Debt Collection Practices (Regulation F); Deceptive and Unfair Collection of Medical Debt, 80715-80724 [2024-22962]
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Rules and Regulations
Federal Register
Vol. 89, No. 193
Friday, October 4, 2024
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10 CFR Part 2
[NRC–2023–0210]
RIN 3150–AL09
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On August
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procedure to improve access to
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technology neutral, to delete an obsolete
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SUPPLEMENTARY INFORMATION:
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rule. Therefore, this direct final rule will
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Dated: October 1, 2024.
For the Nuclear Regulatory Commission.
Cindy Bladey,
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[FR Doc. 2024–23015 Filed 10–3–24; 8:45 am]
BILLING CODE 7590–01–P
CONSUMER FINANCIAL PROTECTION
BUREAU
12 CFR Part 1006
Debt Collection Practices (Regulation
F); Deceptive and Unfair Collection of
Medical Debt
Consumer Financial Protection
Bureau.
ACTION: Advisory opinion.
AGENCY:
The Consumer Financial
Protection Bureau (CFPB) is issuing this
advisory opinion to remind debt
collectors of their obligation to comply
with the Fair Debt Collection Practices
Act (FDCPA) and Regulation F’s
prohibitions on false, deceptive, or
misleading representations or means in
connection with the collection of any
medical debt and unfair or
unconscionable means to collect or
attempt to collect any medical debts.
DATES: This advisory opinion is
applicable as of December 3, 2024.
FOR FURTHER INFORMATION CONTACT:
George Karithanom, Regulatory
Implementation & Guidance Program
Analyst, Office of Regulations, at 202–
435–7700 or at: https://reginquiries.
consumerfinance.gov/. If you require
this a document in an alternative
electronic format, please contact CFPB_
Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Executive Summary
The CFPB is issuing this advisory
opinion through the procedures for its
Advisory Opinions Policy.1 Refer to
those procedures for more information.
This advisory opinion explains that
debt collectors are strictly liable under
the FDCPA and Regulation F (12 CFR
part 1006) for engaging in the following
1 85
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unlawful practices when collecting
medical bills:
Æ Collecting an amount not owed
because it was already paid. This
includes instances when a bill was
already fully or partially paid by
insurance or a Government payor.
Æ Collecting amounts not owed due to
Federal or State law. This includes
where law prohibits obligating a person
on certain debts. For example, a State
workers’ compensation scheme may
make employers or insurers responsible
for qualifying medical expenses, rather
than the patients. In addition, the
Nursing Home Reform Act prohibits
nursing homes from requiring third
parties to pay for a patient’s expenses in
certain circumstances.
Æ Collecting amounts above what can
be charged under Federal or State law.
This includes, for example, collecting
amounts that exceed limits in the No
Surprises Act. It also includes collection
of amounts that exceed a State’s
common law remedies for claims when
there is no express contract.
Æ Collecting amounts for services not
received. This includes ‘‘upcoding’’
where a patient is charged for medical
services that are more costly, more
extensive, or more complex than those
actually rendered.
Æ Misrepresenting the nature of legal
obligations. This includes collecting on
uncertain payment obligations that are
presented to consumers as amounts that
are certain, fully settled, or determined.
Æ Collecting unsubstantiated medical
bills. Debt collectors must have a
reasonable basis for asserting that the
debts they collect are valid and the
amounts correct. Debt collectors may be
able to satisfy this requirement by
obtaining appropriate information to
substantiate those assertions, consistent
with patients’ privacy. This information
could include payment records
(including from insurance); records of a
hospital’s compliance with any
applicable financial assistance policy;
copies of executed contracts or, in the
absence of express contracts,
documentation that the creditor can
make a prima facie claim for an alleged
amount under State law (e.g.,
‘‘reasonable’’ or ‘‘market rates’’).
This advisory opinion also interprets
the meaning of ‘‘in default’’ for purposes
of FDCPA section 803(6)(F)(iii) in the
medical debt context to be determined
by the terms of any agreement between
the consumer and the medical provider
under applicable law governing the
agreement.
II. Background
Medical debt is a major burden for
many Americans. Recent estimates
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place total medical debt owed by people
in the United States at $220 billion.2
Medical debt is known to
disproportionately impact young and
low-income adults, Black and Hispanic
people, veterans, older adults, and
people in the Southern United States.3
Medical debt is unique because
consumers rarely plan to take on
medical debt or choose among providers
based on price. Most medical debt arises
from acute or emergency care.4 In many
cases, patients lack the ability to
substantively comparison-shop between
medical service providers due to
emergency need, restrictive insurance
networks, price opacity, or limited
provider availability.5 This leaves many
patients subject to the pricing and
policies of the medical service providers
available to them.
Healthcare providers send medical
bills to consumers to obtain
compensation for care rendered to
patients. In some cases, providers and
patients enter into express contractual
relationships, which may define
patients’ payment obligations or
providers’ pricing for the care. Yet
contracts between providers and
patients may still be vague, as some do
not define specific prices for the care
provided.6 In other cases, such as in
emergency settings or where
independent contractors or provider
groups are involved (e.g., lab work or
anesthesiology), consumers may not
have any contractual relationship with a
medical provider that provides care and
then sends a bill.7
2 Shameek Rakshmit et al., The Burden of Medical
Debt in the United States, KFF (Feb. 12, 2024),
https://www.kff.org/health-costs/issue-brief/theburden-of-medical-debt-in-the-united-states/#:∼:
text=This%20analysis%20of%20government%20
data,debt%20of%20more%20than
%20%2410%2C000.
3 CFPB, Medical Debt Burden in the United States
at 2 (Mar. 1, 2022), https://www.consumer
finance.gov/data-research/research-reports/
medical-debt-burden-in-the-united-states/.
