Prepared Remarks of Seth Frotman, General Counsel and Senior Advisor to the Director Consumer Financial Protection Bureau, at the National Consumer Law Center/National Association of Consumer Advocates Spring Training

Thank you very much for having me here today. It’s always great to talk to the people in the trenches, fighting day in and day out for consumers. I’m Seth Frotman, the General Counsel of the Consumer Financial Protection Bureau. As many of you know, the CFPB administers and is the primary enforcer of the Fair Debt Collection Practices Act (FDCPA) and Fair Credit Reporting Act (FCRA). I’d like to talk just a little bit today about how we see consumer finance, including but not limited to debt collection and credit reporting, seeping into what feels like every single aspect of American life, and how we at the CFPB are working to protect people facing new challenges in new areas. I’m going to focus on medical and rental bills, but parallels could be drawn in so many other places.

At the CFPB, we are paying attention to what you might call the growing financialization of nearly every sector of the economy. From employer-provided loans for workers whose paychecks doesn’t cover their expenses to employer-originated debts to cover workers’ on-the-job “training,” to doctors’ visits that leave people with a new credit card or an exotic payment plan, to being required to download a new app just to pay rent – it increasingly feels that every interaction is turning into a consumer financial transaction, often with debt collection and credit reporting implications. And because we are seeing consumer finance enter so many aspects of everyday life, the consumer financial protection laws have become a central tool for ensuring that consumers are treated fairly as they go about their lives. As the CFPB has made clear in several contexts, there is no exception in the federal consumer financial protection laws, including the FDCPA and FCRA, for new market entrants or new technologies – or, as particularly relevant here, with respect to practices covered by the law that are popping up in new areas.

That’s why I’m so glad to be here today with so many FDCPA and FCRA practitioners. We all know that the FDCPA and FCRA require people to be provided important information – like the validation notice disclosing who is collecting a debt or an adverse action notice when someone is turned down for a job or an apartment based on a credit report. But what I want to emphasize today is how these laws also really address some of the most significant, central abuses faced by those who are struggling. For example, we are focused on how the FDCPA and FCRA protect people, in a wide range of contexts, from being hounded about bills that they do not actually owe. This includes both bills that the person does not owe at all – such as debts that have been paid off or were never incurred in the first place – and also bills that are for the wrong amount. Of course, that latter category includes bills padded with illegal junk fees that harm a transparent and competitive marketplace. Although large corporations may view these inflated expenses as just another way to make money, I think we all know that they put a real burden on people, especially those who are already struggling. As I’ll discuss, the FDCPA and FCRA provide crucial protections against the collection of bills for the wrong amount or those not owed at all. But that is just one of the many ways that the consumer financial protection laws address some of the core issues and challenges in a society that is becoming more financialized every day.

As I said, today I will be focusing on FDCPA and FCRA issues in (1) medical billing and collections and (2) landlord-tenant screening and debt. One of the reasons that I want to emphasize these two markets is because they are both areas where the importance of the consumer financial protection laws – at least at the federal level – has not always been recognized. And today I’ll emphasize how, at the CFPB, we are dedicated to ensuring that the laws that we administer are being interpreted and used appropriately to meet this moment, to protect all the people that Congress wanted to protect – whether that’s parents faced with an unexpected ER visit for their kid, or families trying to find somewhere stable to live, or any number of other people who are being taken advantage of financially when they’re struggling.

Medical Billing, Collections, and Credit Reporting

As the cost of healthcare continues to rise, the CFPB has found that families are being saddled with medical bills that they should not – or do not – owe. You may have seen our most recent FDCPA annual report from November 2023. That report focused on debt collectors that pursue allegedly unpaid medical bills, which the CFPB has now received more than 15,000 complaints about in just the past two years. This includes many complaints from servicemembers and older adults as well as other populations that have comprehensive medical insurance.

