The tables, it seems, have turned. We as consumers are all too familiar with being the subjects of debt collection efforts, and now it’s the debt collectors’ turn to face some scrutiny. Not only has the controversial Patient Protection and Affordable Care Act (better known as Obamacare) implemented some new rules that require hospitals to curb unfair collection practices against patients if they want to receive their federal tax exemption, but the Consumer Financial Protection Bureau (CFPB) also published a rule yesterday giving itself the ability to oversee the nation’s largest debt collectors.
Roughly 30 million Americans have debt subject to collections, according to the CFPB, which estimates the average amount owed to be around $1,500. These statistics are worrisome both because they speak to our country’s obsession with overspending and in light of the negative repercussions of severely delinquent debt. You see, in addition to the inconvenience and stress of having debt collectors pester you, your debt burden will grow as interest continues to accrue, you’ll incur more and more credit score damage as delinquency increases, and you could eventually default and even get sued. To complicate matters, debt collectors are notorious for misleading consumers, overstepping the law, and making mistakes that cost people like you and me a lot of money.
That last part is what the aforementioned new regulations largely seek to address. The CFPB has announced that it will place particular emphasis on making sure that debt collectors properly identify both themselves and the amounts owed by consumers, are honest and polite in their dealings, and handle consumer complaints properly. The Affordable Care Act directed the IRS to make changes to the tax code that require hospitals to take the following steps if they want to claim the federal tax exemption many are eligible for as result of providing community benefits such as pro bono care, free health screenings, health education, and research:
- Publicize clear eligibility requirements for free or reduced-cost care.
- Screen patients for financial need before employing extraordinary collections tactics.
- Limit amounts billed to patients eligible for financial assistance to either Medicare rates or the lowest payments required of insured patients.
So, what exactly do all these changes mean for you and me?
Perhaps most importantly, they show that decision makers recognize that debt collection impropriety is an issue that merits close attention. This should give consumers peace of mind and, hopefully, whip debt collectors into shape, at least in the short term, since they now know that someone influential is watching and that breaking the law could have tangible repercussions.
Broad, overarching benefits based largely on perception are about all we’ll get before we actually see how these new rules are enforced, though. The rules themselves are rather vague, after all. I mean, it’s great to hear which aspects of debt collection the CFPB will be monitoring, but what will happen to debt collectors that break the rules? The CFPB hasn’t announced penalties yet. Similarly, it’s a nice idea to make hospitals evaluate patients’ financial need, much like they’re college applicants, before resorting to “extraordinary” means of collection, but what does that mean exactly? How will hospitals that forgo such screenings be punished? We don’t know either of those things yet either.
In other words, there’s no need to schedule a celebratory parade quite yet, but we should certainly be encouraged until debt collectors find new ways to circumvent the rules or their lobbying efforts weaken their enforcement.