4 See Lunna Lopes et al., Health Care Debt in the
U.S.: The Broad Consequences of Medical and
Dental Bills, KFF (June 16, 2022), https://
www.kff.org/report-section/kff-health-care-debtsurvey-main-findings/ (finding that 50 percent of
the people in the United States who have medical
debt have it because of emergency care and 72
percent have it because of acute care).
5 CFPB, Medical Debt Burden in the United
States, at 3 (Mar. 1, 2022), https://www.consumer
finance.gov/data-research/research-reports/
medical-debt-burden-in-the-united-states/.
6 George A. Nation III, Contracting for Healthcare:
Price Terms in Hospital Admission Agreements, at
106, 124 Dick. L. Rev. 91 (2019) (describing how it
is ‘‘very common’’ for admissions agreements to not
include exact prices).
7 Id. at 92 (‘‘self-pay patients, who enter the
hospital through the emergency department, simply
lack capacity to contract due to the rushed, stressful
and tension-laden emergency circumstances’’). As
described below, the issue of whether this
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Consumers consistently report being
confused about medical billing
practices.8 One reason for this is the
variation in how medical providers bill
their patients. In most cases, medical
providers charge different rates for the
same services to different payors, for
example charging patients far more than
what Medicare would pay for a given
procedure if the patient is not covered
by Medicare.9 This, in part, stems from
the fact that the pricing of medical
services is heavily negotiated between
providers and certain institutional
payors such as insurance companies,
and set by Government programs like
Medicare and Medicaid. As a result,
healthcare providers are incentivized to
initially set high list prices as starting
offers in negotiations with insurers.10 As
a result, uninsured and out-of-network
patients are often charged much higher
prices than those ultimately agreed to
with insurers for patients in their
networks.11 Even within network, prices
sometimes vary by facility or
department.12 These rates often vastly
exceed the cost of providing care.13
Research has also shown that healthcare
markups are higher at hospitals with
constitutes an implied contract is a matter of State
law.
8 See CFPB, Medical Debt Burden in the United
States, at 3 (Mar. 1, 2022), https://www.consumer
finance.gov/data-research/research-reports/
medical-debt-burden-in-the-united-states/
(‘‘medical billing and collections practices can be
confusing and difficult to navigate’’).
9 See Eric Lopez et al., How Much More Than
Medicare Do Private Insurers Pay? A Review of the
Literature, KFF (Apr. 15, 2020), https://www.kff.org/
medicare/issue-brief/how-much-more-thanmedicare-do-private-insurers-pay-a-review-of-theliterature/; Frank Griffin, Fighting Overcharged Bills
from Predatory Hospitals, 51 ARIZ. ST. L.J. 1003
(2019).
10 Hospitals generally have no limit on their
‘‘chargemaster’’ rate, the rate they initially charge
most private payors, and chargemaster rates are
typically significantly higher than the actual cost of
services rendered. See National Nurses United,
Fleecing Patients: Hospitals Charge Patients More
Than Four Times the Cost of Care’’ (Nov. 2020),
https://www.nationalnursesunited.org/sites/default/
files/nnu/graphics/documents/1120_
CostChargeRatios_Report_FINAL_PP.pdf.
11 See Jennifer Tolbert et al., Key Facts about the
Uninsured Population, KFF (Dec. 18, 2023), https://
www.kff.org/uninsured/issue-brief/key-facts-aboutthe-uninsured-population/.
12 See Matthew Panhans et al., Prices for Medical
Services Vary Within Hospitals, but Vary More
Across Them, Medical Care Research and Review
78(2), 157 (June 19, 2019); Xu, Tim, Angela Park
and Ge Bai, Variation in Emergency Department vs
Internal Medicine Excess Charges in the United
States,’’ JAMA Internal Medicine (2017), https://
pubmed.ncbi.nlm.nih.gov/28558093/.
13 See Ge Bai and Gerard F. Anderson, ‘‘Extreme
Markup: The Fifty US Hospitals With The Highest
Charge-To-Cost Ratios,’’ Health Affairs (June 2015),
https://www.healthaffairs.org/doi/full/10.1377/
hlthaff.2014.1414.
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more Black and Hispanic patients and at
investor-owned, for-profit hospitals.14
Further, healthcare providers
sometimes charge patients for
‘‘upcoded’’ services, or services more
expensive than what the consumer
actually received.15 A 2024 study found
that, from 2010–2019, the total of
upcoding expenses for Medicare Parts
A, B, and C was $656 million, $2.39
billion, and $10–15 billion,
respectively.16 Upcoding is relatively
widespread and has been estimated to
account for 5–10 percent of total
healthcare expenditures in the United
States.17
After an individual receives a medical
service, they and their insurer are billed,
if the individual is insured. Some
healthcare providers also market
medical payment products or other
external financing options to their
patients.18 In some cases, providers are
obligated by State or Federal laws to
perform certain affirmative functions
involving the medical bill or refrain
from specific collection actions.19 After
14 See CFPB, Medical Debt Burden in the United
States, at 11 (Mar. 1, 2022), https://www.consumer
finance.gov/data-research/research-reports/
medical-debt-burden-in-the-united-states/
(referencing Faiz Gani, et al., Hospital markup and
operation outcomes in the United States, Surgery
(July 2016), https://www.sciencedirect.com/science/
article/abs/pii/S0039606016300022?via%3Dihub;
Tim Xu, Angela Park, and Ge Bai, Variation in
Emergency Department vs Internal Medicine Excess
Charges in the United States, Jama Internal
Medicine (2017), https://pubmed.ncbi.nlm.nih.gov/
28558093/).
15 Medical care providers often calculate and
itemize charges for care using a standardized set of
codes. These codes indicate the various aspects of
care a patient received along with the type and
scope of that care. Typically, more serious, more
urgent, or more involved forms of care will incur
higher charges. If a medical provider designates an
aspect of a patient’s care with a code that denotes
a higher or more involved level of care than was
actually received, the provider is said to be
‘‘upcoding.’’
