ARM executives are still spinning from the compliance whirlwind that hit the industry in 2014. From the perils of window envelopes to the near demise of credit reporting, executives agree they are living dangerously. So what can we learn from the events of 2014?  How can we bring order, safety and soundness to what most would agree has been a precarious time at best and a most dangerous time at its worst? The answer is – follow the trends.

Medical Debt Trends

On December 11, 2014, the CFPB conducted a field hearing in Oklahoma City on medical debt collection practices and the relationship between medical debt collection practices and consumer credit reporting in general. From my vantage point, the meeting was nothing short of a crystal ball regarding the future of medical debt collection. But for reasons that escape me, it is one that has gone largely unnoticed by the industry.

CFPB Director Richard Cordray once again shared the Bureau’s position that problems with debt collection are magnified when the debt collector reports a debt as a collections trade line to the national credit reporting companies. He characterized a collections trade line as a black mark – more like a scarlet letter − on any consumer or patient’s credit report, and explained how having a reported collections item or a severe delinquency can increase that patient or consumer’s interest rate, and affect their ability to borrow money.  Cordray’s prepared remarks should be a wakeup call to any medical debt collection agency owner. It should be noted first that the Director opened the hearing reiterating how debt collection practices have long been a source of frustration for many consumers, making it clear debt collection continues to be a top source of consumer complaints to the Consumer Bureau and to its sister agency, the Federal Trade Commission.

According to Cordray, those sentiments have resulted in a major new development, namely as part of the Bureau’s ongoing effort to improve the nation’s credit reporting system, the Bureau will now require the largest credit reporting companies to provide it with regular, standardized accuracy reports, specifying the number of times consumers dispute information on their credit reports during a reporting period, along with furnishers with the most disputes, industries with the most disputes, and furnishers with particularly high dispute rates relative to their peers. To learn more about the CFPB’s view of medical debt collections and changes that will impact the collection of medical debt, visit my blog.

Since the hearing on December 11, the three major credit bureaus, Transunion, Experian and Equifax, in collaboration with the attorney general from New York and other state attorneys general, announced a National Consumer Assistance Plan. This plan includes changes to reporting consumers’ medical debts and will enhance their ability to collect complete and accurate consumer information and will provide consumers more transparency and a better experience interacting with credit bureaus about their credit reports,

During discussions over recent months, the New York attorney general and other state attorneys general allowed the credit reporting agencies to collaborate in an unprecedented manner to share industry best practices and develop a plan that will offer consistent and meaningful benefits to consumers, according to TransUnion’s press release. Moreover, “the National Consumer Assistance Plan focuses on enhancements in two primary areas: consumer interaction with national credit reporting agencies and data accuracy and quality. In particular, medical debts won’t be reported until after a 180-day waiting period to allow insurance payments to be applied. The credit reporting agencies will also remove previously reported medical collections that have been or are being paid by insurance from consumers’ credit reports.”

The question is whether this all this collaboration between the credit reporting agencies and the state attorneys general will be enough. To say it differently, from the CFPB’s position, is it lipstick on a pig? The CFPB is committed to protecting consumers and their data. It recently published a report on credit reporting and the future for data furnishers does not look bright. In my opinion, the cost of being a data furnisher will soon become too high for collection agencies and the creditors will assume the role entirely. If your agency furnishers consumer data to the credit reporting agencies, you will want to follow one of two paths. Either discontinue furnishing consumer data entirely or ensure your policies and procedures include pre-report four point consumer identification criteria, elaborate, dispute specific investigation procedures and a specialized team off credit reporting quality assurance professionals. If you assume the later, recognize you are in the sights of the CFPB and your consumer complaint and dispute data as presented on the CFPB’s complaint portal will attract attention.