CFPB Finds Failures in Loan Collection and Medical Credit Cards
The companies collecting Americans’ student loans, auto loans and medical payments have some work to do. That’s according to a report issued Tuesday (July 2) by the Consumer Financial Protection Bureau (CFPB), which found numerous failures in student and auto loan servicing, deceptive and abusive debt collection practices, and complaints centered on credit cards offered by dental and medical […]
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The companies collecting Americans’ student loans, auto loans and medical payments have some work to do.
That’s according to a report issued Tuesday (July 2) by the Consumer Financial Protection Bureau (CFPB), which found numerous failures in student and auto loan servicing, deceptive and abusive debt collection practices, and complaints centered on credit cards offered by dental and medical practices.
“Loan servicers and debt collectors harm borrowers when they fail to provide required information, create barriers to customer assistance, or harass people about their debts,” said CFPB Director Rohit Chopra. “The CFPB is working to ensure servicers, debt collectors, and other financial service providers follow the law to protect consumers.”
According to the report, the CFPB found instances where auto loan servicers mishandled consumers’ final loan payments, as well as examples of student loan servicers creating “excessive barriers to assistance,” or provided inaccurate information about benefit forms.
In addition, the regulator also uncovered cases of debt collectors that violated laws such as the Fair Debt Collection Practices Act by misleading borrowers and in some cases harassing them.
“Examiners uncovered instances of collectors using aggressive or verbally abusive language, including to consumers unable to pay due to a recent hospitalization,” the report said.
Lastly, the CFPB examination found a “significant number of consumer complaints” on how dentists and other healthcare providers promoted or sold medical credit cards to their patients, by misrepresenting things like “deferred interest” promotions or pressuring consumers to open these cards while undergoing treatment.
The report comes on the heels of a new CFPB proposal that would prevent credit reporting companies from sharing medical debts with lenders and block card issuers and other lenders from making decisions based on medical information.
“We expect that Americans with medical debt on their credit reports will see their credit scores rise by 20 points, on average, if today’s proposed rule is finalized,” the CFPB said.
As PYMNTS wrote recently, the implication is that more credit (and even mortgages) would be extended to more consumers as $88 billion in medical debt would vanish from those reports.
One critic of the proposal is Rep. Patrick McHenry, the North Carolina Republican who heads the House Financial Services Committee.
He said last month that removing medical debt from credit reports “will have a negative impact on our credit and healthcare systems.”
“It is badly misguided to remove consequences for consumers who do not pay a debt by wiping out an entire category of debt from credit reports,” McHenry said.
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