16 Keith Joiner, Jianjing Lin, and Juan Pantano,
Upcoding in medicare: where does it matter most,
Health Economics Review 14(1) (2024), https://
www.ncbi.nlm.nih.gov/pmc/articles/
PMC10759668/.
17 William Hsiao, Fraud and Abuse in Healthcare
Claims, California HHS (Jan. 2022), https://
www.chhs.ca.gov/wp-content/uploads/2022/01/
Commissioner-William-Hsiao-Comments-on-Fraudand-Abuse-in-Healthcare-Claims.pdf.
18 Consumers are increasingly using medical
credit cards and other financing options to pay for
medical care, and the CFPB has done significant
work studying and addressing this issue. See CFPB,
Medical Credit Cards and Financing Plans’’ (May 4,
2023), https://www.consumerfinance.gov/dataresearch/research-reports/medical-credit-cardsand-financing-plans/; see also Lorelei Salas,
Ensuring consumers aren’t pushed into medical
payment products’’ (June 18, 2024), https://
www.consumerfinance.gov/about-us/blog/ensuringconsumers-arent-pushed-into-medical-paymentproducts/; CFPB, Request for Information on
Medical Payment Products,’’ 88 FR 44281 (July 12,
2023).
19 Certain Federal laws, such as the No Surprises
Act and the Nursing Home Reform Act, limit
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any insurance payments or payment via
a medical payment product are
received, unpaid amounts, if any, are
collected by phone calls, letters, emails,
and offers of payment plans or
settlements.20 Hospitals and other
healthcare providers in the United
States are increasingly outsourcing
medical billing and collection activities
to third parties, such as ‘‘Revenue Cycle
Management’’ firms, which are often
funded by private equity.21 One
estimate projects the domestic market
for Revenue Cycle Management
companies to grow by 10.2 percent
annually until 2030.22 Unpaid medical
bills may also be assigned to more
traditional debt collectors, including
those that specialize in medical debt,
placed with an attorney for litigation, or,
more rarely, sold to a debt buyer.
The CFPB has observed and reported
on many issues with how debt
collectors collect medical debt in the
United States. For example, the CFPB
has brought enforcement actions against
debt collectors for collecting on
disputed medical debts without
adequate substantiation.23 The CFPB
has also previously described reports
from consumers who have received
collections notices for medical debts
they should or do not owe. Specifically,
consumers have reported receiving
collections notices for debts that have or
should have been covered by insurance,
government payors, hospital financial
assistance programs, or that the patient
collection activities for certain kinds of medical
debt. Non-profit hospitals may lose their non-profit
tax status if they fail to evaluate patients for
eligibility for financial assistance before the
hospital takes certain types of collection actions.
See 26 U.S.C. 501(r)(6). Some State laws similarly
limit medical debt collections activities. For
example, states have enacted additional
requirements that broaden the applicability of
hospital financial assistance, covering additional
services for those patients deemed eligible. See
Washington State Charity Care Law, RCW
70.170.060 (2024) (requiring non-profit hospitals to
provide charity care for patients and their
guarantors with incomes less than 300 percent of
the Federal poverty guidelines). Medicare and
Medicaid requirements also vary by State and may
limit medical debt collections activities.
20 See CFPB, Medical Debt Burden in the United
States, at 12 (Mar. 1, 2022), https://www.consumer
finance.gov/data-research/research-reports/
medical-debt-burden-in-the-united-states/.
21 See Jacqueline LaPointe, What’s Behind Private
Equity’s Interest in RCM Vendors, TechTarget (Mar.
5, 2024), https://www.techtarget.com/
revcyclemanagement/answer/Whats-BehindPrivate-Equitys-Interest-in-RCM-Vendors.
22 See Grand View Research, U.S. Revenue Cycle
Management Market Size, Share, and Trends
Analysis Report, https://www.grandview
research.com/industry-analysis/us-revenue-cyclemanagement-rcm-market.
23 See Consent Order, Commonwealth Fin. Sys.,
Inc., CFPB No. 2023–CFPB–0018 (Dec. 15, 2023);
Consent Order, Phoenix Fin. Servs., LLC, CFPB No.
2023–CFPB–0004 (June 8, 2023).
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has otherwise paid.24 Consumers also
have reported receiving collections
notices for debts they believe they do
not owe under State or Federal law.
Further, many debt collectors do not
have timely access to healthcare
providers’ billing and payment
information, increasing the likelihood
that the debt collector collects on an
amount that is not owed, such as a bill
that has already been paid.26 Many
consumers have reported difficulties
receiving verification of medical debts
for which they have received collections
notices.27 In some cases, debt collectors
either may not have or refuse to provide
to a consumer upon request proof of
insurance payments, documentation
confirming that the amount billed
complies with State law and other
affirmative collection requirements,
such as hospital financial assistance, or
other documents that would
demonstrate the validity of the debt and
the accuracy of the demanded amount.
The FDCPA’s protections are enforced
by the CFPB, by other Federal
regulators, by individual consumers,
and, under certain circumstances, by
States.28 And the CFPB is responsible
for issuing rules regarding the FDCPA.29
To the extent a person qualifies as a
‘‘debt collector’’ under the FDCPA and
its implementing Regulation F, that
person is subject to the FDCPA and
24 See CFPB, Fair Debt Collection Practices Act
CFPB Annual Report 2023 (Nov. 16, 2023); https://
www.consumerfinance.gov/data-research/researchreports/fair-debt-collection-practices-act-cfpbannual-report-2023/.
