An important announcement was made yesterday that affects healthcare providers who engage third-party debt collectors to pursue delinquent patient accounts.
The Consumer Financial Protection Bureau (CFPB) noted in its final rule Defining Larger Participants of the Consumer Debt Collection Market that medical debts will not be included in the definition of receipts. Specifically, the rule “excludes from the definition of annual receipts those receipts that result from collecting debts that were originally owed to a medical provider.” According to official sources at the CFPB, “annual receipts” is determined by the economic census and is roughly equivalent to annual revenue. Various media outlets and some industry associations had confused the term “annual receipts” [revenue] with “gross collections.”
The central issue cited by the Bureau for the exclusion is the difficulty in determining whether each individual debt meets the definition of “credit” under Dodd-Frank. The law defines credit as “the right granted by a person to a consumer to defer payment of a debt, incur debt and defer its payment, or purchase property or services and defer payment for such purchase.”
The Bureau expressed concern that it would not be practical for consumer debt collectors to know in each case whether credit was extended, so it has made the decision to exclude the entire category. Exceptions might be in specific cases, for instance, where a payment for medical services was made by credit card. In instances like this, the debt is actually owed to the credit card company, and not the medical provider.
Before medical collectors breathe a sigh of relief, though, It should be noted that the rule “excludes medical debt collection activities from receipts because of the difficulty, at the current time [emphasis mine], of identifying whether particular medical debts resulted from extensions of credit. The Bureau will continue to seek more information [emphasis mine] relevant to that task…”
We also encourage readers to recall this from Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (referenced in the footnotes here on the CFPB site):
8Id. §§ 1024(a)(1)(B) and 1024(a)(2). The CFPB also has the authority to supervise any covered person [emphasis mine] that it “has reasonable cause to determine, by order, after notice and a reasonable opportunity … to respond” that such covered person “is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services.” Id. § 1024(a)(1)(C).
See id. § 1002(6) (a “covered person” means “(A) any person that engages in offering or providing a consumer financial product or service; and (B) any affiliate of a person described [in (A)] if such affiliate acts as a service provider to such person.”). A “service provider” is a person that provides a material service to a covered person in connection with the offering or provision of a consumer financial product or service. Id. § 1002(26). Service providers also may be subject to CFPB supervision.
So it seems that this current “final” rule may not be the last word on the matter as it relates to supervision of firms focused primarily on the medical market. Should medical debt collectors be proactively supervised by the CFPB in the future, this may give healthcare providers an easy way to “check a compliance box” in the due diligence process.