We know that patients and their families can have substantial difficulty identifying whether a medical bill is actually for the services they received, let alone for the right amount. This presents a substantial opportunity for abuse by unscrupulous collectors who contact consumers about medical bills without knowing whether the bills are valid, accurate, and up-to-date. For instance, we know that medical bills are often sent to debt collectors with little or no supporting documentation or access to providers’ records. We are also using our supervisory authority to look into troubling reports that medical debt collectors rarely go back to the healthcare provider to stay current on changes to the amount owed, such as when an insurance claim settles. And we have heard concerning accounts of revenue management companies backed by private equity sending bills to collections before even receiving a statement from an insurer or Medicare detailing the patient’s financial responsibility.

As the CFPB recently made clear in an amicus brief in the U.S. Court of Appeals for the First Circuit, debt collectors are strictly liable under the FDCPA for any misrepresentations they make about whether and how much a consumer owes. “That’s how much they told me you owe” is not a valid legal excuse. For example, if a revenue management company sends a bill to collections and that bill is for an incorrect amount, the debt collector violates the FDCPA by trying to collect on that bill; it does not matter that the collector was relying on a representation from the company working on behalf of the healthcare provider. Similarly, a debt collector violates the FDCPA if they collect an amount that is no longer correct, such as because an insurance company or patient has made a payment on the underlying bill. In short, it is up to the debt collector to ensure their information is correct and up-to-date – it is not the consumer’s responsibility to tell the collector how much they owe. There could also be liability under the FCRA for the debt collector or others in these circumstances if incorrect information is furnished to a consumer reporting company.

On the topic of credit reporting, we all know that when a consumer has a medical debt, it’s not just that debt that hangs over their head. To add insult to injury, debt collectors often provide this information to consumer reporting companies. It then appears on peoples’ credit reports, affecting their ability to get a loan or even a job or housing. We have heard from too many consumers that say they pay these bills – even if they think they don’t owe the money – when they need to apply for a loan or a job. We believe that furnishing information to consumer reporting companies just to coerce people to pay bills they may not even owe is a deliberate misuse of the credit reporting system, which is supposed to be used to gauge credit risk.

For these reasons, the CFPB has kicked off a rulemaking process to remove medical bills from credit reports used by creditors as a matter of federal law. As in so many other areas, this federal effort is being accompanied by strong state action. Many states have proposed or enacted laws in recent years providing significant consumer protections with respect to the collection and reporting of medical bills. I would highlight recently enacted laws in Colorado and New York that have prohibited the furnishing and reporting of medical debt. These laws will complement what the CFPB is doing at the federal level on this issue. And, I’ll be candid, state laws can provide relief for people on a timeline that is likely going to be faster than our federal efforts. Other states are considering such laws, and we encourage them to do so as being fully consistent with the CFPB’s work in this area. As the CFPB made clear in a 2022 interpretive rule and as two Circuits have ruled, the FCRA has a limited preemptive scope. Preemption generally does not apply to state restrictions on the furnishing and reporting of medical bills, including state laws that prohibit the furnishing and reporting of medical debt entirely. Additionally, because inaccuracies in the collection, furnishing, and reporting of medical bills are common, state restrictions on these practices are unlikely to result in less accurate or robust collections or credit reporting.

Another important issue is that federal law and the law of many states require non-profit hospitals to have financial assistance programs for people who cannot afford to pay, and require hospitals to let people know about these programs. But too often we have seen this to be an empty promise. The CFPB’s database is full of complaints from people being contacted by debt collectors about bills that have actually already been addressed by hospitals under their financial assistance programs, but that are still inexplicably being collected on. The vast majority of the time, when the CFPB follows up with debt collectors about these bills, the collectors simply close the account. This behavior strongly suggests that these collectors do not have confidence that this money is actually owed. Moreover, we have also heard complaints that many more medical bills do not get addressed because non-profit hospitals have requirements in their financial assistance policies that are contrary to IRS regulations and possibly also to state law. For example, hospitals may erroneously claim that patients can only get large medical bills forgiven, or can’t apply if they have insurance, or if they’ve already paid, or have signed up for a credit card, or if they’re not a resident of the area where they happen to have received emergency care. We have also heard troubling accounts of medical providers steering patients to medical payment products, rather than financial assistance programs. By offloading the debt and any future debt collection activity onto medical payment products, non-profit hospitals may be trying to exploit a perceived loophole in IRS rules that are supposed to protect patients from “Extraordinary Collection Actions,” including high interest rates and lawsuits that are filed before patients have been evaluated for financial assistance.