25 See CFPB, Fair Debt Collection Practices Act
CFPB Annual Report 2023 (Nov. 16, 2023), https://
www.consumerfinance.gov/data-research/researchreports/fair-debt-collection-practices-act-cfpbannual-report-2023/; CFPB, Nursing Home Debt
Collection (Sept. 9, 2022), https://www.consumer
finance.gov/data-research/research-reports/issuespotlight-nursing-home-debt-collection/; see also,
e.g., Complaint for Civil Penalties, Injunctive and
Other Relief, Washington v. Providence Health &
Services, No. 22–2–01754–6 SEA (King Cnty. Sup.
Ct. Feb. 24, 2024), ¶¶ 70–77 (alleging that hospital
system sent the accounts of patients it knew were
eligible for financial assistance under state law to
debt collectors).
26 John McNamara, Debt collectors re-evaluate
medical debt furnishing in light of data integrity
issues (Feb. 14, 2023), https://www.consumer
finance.gov/about-us/blog/debt-collectors-reevaluate-medical-debt-furnishing-in-light-of-dataintegrity-issues/.
27 See CFPB, Medical Debt Burden in the United
States, at 4 (Mar. 1, 2022), https://www.consumer
finance.gov/data-research/research-reports/
medical-debt-burden-in-the-united-states/.
28 15 U.S.C. 1692l, 1692k; see 87 FR 31940, 31941
(May 26, 2022) (explaining state authority to
address violations of the federal consumer financial
laws committed by ‘‘covered persons’’ and ‘‘service
providers’’ under the Consumer Financial
Protection Act).
29 12 U.S.C. 5481(12)(F), (H), 5512(b), 5514(c); 15
U.S.C. 1692l(d).
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Regulation F.30 The FDCPA and
Regulation F prohibit the use of ‘‘any
false, deceptive, or misleading
representation or means in connection
with the collection of any debt,’’ 31
including, for example, any false
representation of ‘‘the character,
amount, or legal status of any
debt.’’ 32 The FDCPA and Regulation F
also prohibit the use of ‘‘unfair or
unconscionable means to collect or
attempt to collect any debt,’’ 33
including, for example, the ‘‘collection
of any amount (including any interest,
fee, charge, or expense incidental to the
principal obligation) unless such
amount is expressly authorized by the
agreement creating the debt or permitted
by law.’’ 34 The CFPB reminds debt
collectors that these FDCPA
prohibitions interact with other Federal
and State laws in a variety of ways that
could create liability for debt collectors
operating in the medical debt market.
The CFPB also reminds debt
collectors that sections 1692e(2)(A) and
1692f(1) impose strict liability. First,
these two provisions include no scienter
requirement, in contrast to several
others that do.35 Second, the statute
differentiates between intentional and
unintentional violations.36 As many
courts have held,37 imposing strict
30 15 U.S.C. 1692a(6) (defining ‘‘debt collector’’);
12 CFR 1006.2(i) (same).
31 15 U.S.C. 1692e; 12 CFR 1006.18(a).
32 15 U.S.C. 1692e(2)(A); 12 CFR 1006.18(b)(2)(i).
33 15 U.S.C. 1692f; 12 CFR 1006.22(a).
34 15 U.S.C. 1692f(1); 12 CFR 1006.22(b).
35 See, e.g., 15 U.S.C. 1692e(8) (prohibiting
‘‘[c]ommunicating or threatening to communicate to
any person credit information which is known or
which should be known to be false’’) (emphasis
added); 15 U.S.C. 1692d(5) (prohibiting debt
collectors from ‘‘causing a telephone to ring or
engaging any person in telephone conversation
repeatedly or continuously with intent to annoy,
abuse, or harass’’) (emphasis added); 15 U.S.C.
1692j(a) (making it unlawful to ‘‘design, compile,
and furnish any form knowing that such form
would be used’’ to deceive consumers in a specified
way’’) (emphasis added).
36 See, e.g., 15 U.S.C. 1692k(b)(1) (including as a
factor for calculating statutory damages ‘‘the extent
to which [the debt collector’s] noncompliance was
intentional’’). Entities may also have an affirmative
defense to liability for violations described in this
advisory opinion, but only if they maintain
procedures that are reasonably designed to prevent
unintentional violations that are the result of bona
fide errors. See 15 U.S.C. 1692k(c) (providing
affirmative defense for violations if they are: (1)
‘‘not intentional,’’ (2) the result of ‘‘a bona fide
error,’’ and (3) occurred despite ‘‘the maintenance
of procedures reasonably adapted to avoid any such
error’’). Further, ‘‘the broad statutory requirement of
procedures reasonably designed to avoid ‘any’ bona
fide error indicates that the relevant procedures are
ones that help to avoid errors like clerical or factual
mistakes. Such procedures are more likely to avoid
error than those applicable to legal reasoning. . . .’’
Jerman v. McNellie, et al., 559 U.S. 573, 587 (2010).
37 Every Federal Circuit Court of Appeals to
address this issue has held that the FDCPA is a
strict liability statute. See, e.g., Vangorden v.
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liability for violations of these
provisions is therefore the best reading
of the plain language, consistent with
the statute’s overall structure, and
consonant with Congress’ intent.38
III. Collection of Debts Invalid Under
Law
A. Collection of Amounts Not Owed
Because Already Paid
Section 808(1) of the FDCPA
prohibits, in relevant part, the collection
of any amount ‘‘unless such amount is
expressly authorized by the agreement
creating the debt or permitted by
law.’’ 39 And section 807(2)(A) prohibits
any false representation of ‘‘the
character, amount, or legal status of any
debt.’’ 40
Under these provisions, debt
collectors must only collect or attempt
to collect the amount that a consumer,
in fact, owes at the time of a debt
collection action after all appropriate
deductions for partial payments by the
consumer or third parties are made. The
amounts due on a medical bill can often
be adjusted multiple times, in light of
payments made by consumers
themselves or by third parties, such as
insurers. Providers may also agree to
accept a reduced amount in full
satisfaction of the bill, or reduce the
amount billed pursuant to a financial
assistance policy or program.
