someone trying to collect a debt, or a servicemember who is getting threatened or victimized about a debt, we’d like to hear from you. Your complaints can help us spotlight and stop illegal actions like the ones in this case.
Today, we held a field hearing on medical debt collection in Oklahoma City, OK. The hearing featured remarks from Director Richard Cordray, as well as testimony from consumer groups, industry representatives, and members of the public.
The live event has now ended, but we’ll have a recording available here soon.
Debt collection is the top complaint we’ve received since September 2013. Out of all debt types, medical collections make up 52 percent of collection accounts on credit reports, far outpacing all other types of debt.
Medical collections are so widespread, that an estimated 43 million consumers with an account in collection have medical debt. We analyzed medical collections in our latest report, to explain why medical debt is affecting so many more credit reports than any other type of debt. You can read more about how medical debt hurts your credit report.
Here are steps you can take to keep medical debt in check:
1. Review medical bills carefully
If you don’t recognize the provider, check the date of service to see if you had a medical treatment on that day. For more complicated procedures, ask for an itemized bill from the provider in order to check how much you were charged for each service. Some providers who bill you directly may have been associated with a hospital where you were treated, so you may not have known you were receiving services from them at the time you were being treated.
2. Get documentation
Prepare an organized record of all bills. If you need to dispute a bill, send a written notice to the provider and include a copy of all relevant documents, such as records from doctors’ offices or credit card statements. Do not send original documents.
3. Check your health insurance policy and make sure your provider has your correct insurance info
You should know what your insurance covers, and what it doesn’t – but first your insurance information needs to be up-to-date and accurate! A small mix up can lead to big bills for expenses that your insurance should have covered.
4. Act quickly to resolve or dispute the medical bills that you receive
If you have verified you owe the bill, try to resolve it right away. Verify whether an insurer is paying for all or part of a bill. If you delay the bill and let it end up in collections, it can have a significant impact on your credit score. If you don’t owe the bill, act quickly to dispute it.
5. Negotiate your bill
Hospitals may negotiate the amount of the bill with you. The tab may be reduced if you pay the whole amount up front. You can also try asking for the rate that people who have insurance get. The hospital might also offer a plan that enables you to pay off the debt in installments at no interest. It doesn’t hurt to ask.
6. Get financial assistance or support
Many hospitals have financial assistance programs, which may be called “charity care,” if you are unable to pay your bill. Check the deadlines, which can vary.
7. Don’t put medical bills on your credit card, if you can’t pay it
If you can’t immediately pay off a high debt on your credit card bill, you will be charged high interest, and it will look like regular debt to other creditors. Instead, ask your medical provider for a payment plan with little or no interest.
Since September 2013, debt collection has been the top complaint at the CFPB. Among all debt types, medical debt tops the list. When a debt is past due, a collector may report the account to a credit agency. This would appear as an account in collection, often resulting in a credit score drop.
A staggering 52 percent of all collection accounts on credit reports are medical. An estimated 43 million consumers with a credit report at a nationwide consumer reporting agency have one or more medical accounts in collection. Learn how you can keep medical debt in check.
A collections item on a credit report can hurt a credit score severely and inhibit access to insurance, housing or employment. A consumer with a FICO score of 680 could see a score drop of 45-65 points. A score of 780 could drop 105-125 points.
Lack of accountability and standards for collections practices
According to complaints to the CFPB, consumers may not be aware that they owe a medical debt or have time to resolve it, before a collection account appears on their credit report. The absence of any standard of how delinquent a medical debt has to be before it appears on a credit report means this can happen anywhere between 30 – 180 days past the billing date. When collectors substitute active efforts to contact a consumer with a report to credit reporting agencies, they impose a huge cost on consumers.
Confusion from multiple bills, providers, and collectors
Medical billing is complicated and confusing. A single treatment at a hospital can result in multiple bills from multiple providers. For example, after a surgery, a consumer can receive a bill from the surgeon, the anesthesiologist, and the surgery facility. A health insurance policy may cover some providers and some procedures, but not others. And it may cover all or part of a bill. Some consumers may find it difficult to know what they owe, to whom or for what.
This confusion can be amplified when a medical bill goes to collections. Medical providers in turn rely on a series of third-party collectors with only indirect and short term ties to the underlying debt, thereby introducing potential for errors in collections reporting. This can make it challenging for consumers to verify whether they truly owe the debt.
Medical debt is different, but scores haven’t treated it that way
Many consumers who have medical debts in collection, may have the ability and willingness to pay. Of the consumers with only medical collections accounts, 50 percent have otherwise “clean” credit reports. These consumers may have lacked proper notification about the debt from the collector or are in the process of contesting it. Our May 2014 data determined medical debt is not as good a predictor of a consumer’s likelihood of paying a debt as was previously believed.
Medical collections accounts are smaller (on average) than many other types of debt. Half of medical debts are under $207. This indicates that consumers may be able to pay them. Some consumers may just be confused about what they owe, believe the debt has already been paid, or that they simply do not owe it. Credit scores that treat medical and non-medical debts the same over-penalize the millions of consumers who have medical debt.