Again, states are taking the lead here. I would flag – in particular – actions by the Attorneys General of California, Minnesota, and Washington State, based on the strong laws in those states, alleging that certain medical providers have failed to make charity care accessible to their patients. As the recent FDCPA report articulated, states have wide latitude to pass debt collection laws to protect consumers, as preemption of state law is very narrow under the FDCPA. The federal government is closely examining its authorities with respect to medical billing and collections, and the CFPB is eager to work with states in our oversight of debt collectors.

I would also emphasize for this audience in particular that, as the FDCPA report noted, the CFPB has made clear that collecting debts that are not owed at all or collecting wrong amounts violates the FDCPA. This principle is applicable broadly across types of debts, including in the medical context. In this area, we have seen debt collectors collect charges for services the patients never received, collecting for more expensive versions of services than what were actually provided – often called “upcoding” – or collecting amounts based on rates that are inconsistent with applicable state law. These practices violate the FDCPA, and I encourage many of you fighting these battles on behalf of individual clients to consider how the FDCPA can be used as a tool to protect people from these inappropriate charges.

We do this work – and we know so many of you do too – because we are keenly aware that medical debt is a leading driver of bankruptcy in this country and is associated with many other ill effects, such as avoidance of additional medical care and worse health outcomes.

Rental Collections and Credit Reporting

The other topic that I’ll highlight today where the federal consumer financial protection laws may not always have been considered central, but should be, is the collection and reporting of rental bills. It’s been said a lot lately, but we all know that it’s true – the rent is too damn high. And perhaps not surprisingly, many consumer financial trends that we are seeing across the economy are charging into the rental space to capitalize on market failures and housing scarcity. For example, we are seeing increased financialization, with new entrants offering landlord and tenants new financial products. This includes everything from specialized “rent delinquency” companies that take aggressive tactics with tenants, to loans or other newfangled products offered or even required to cover the security deposit or rent itself, to rent-specific credit cards offering “rewards,” to new payment platforms, often loaded with up fees, on which tenants can or are required to pay their rent. The list goes on and on.

The infusion of consumer financial products into the rental market can lead to housing insecurity and an imbalance of power between landlords and tenants. For example, we have seen an explosion in companies that harvest reams of data to determine who will purportedly be a reliable tenant. As corporate landlords have increased their rental holdings, demand has substantially increased for “tenant screening” products that perform digital, algorithmic scoring of prospective tenants or that even use machine learning and artificial intelligence. And as the CFPB has noted, the determinations made by these companies are often opaque, inaccurate, difficult to challenge, or even discriminatory. A CFPB report from November 2022 emphasized that tenant screening reports are filled with largely unvalidated information of uncertain accuracy or predictive value. While renters bear the costs of errors and false information in these reports, it has been difficult for them to make tenant screening companies fix their sloppy procedures. We have heard directly from many renters that inaccuracies and errors can have a decades-long impact on housing opportunities.

In response to these comments, the CFPB recently issued an advisory opinion on background screening to highlight that credit reporting companies, including those offering tenant screening products, must under the FCRA maintain reasonable procedures to avoid producing reports with false or misleading information. This includes, for instance, having procedures to ensure disposition information is reported for eviction proceedings, as well as for arrests or court filings that are included in reports. Further, the CFPB and FTC recently took enforcement action against a rental screening subsidiary of TransUnion for failing to take steps required by the FCRA to ensure that rental reports were accurate. Again, as the interpretive rule that I mentioned articulated, states have broad authority to regulate the content of credit reports, and we are interested in steps that states and even localities might take to address problems in this area.