Under the FDCPA, the ‘‘amount [ ]
expressly authorized by the agreement
creating the debt’’ refers only to the
remaining balance on a debt that is fully
owed by the consumer after any
payments that reduce the debt’s
remaining balance are deducted because
such payments reduce the amount that
the consumer is obligated to pay under
the original agreement. Accordingly,
seeking to collect an amount that does
not account for partial payments or
changes to the bill made by the provider
Second Round, Ltd. P’ship, 897 F.3d 433, 437–38
(2d Cir. 2018) (‘‘The FDCPA is ‘a strict liability
statute’ and, thus, there is no need for a plaintiff
to plead or prove that a debt collector’s
misrepresentation . . . was intentional.’’); Allen ex
rel. Martin v. LaSalle Bank, N.A., 629 F.3d 364, 368
(3d Cir. 2011) (‘‘The FDCPA is a strict liability
statute to the extent it imposes liability without
proof of an intentional violation.’’); Stratton v.
Portfolio Recovery Assocs., LLC, 770 F.3d 443, 448–
49 (6th Cir. 2014) (‘‘The FDCPA is a strict-liability
statute: A plaintiff does not need to prove
knowledge or intent.’’).
38 Congress enacted the FDCPA in 1977 to
‘‘eliminate abusive debt collection practices by debt
collectors, to ensure that those debt collectors who
refrain from using abusive debt collection practices
are not competitively disadvantaged, and to
promote consistent State action to protect
consumers against debt collection abuses.’’ Public
Law 95–109, sec. 802(e), 91 Stat. 874, 874 (codified
at 15 U.S.C. 1692(e)).
39 15 U.S.C. 1692f(1); 12 CFR 1006.22(b).
40 15 U.S.C. 1692e(2)(A); 12 CFR 1006.18(b)(2)(i).
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would violate the FDCPA’s prohibitions
against unfair or unconscionable debt
collection practices because the amount
has not been expressly agreed to. In
other words, once a partial payment has
been made toward an agreed-to amount,
collection or attempted collection of the
full amount without accounting for the
partial payment is collection of an
amount greater than that agreed to or
permitted by law. Such collection or
attempted collection would also violate
the FDCPA’s prohibitions against
deceptive or misleading debt collection
practices because it would misrepresent
the amount of the debt actually owed.41
Because payments toward a debt might
be made at any time, debt collectors are
responsible for ensuring that the correct
collection amount is sought during each
attempt at collection.
B. Collection of Amounts Not Owed Due
to Federal or State Law
Section 808(1) of the FDCPA
prohibits, in relevant part, the collection
of any amount ‘‘unless such amount is
expressly authorized by the agreement
creating the debt or permitted by
law.’’ 42 An ‘‘amount expressly
authorized by the agreement creating
the debt or permitted by law’’ means
only a debt that the consumer is legally
obligated to pay. If a Federal or State
law relieves consumers of the obligation
to pay for medical costs, in whole or in
part, then collection of those costs is not
‘‘permitted by law’’ but rather
prohibited by law. Thus, any amount
that a consumer is not obligated to pay
by operation of Federal or State law, is
not an ‘‘amount . . . permitted by law.’’
Nor is the amount collectible as an
‘‘amount [ ] expressly authorized by the
agreement creating the debt’’ since
contractual terms that contravene
Federal or State law are unenforceable
as contrary to public policy.43
41 See Vangorden v. Second Round, L.P., 897 F.3d
433, 437–38 (2d Cir. 2018) (consumer stated claim
under FDCPA sections 807 and 808 when debt
collector sought to collect debt that consumer had
already settled with creditor); Gonzalez v. Allied
Collection Servs., Inc., No. 216CV02909MMDVCF,
2019 WL 489093, at *8–9 (D. Nev. Feb. 6, 2019),
aff’d, 852 F. App’x 264 (9th Cir. 2021) (debt
collector violated FDCPA sections 807 and 808
when it sought to collect full amount of debt that
had been partially paid); see also Complaint for
Permanent Injunction and Other Equitable Relief,
FTC v. Midwest Recovery Systems, LLC, No. 12–
00182 (E.D. Mo. Nov. 25, 2020), https://
www.ftc.gov/system/files/documents/cases/01_-_
complaint.pdf (pleading violation of FDCPA section
807 where, among other things, ‘‘[t]he debt was
medical debt in the process of being re-billed to the
consumer’s medical insurance’’).
42 15 U.S.C. 1692f(1); 12 CFR 1006.22(b).
43 See Restatement (Second) of Contracts sec. 178
(‘‘A promise or other term of an agreement is
unenforceable on grounds of public policy if
legislation provides that it is unenforceable. . . .’’);
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A range of laws protect consumers
from the legal obligation to pay medical
bills in certain circumstances. For
example, a State workers’ compensation
scheme may provide that a medical
provider only has recourse against a
patient’s employer or workers’
compensation insurer for the treatment
of a work-related injury.44 And the
Federal Nursing Home Reform Act
prohibits, among other things, nursing
care facilities that participate in
Medicaid or Medicare from requesting
or requiring a third-party guarantee of
payment as a condition of admission,
expedited admission, or continued stay
in the facility, and thus nursing care
facilities cannot collect the debt from
third parties in violation of this law.45
A debt collector that collects or
attempts to collect a debt from a
consumer who is not legally obligated
on the debt by operation of State or
Federal law violates the FDCPA’s
prohibitions against unfair or
unconscionable debt collection
practices because the amount is not
expressly authorized by the agreement
creating the debt or permitted by law 46
see also, e.g., United States v. Blue Cross/Blue
Shield of Ala., 999 F.2d 1542, 1547 (11th Cir. 1993)
(‘‘The application of a regulatory statute that is
otherwise valid may not be defeated by private
contracts.’’) (citing Connolly v. Pension Benefit
Guaranty Corp., 475 U.S. 211, 224 (1986));
SodexoMAGIC, LLC v. Drexel Univ., 24 F.4th 183,
219–20 (3d Cir. 2022) (‘‘[A] voluntarily-agreed-to
contract term is enforceable unless a statute or the
common law specifically prevents enforcement of
that term.’’) (applying Pennsylvania law); Metcalfe
v. Grieco Hyundai LLC, 698 F. Supp. 3d 239, 2442
(D.R.I. 2023) (‘‘Because the [Rhode Island State
statute] explicitly allows collective actions, the
class action waiver provision in the Leasing
Agreement is unenforceable as against public policy
in Rhode Island.’’) (applying Rhode Island law).
