CFPB Takes Action Against Medical Debt Collector

Company Mishandled Consumer Credit Reporting Disputes, Prevented Consumers From Exercising Debt Collection Rights

WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) announced an enforcement action against a medical debt collection company for mishandling consumer credit reporting disputes and preventing consumers from exercising important debt collection rights. These practices potentially affected the credit scores of thousands of individuals and caused consumers distress and confusion. The CFPB is ordering the company to provide over $5.4 million in relief to harmed consumers, correct its business practices, and pay a $500,000 penalty.

“Syndicated Office Systems mistreated consumers and prevented them from exercising critical debt collection rights,” said CFPB Director Richard Cordray. “These violations are particularly egregious given the challenges many consumers already face who are attempting to navigate the medical debt maze. Today we are putting a stop to these illegal practices and getting consumers the relief they deserve.”

Syndicated Office Systems, LLC, which does business as Central Financial Control, is a debt collection agency that primarily collects medical debt on behalf of hospitals, doctors, and other healthcare providers. The company is an indirect subsidiary of Conifer Health Solutions, LLC, which provides billing and other services to more than 600 hospitals nationwide. Tenet Healthcare Corporation, a publicly traded healthcare services company based in Dallas, Texas, is the parent company of Conifer Health Solutions.

Companies that collect medical debt and supply this information to credit reporting agencies have a significant impact on consumers’ credit scores. More than 43 million Americans have medical debt adversely affecting their credit reports, and more than half of all overdue debt on consumer credit reports is from medical debt. A recent CFPB report found that the complex processes by which medical bills are incurred, collected by a wide range of debt collectors, and reported to credit reporting agencies can create unique challenges for consumers. The Bureau also found that medical debt can overly penalize consumer credit scores.

As part of its debt collection business, Syndicated Office Systems regularly supplies information on the status of its medical debt collection accounts to credit reporting agencies and is considered a furnisher under the Fair Credit Reporting Act. Credit reporting agencies track a consumer’s credit history and other consumer transactions based on information supplied by furnishers. The reports that credit reporting agencies sell are used in determining everything from consumer eligibility for credit to employment decisions.

Syndicated Office Systems typically initiates collection efforts through letters and telephone calls to consumers. Within five days of their initial communication, debt collectors are generally required to send debt validation notices to alert consumers about their right to request proof that a debt is valid or dispute the debt. A CFPB investigation, however, uncovered that Syndicated Office Systems failed to send debt validation notices to thousands of consumers.

The CFPB also found that the company mishandled consumer credit reporting disputes by failing to investigate and respond to consumers within the 30-day timeframe required under the law. Because the company furnishes information related to past-due medical debt, the information consumers seek to dispute or validate has the potential to lower credit scores.

The CFPB order charges the company with violating the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. The violations specifically include:

• Mishandling consumer credit reporting disputes: Syndicated Office Systems failed to respond to more than 13,000 consumer credit report disputes within the 30-day timeframe required by law. On average, the company took more than 90 days to respond to consumers’ disputes and, in some cases, took over a year. Consumers spent time and money attempting to follow up on unresolved disputes and experienced distress and confusion due to the delays. The CFPB found that the company had no policies or procedures in place to investigate these consumer credit report disputes. Instead, the company treated consumer credit report disputes in the same way as other consumer complaints and had no deadline for responding.

• Preventing consumers from exercising important debt collection rights: Syndicated Office Systems failed to send debt validation notices to more than 10,000 consumers. During this time, the company continued to collect over $2 million from consumers who did not receive the notices. Failing to provide notices denies consumers the opportunity to assess whether the debt is valid and whether the amount or source is correct. These notices can be an especially important consumer safeguard with regard to medical debt, where issues like insurance reimbursements and medical billing processes are commonly fraught with complexity, confusion, and delay, and can lead to consumers being unsure of how much to pay or even whom to pay.

Together, these violations had the potential to harm thousands of consumers and in some cases, negatively impact their credit scores. This can hinder consumers’ ability to obtain credit or increase the rates they may pay for credit. In some cases, the company reported inaccurate information to the credit reporting agencies and then failed to provide a timely response to consumer disputes about the errors. Some consumers may also have been able to avoid negative information on their credit reports if they had known about their right to assess and dispute the debt in question.

Enforcement Action

To address these violations, the CFPB order requires Syndicated Office Systems to take the following actions:

• Provide over $5 million in relief to harmed consumers: Syndicated Office Systems must identify all affected consumers and provide monetary relief. Consumers who were never sent a debt validation notice and who made payments to the company will receive a full refund and have remaining account balances forgiven. The company will pay $100 to consumers who were never sent a debt validation notice and did not make any payments to the company. The company must also pay damages ranging from $100-$1,000 to each consumer who did not receive a timely response to his or her credit report dispute. The amount that each consumer receives will correspond to the duration of the company’s delay in responding to the consumer’s credit report dispute. The company must submit a written plan to the CFPB for approval detailing how the company will identify affected consumers and provide relief.

• Correct errors on credit reports: Syndicated Office Systems must identify all consumer accounts affected by its illegal business practices and fix any inaccuracies. The company must also update the account information it has furnished to the credit reporting companies and notify all affected consumers of this update, to the extent it has not already done so.

• End illegal credit reporting and debt collection practices: The company must cease its illegal business practices and develop new policies to comply with federal consumer credit reporting and debt collection laws.

• Establish consumer safeguards: Syndicated Office Systems must change how it does business and establish safeguards to ensure it has the staffing, facilities, systems, and information necessary to timely and completely respond to consumer credit report disputes. It must also establish a strong oversight program to identify any systemic inaccuracies to ensure that it informs consumers of their right to validate and dispute inaccurate debts in collection.

• Pay a civil monetary penalty of $500,000: Syndicated Office Systems will pay a $500,000 fine for the illegal actions.

The consent order filed today is available here: https://files.consumerfinance.gov/f/201506_cfpb_order-syndicated.pdf

The CFPB will continue to enforce federal laws to ensure accuracy in credit reporting and debt collection. Consumers should check their credit report for inaccuracies at least once a year. Consumers can order a free credit report once every 12 months from AnnualCreditReport.com .

Tips for consumers on how to deal with medical debt can be found at: https://files.consumerfinance.gov/f/201412_cfpb-7-ways-to-keep-medical-debt-in-check.pdf