Tenant screening is just one example of our attention to a range of consumer financial products and services in the rental space. We are also monitoring debt collection and credit reporting complaints involving all sorts of rental-related activity. As many of the people in this room probably know, debt collection activity related to rental debt has increased substantially over the last several years. Though it varies by jurisdiction, we have seen a significant increase in both the total number and average amount of rental debts in collections. Complaints submitted to the CFPB concerning rental debt collection have similarly increased dramatically over the last five years, rising from a few hundred per month in 2019 to over 1,000 per month in 2023. Consumers have reported a wide range of issues in these complaints, and attempts to collect debts not actually owed are particularly common.

As I said at the top, there is no exception to the federal consumer financial protection laws, including the FDCPA and FCRA, for new market entrants or new technologies. For instance, companies extending credit in the rental space – regardless of how they label their products – must comply with the Truth in Lending Act as well as the Consumer Financial Act Protection’s prohibition on unfair, deceptive, or abusive acts or practices. Especially relevant for this audience, as the CFPB noted a few years ago, it’s clear that the FDCPA applies to the collection of residential rental debt by debt collectors as defined in the law, including by attorneys, such as when attorneys file eviction actions with a demand for unpaid rent. So, for example, law firms that operate “eviction mills” can be held liable under the FDCPA if they rubber stamp eviction actions without performing a meaningful review of each case.

Beyond eviction actions, law firms or others that provide services to landlords related to unpaid rent may be covered by the FDCPA. For instance, we are aware of litigation in Virginia where a firm that was drafting and sending rent delinquency notices for a landlord claimed it was not covered by the FDCPA because the landlord electronically signed the communications and the notices said to follow-up with the landlord. The plaintiffs alleged that they deserved protection under the FDCPA from, among other things, the “multiple and repetitive” fees that this firm tacked onto unpaid rent. As a federal district court held, and we agree, firms that draft and send rent delinquency notices may be covered by the FDCPA, even if the communications appear to be from the landlord, because the FDCPA applies to those who regularly collect debts on behalf of another. More broadly, I believe this principle will be increasingly important as new technology allows firms to operate on behalf of other firms in ways that are not immediately visible to consumers.

Additionally, debt collectors acting on behalf of landlords may violate the FDCPA and similar state collection laws by collecting amounts that are inflated by junk fees or other sums that are not owed as a matter of state law. For instance, landlords may improperly charge tenants for basic repairs and routine upkeep that should be the landlord’s financial responsibility under the warranty of habitability in most states. These amounts may then improperly end up in debt collection actions subject to the FDCPA or on credit reports, magnifying their harm. I would encourage you and your clients to dispute amounts that are not actually owed with consumer reporting companies as well as the debt collectors or others that furnish to those companies. We have fought hard, including in several amicus briefs, to fight off the erroneous argument that firms do not have to follow-up on disputes that can be characterized as “legal” in nature, and several courts have validated this principle, including most recently the U.S. Court of Appeals for the Second Circuit.

To give just one more example, the movement of rental payments to online platforms raises a host of state and federal issues, especially where fees are concerned. Under the FDCPA, debt collectors using payment platforms may not tack on fees that are not in the original rental contract or expressly permitted by state law to accept payments on an expedited basis. Consumers have also had success with similar claims under states law that incorporate the FDCPA against a broader group of companies, such as mortgage servicers. The CFPB released an advisory opinion and has filed several amicus briefs explaining that the FDCPA prohibition applies across markets, and several courts have agreed, including in a recent decision by the U.S. Court of Appeals for the Fourth Circuit. We will not let struggling parents trying to keep their families in a house or apartment be nickeled-and-dimed unlawfully by unscrupulous companies working on behalf of landlords.

Conclusion

As I said at the top, the federal consumer financial protection laws have increasingly become an important tool for addressing the abuses that people are facing in seemingly every aspect of American life. I focused today on medical and rental bills, but those are really just the tip of the proverbial iceberg. I believe there will be, and indeed already are, similarly important challenges in many other areas that I am sure we will be talking about in years to come.

Briefly, I’d like to conclude with a request: please tell us about your cases. The CFPB has an active amicus brief program. And we rely on monitoring of active litigation to bring to our attention emerging issues and areas of concern.

Thank you for spending some time with me today, but more importantly, thank you for all the work of you do on behalf of so many who need it.