44 See, e.g., Kottler v. Gulf Coast Collection
Bureau, Inc., 460 F. Supp. 3d 1282, 1293 (S.D. Fla.
2020), aff’d, 847 F. App’x 542 (11th Cir. 2021) (debt
collector violated section 807(2)(A) when it
attempted to collect a debt for which consumer had
pending workers’ compensation claim); Young v.
NPAS, Inc., 361 F. Supp. 3d 1171, 1196 (D. Utah
2019) (debt collector violated FDCPA sections
807(2)(A) and 808(1) when it attempted to collect
a debt that consumer did not owe under Utah
workers’ compensation law); Raytman v. Jeffrey G.
Lerman, P.C., No. 17 CIV. 9681 (KPF), 2018 WL
5113952, at *5–6 (S.D.N.Y. Oct. 19, 2018)
(consumer stated claim for violations of FDCPA
sections 807 and 808 when debt collector sought to
collect debt that consumer did not owe under New
York Medicaid payment rules).
45 See generally CFPB Circular 2022–05: Debt
collection and consumer reporting practices
involving invalid nursing home debts (Sept. 8,
2022), available at: https://www.consumer
finance.gov/compliance/circulars/circular-2022-05debt-collection-and-consumer-reporting-practicesinvolving-invalid-nursing-home-debts/.
46 This may be the case even if terms of the
contract creating the debt would make a given
consumer liable. See, e.g., Tuttle v. Equifax Check,
190 F.3d 9, 13 (2d Cir. 1999) (noting that it would
be a violation of section 1692f(1) to collect a fee if
State law expressly prohibits such fees, even if the
contract allows it).
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and also violates the FDCPA’s
prohibitions against deceptive or
misleading debt collection practices
because it would falsely represent the
amount of the debt. Debt collectors are
responsible for ensuring that they do not
collect or attempt to collect debts that
are not legally owed by the relevant
consumer, whether by operation of State
or Federal law.
C. Collection of Amounts Above That
Permitted by Federal or State Law
Section 807 prohibits any false
representation of ‘‘the character,
amount, or legal status of any
debt.’’ 47 Section 808(1) of the FDCPA
prohibits, in relevant part, the collection
of any amount ‘‘unless such amount is
expressly authorized by the agreement
creating the debt or permitted by
law.’’ 48 Debt collectors would violate
the FDCPA when they collect or attempt
to collect amounts that exceed limits or
calculation methods provided by State
or Federal law, thus misrepresenting the
consumer’s obligation to pay the debt
and collecting or attempting to collect
an amount not permitted by law. Here
again, a range of laws may operate to
limit or control the amount that a
medical provider may bill a patient in
certain circumstances. For example, the
Federal No Surprises Act of 2020
restricts the charges that certain medical
providers can bill to certain patients
depending on a number of factors such
as their insured status and whether a
billing provider is in- or out-of-network
for a patient’s health insurance plan.49
As the CFPB has previously stated, the
FDCPA’s prohibition on
misrepresentations includes
misrepresenting that a consumer must
pay a debt stemming from a charge that
exceeds the amount permitted by the No
Surprises Act.50 Thus, for example, a
debt collector who represents that a
consumer owes a debt arising from outof-network charges for emergency
services would violate the prohibition
on misrepresentations if those charges
exceed the amount permitted by the No
Surprises Act. Relatedly, if a Federal
law limits or caps the amount a
consumer may be billed in a given
circumstance, then collection or
attempted collection of an amount over
the relevant limit or cap would run
afoul of the FDCPA’s prohibition on
47 15
U.S.C. 1692e(2)(A); 12 CFR 1006.18(b)(2)(i).
U.S.C. 1692f(1); 12 CFR 1006.22(b).
49 See Requirements Related to Surprise Billing;
Part II, 86 FR 55980 (Oct. 7, 2021).
50 See CFPB Bulletin 2022–01: Medical Debt
Collection and Consumer Reporting Requirements
in Connection With the No Surprises Act, 87 FR
3025, 3026 (Jan. 20, 2022).
48 15
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80719
collection of amounts unless permitted
by law.
State law may also provide a limit on
the allowable amount that a medical
provider can bill a consumer. Many
States have enacted laws to protect
consumers from unexpected medical
bills in much the same vein as the
Federal No Surprises Act and which
may provide additional protections
beyond those in the Federal law.51
While State laws vary considerably,
many include limits on the amounts
that medical providers, both emergency
and non-emergency, can bill certain
consumers and provide specific
standards to guide billing
calculations.52 As with the Federal
statute, where one of these State laws
applies to limit the amount that a
medical provider can bill a consumer, a
debt collector that collects or attempts
to collect an amount that exceeds the
relevant limits would violate the
FDCPA’s prohibition against
misrepresenting the amount of the debt
owed and the prohibition against
collecting or attempting to collect an
amount unless permitted by law.
