Debt Collection Agency: In a dramatic regulatory showdown, the Consumer Financial Protection Bureau (CFPB) has wielded its authority, compelling Commonwealth Financial Systems, a Pennsylvania-based medical debt collection agency, to cease operations. The decisive move follows the CFPB’s determination of illicit collection practices by the company.
According to the CFPB’s investigation, Commonwealth Financial Systems was found wanting in its failure “to conduct reasonable investigations of disputed debts” and neglect in informing consumer reporting companies about disputed information. The company was further accused of persisting in collecting disputed debts without proper documentation. These infractions were identified as breaches of the Fair Credit Reporting Act and the Fair Debt Collection Practices Act.
The repercussions for Commonwealth Financial Systems are severe. The CFPB’s directive mandates an immediate shutdown, prohibiting the company from participating in any debt collection activities, debt buying, debt selling, and consumer reporting activities. Additionally, the company must instruct all consumer reporting agencies to expunge collection accounts associated with the information provided by Commonwealth.
Adding financial sting to the regulatory action, the debt collection agency is slapped with a $95,000 fine payable to the CFPB‘s victim compensation fund.
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This regulatory move aligns with the CFPB’s broader mission to address challenges related to medical debt. In a bold move announced in September, the agency expressed its intent to propose a rule removing medical bills from credit reports.
The rationale behind this initiative is rooted in the recognition that medical bills hold limited predictive value in credit decisions. The proposed rule, expected to emerge next year, could have sweeping implications, preventing credit reporting agencies nationwide from including medical debt and collection information in reports used for underwriting decisions.
CFPB Director Rohit Chopra emphasized the significance of this initiative, stating, “When someone gets sick, they should be able to focus on getting better, rather than fighting debt collectors trying to extort them into paying bills they may not even owe.”
While the CFPB spearheads these efforts, some states are taking proactive measures. New York recently enacted legislation prohibiting the collection of medical debt by credit reporting agencies and its inclusion in consumer credit reports. Colorado has followed suit with a similar ban. These state-level actions underscore the growing awareness and regulatory response to the challenges posed by medical debt within the credit reporting landscape.
Our Reader’s Queries
Is it worth using a debt collection agency?
Debt collection is a quick way to recover debts and can save you time. A polite and professional debt collection agency may help you retain your customer, which is unlikely if you resort to legal action. If your customer still refuses to pay, the agency can hire solicitors on your behalf. Utilizing debt collection services can be a smart move for businesses looking to recover outstanding debts.
What happens if your debt goes to a collection agency?
In the event of a worst-case scenario, the agency may resort to garnishing your wages or seizing your property. However, it’s important to note that these extreme measures can only be taken if the contract you signed with the original creditor and state law permit them.
What are 3 things that a debt collection agency Cannot do?
As per the law, debt collectors are prohibited from harassing or abusing you. This means they cannot use foul language, threaten to harm you or your property illegally, or falsely threaten you with actions they have no intention of taking. Additionally, they are not allowed to make repeated calls in a short span of time to annoy or harass you. Remember, you have the right to be treated with respect and dignity, even if you owe money.
What does a debt collection agency do?
A debt collector is someone who specializes in collecting debts owed to others. Their main objective is to recover the outstanding amount from the debtor. If you’re receiving calls or messages from them, it’s probably because they’re trying to locate the person who owes the debt.