Beware, medical debt collectors. You can’t count on the U.S. Supreme Court to protect you.
In a 7-2 decision, the court overturned a federal appeals court in Louisiana that had ruled that the Consumer Financial Protection Bureau (CFPB) could continue to receive funds from the Federal Reserve rather than from congressional appropriations. If upheld, the appeals court’s ruling could have spelled disaster for the bureau.
To the average citizen, the Supreme Court’s ruling may sound incredibly odd—until they learn that the CFPB is increasingly cracking down on medical debt collection agencies that are engaged in collecting money that patients owe to hospitals, nursing homes and other health care facilities.
A recent Peterson-KFF survey found that Americans owe $220 billion in healthcare debt alone. Last September, the CFPB announced plans to develop new rules that would protect an estimated 100 million patients (41% of Americans) from overzealous debt collectors.
Specifically, the proposed rules aim to prevent the reporting of medical debt to creditors, insurers, landlords, employers and others, thereby lowering consumers’ credit scores and making it harder for them to rent homes, get loans and find jobs. A final rule is expected later this year.
In addition, the CFPB has taken action against law firms involved in medical debt collection, ordering one of those firms to pay $577,135 in restitution to injured consumers and an additional $78,000 in fines.
According to an investigation by KFF Health News and NPR, some debt collectors are so aggressive that many are forced to abandon their homes and ration food and other essentials.
The KFF-NPR investigation found that at least 90 of more than 500 U.S. hospitals deny medical care to patients who can’t pay their bills. Of medical debtors under age 65, nearly two-thirds (61%) have health insurance.
At the same time, the federal government is receiving a lot of support through the efforts of state and local governments.
In March, New York state passed a law banning medical debt disclosure on consumer reports. New York follows Colorado, California and Minnesota, which have either proposed or passed similar laws.
In addition, New York City has committed to paying off $2 billion in its citizens’ medical debt. Inspiration came in part from Cook County, Illinois (home to Chicago), which was the first local government to partner with RIP Medical Debt, a nonprofit that buys patient debt.
In addition, last month a group of federal lawmakers, including health and consumer activist Senator Bernie Sanders of Vermont, introduced a bill they say would eliminate all Americans’ medical debt. In March, 10 Democratic senators formally called on the CFPB to expedite its legislation.
The federal proposal follows an announcement earlier this year by the three largest credit reporting agencies – Equifax, TransUnion and Experian – that they would remove discharged medical debt from consumers’ credit reports starting July 1, 2022.
Some Supreme Court observers expected the nation’s highest court might uphold the lower court’s ruling barring the Federal Reserve from funding the CFPB. The lawsuit was filed by two industry groups challenging a rule implemented in 2017 to regulate payday lenders.
But after a heated debate over the budget clause in Article I, Section 9 of the U.S. Constitution, the court dismissed the challenge in a majority opinion written by Justice Clarence Thomas. Justices Alito and Gorsuch dissented, saying that the CFPB’s funding mechanism “is a blatant attempt to circumvent the Constitution.”
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