Finally, State contract or common law
may also provide limits on the
allowable amount that a medical
provider can bill a consumer in certain
circumstances. For example, consumers
are sometimes billed by medical service
providers that the consumer did not
enter into an express agreement with
prior to receiving the services. In these
circumstances, some courts have held
that State contract law provides that the
relationship between the consumer and
provider is governed by an implied-infact agreement, the price term of which
may be limited to a ‘‘reasonable’’
amount.53 Courts have also interpreted
some States’ laws to require that when
an express contract for medical services
contains no explicit price term, a
‘‘reasonable’’ price term should be
inserted.54 Courts have even invalidated
51 See State Surprise Billing Laws and the No
Surprises Act, accessible at: https://www.cms.gov/
files/document/nsa-state-laws.pdf, at 2 (‘‘The No
Surprises Act supplements State surprise billing
law protections; it does not replace them.’’).
52 See, e.g., Conn. Gen. Stat. secs. 38a–477aa, 20–
7f; Mich. Comp. Laws sec. 333.24507.
53 See, e.g., Leslie v. Quest Diagnostics, Inc., No.
CV171590ESMAH, 2019 WL 4668140, at *7 (D.N.J.
Sept. 25, 2019) (‘‘Plaintiffs sufficiently allege that
Quest’s chargemaster prices are unreasonable based
on Quest’s internal cost structure, the usual and
customary rates charged, and payments received for
these services by both Quest and other laboratory
testing services.’’).
54 Colomar v. Mercy Hosp., Inc., No. 05–22409–
CIV–SEITZ, 2007 WL 2083562, at *4 (S.D. Fla. July
20, 2007) (‘‘Florida law is settled that when the
price term in a contract for hospital services is left
‘open’ or undefined, then the courts will infer a
reasonable price.’’).
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explicit price terms in contracts when
those terms were determined to be
unconscionable under State law, often
limiting the price that must be paid to
some ‘‘reasonable’’ amount as a
remedy.55
The CFPB reminds debt collectors
that State law may determine or limit
the amount that medical providers may
charge to consumers, and that collection
of or an attempt to collect an amount
that exceeds the allowable amount
under State law (including applicable
State case law) may misrepresent the
amount of the debt in violation of the
FDCPA. Collection or an attempt to
collect an amount that exceeds the
allowable amount under State law may
also violate the prohibition against
collecting or attempting to collect an
amount unless permitted by law. These
State law cases make clear that the
collection amount that is ‘‘permitted by
law’’ may be much less than the amount
asserted to be owed by the medical
provider. Debt collectors are responsible
for ensuring that they do not collect or
attempt to collect amounts above that
which the relevant consumer(s) can be
charged under applicable State and
Federal laws. Because, as noted above,
the FDCPA imposes strict liability, debt
collectors should ensure that they only
collect or attempt to collect amounts
that may be charged under applicable
State law.56
D. Collection of Amounts Not Owed
Because Services Not Received
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Section 808(1) of the FDCPA
prohibits, in relevant part, the collection
of any amount ‘‘unless such amount is
expressly authorized by the agreement
creating the debt or permitted by
law.’’ 57 And section 807(2)(A) prohibits
any false representation of ‘‘the
character, amount, or legal status of any
55 See, e.g., Ahern v. Knecht, 563 NE2d 787, 793
(Ill. App. 1990) (price term in contract for appliance
repair was unconscionable and repairman would be
allowed only ‘‘the actual value of his services’’);
Toker v. Westerman, 274 A.2d 78, 81 (N.J. Super.
1970) (price term in contract for sale of refrigerator
was unconscionably high; court refused to enforce
term, relieving the defendant-consumer from
obligation to pay remaining balance owed);
Restatement (Second) of Contracts sec. 208—
Unconscionable Contract or Term, cmt. g (1981)
(‘‘the offending party [to an unconscionable
contract] will ordinarily be awarded at least the
reasonable value of performance rendered by him’’);
see also De La Torre v. CashCall, Inc., 422 P.3d
1004, 1009 (Cal. 2018) (‘‘As long established under
California law, the doctrine of unconscionability
reaches contract terms relating to the price of goods
or services exchanged.’’).
56 Debt collectors may be able to minimize risk of
misrepresentations in these circumstances by
working with client medical providers to ensure
that pricing and billing practices comply with
applicable legal limits.
57 15 U.S.C. 1692f(1); 12 CFR 1006.22(b).
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debt.’’ 58 As relevant here, the ‘‘amount
[] expressly authorized by the agreement
creating the debt’’ means amounts due
for services actually rendered under the
relevant agreement. Similarly, a ‘‘false
representation of the . . . amount . . .
of any debt’’ includes a representation
to a consumer that they owe an amount
for services that have not been rendered.
Courts have held that it is a violation
of the FDCPA for debt collectors to
collect or attempt to collect amounts for
services that were not rendered.59
Medical bills, especially for services
rendered in hospitals, are frequently
calculated by reference to a
standardized set of codes that indicate
the type and degree of medical care a
patient received. Typically, providers
will seek greater compensation for more
serious, more urgent, or more involved
forms of care. As noted above, if a
medical provider designates an aspect of
a patient’s care with a code that denotes
a higher or more involved level of care
than was actually received, the provider
is said to be ‘‘upcoding.’’ 60
A debt collector that collects or
attempts to collect a debt that has been
‘‘upcoded’’ violates the FDCPA’s
prohibitions against unfair or
unconscionable debt collection
practices because the amount is not
expressly authorized by the agreement
for services actually rendered and also
violates the FDCPA’s prohibitions
against deceptive or misleading debt
collection practices because it would
falsely represent the amount of the debt.
Debt collectors are responsible for
ensuring that they do not collect or
attempt to collect amounts that have
been charged for services that have not
actually been rendered.61
58 15
U.S.C. 1692e(2)(A); 12 CFR 1006.18(b)(2)(i).
v. Statebridge Co., LLC, No. CIV.A. 14–
6366 JLL, 2014 WL 7336787, at *3 (D.N.J. Dec. 22,
2014) (consumer stated claim under FDCPA section
807(2)(A) when debt collector attempt to collect
debt for tax and insurance payments not actually
made by creditor); Fitzsimmons v. Rickenbacker
Fin., Inc., No. 2:11–CV–1315 JCM PAL, 2012 WL
3994477, at *3 (D. Nev. Sept. 11, 2012).
60 See Centers for Medicare & Medicaid Servs.,
Common Types of Healthcare Fraud, at 2 (2016),
https://www.cms.gov/files/document/overview
fwacommonfraudtypesfactsheet072616pdf.
(‘‘Upcoding is a term that is not defined in []
regulations but is generally understood as billing for
services at a higher level of complexity than the
service actually provided or documented in the
file.’’); U.S. ex rel. Harris v. Bernad, 275 F. Supp.
2d 1, 4 (D.D.C. 2003) (‘‘The government alleges that
the defendants engaged in ‘upcoding’—that is,
submitted claims with CPT codes that represented
a level of care higher than the defendants actually
provided.’’).
61 Nothing in this Advisory Opinion should be
interpreted to mean that in order to mitigate risk of
violations of the FDCPA debt collectors should
obtain access to documents beyond relevant patient
contracts or bills. Again, debt collectors may be able
to minimize risk of misrepresentations in these
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IV. Misrepresentation of the Nature of
Legal Obligations
Section 807(2)(A) prohibits any false
representation of ‘‘the character,
amount, or legal status of any debt.’’ A
‘‘false representation of the . . . legal
status of any debt’’ includes
representations to a consumer about the
legal nature of the provider’s claim for
payment and the legal rights and
obligations that arise under that
particular type of claim.
As described above, there are a variety
of ways in which medical bills and the
amounts demanded therein differ from
consumer transactions where a
consumer agrees to a known and
definite price in exchange for goods or
services. In medical billing, consumers
sometimes enter agreements that have
undefined price terms or are billed by
providers with whom the consumer has
never entered into an express
agreement. The legal basis for a
provider’s claim for payment in such
circumstances therefore also varies, and
each such basis may have different
implications for a consumer’s legal
rights or obligations. For example,
under some States’ laws, providers
sometimes demand payment for services
on the basis of an account stated theory,
whereby a party presents another with
an alleged statement of account and a
legal obligation to pay that amount
arises if the receiving party does not
object within a reasonable period of
time.62 The inverse is also true under
these State’s laws: an account stated
claim cannot be maintained if the
receiving party disputes the alleged
statement of account within a
reasonable period of time before making
payments on the account.63
However, the variations in medical
billing and the associated legal
consequences are not readily apparent
or known to most consumers.64 Most
circumstances by working with client medical
providers to ensure appropriate billing practices.
62 See, e.g., Univ. of S. Ala. v. Bracy, 466 So.2d
148, 150 (Ala. Civ. App. 1985) (stating elements of
account stated claim under Alabama law in medical
context); Egge v. Healthspan Servs. Co., No. CIV.
00–934 ADM/AJB, 2001 WL 881720, at *2 (D. Minn.
July 30, 2001) (elements of account stated claim
under Minnesota law in medical context).
63 See, e.g., Grandell Rehab. & Nursing Home, Inc.
v. Devlin, 809 N.Y.S.2d 481 at *3 (N.Y. Sup. Ct.
2005) (rejecting nursing home’s account stated
claim because, among other reasons, receiving
consumer disputed their liability and the amounts)
(citing Abbott, Duncan & Wiener v. Ragusa, 214
A.D.2d 412, 413 (N.Y. App. Div. 1995)).
64 When evaluating a claim under section 807 of
the FDCPA, courts apply the ‘‘least sophisticated
debtor’’ standard. See, e.g., Jensen v. Pressler &
Pressler, 791 F.3d 413, 420 (3d Cir. 2015) (applying
‘‘least sophisticated debtor’’ standard to evaluate
liability under section 807); McCollough v. Johnson,
Rodenburg & Lauinger, LLC, 637 F.3d 939, 952 (9th
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consumers understand a demand for
payment from a debt collector to mean
that they owe the full amount
demanded. The least sophisticated
consumer presented with a demand for
payment may believe that the full
demanded amount is legally owed.65 In
particular, a consumer may be unlikely
to know that, in the absence of an
express agreement and definite price
term, a debt collector’s demand for
payment may not accurately reflect the
consumer’s actual legal obligation to the
provider under State law.66
A debt collector that collects or
attempts to collect a debt where the
amount is not based on an express
contractual price term risks violating the
FDCPA’s prohibitions against deceptive
or misleading debt collection practices
if the debt collector gives the misleading
impression that the amount demanded
is final and that precise amount is
legally owed. Moreover, because, as
noted above, the FDCPA imposes strict
liability, debt collectors are responsible
for ensuring that they do not collect or
attempt to collect debts in a way that
deceives or misleads a consumer,
explicitly or impliedly, about the legal
status of the medical provider’s claim
and a consumer’s right to object to
claims, as appropriate; a debt collector
may misrepresent the legal status of the
debt even if the collector is relying on
Cir. 2011) (same); Jeter v. Credit Bureau, Inc., 760
F.2d 1168, 1177 n.11 (11th Cir. 1985) (same).
65 See, e.g., Miller v. Carrington Mortgage Servs.,
LLC, 607 B.R. 1, 5–6 (D. Me. 2019) (consumer
alleged fear that ‘‘he would never be free from
demands for payment’’ or that debt collector had
‘‘found a way of getting around the bankruptcy
discharge protections.’’); cf. Daugherty v.
Convergent Outsourcing, Inc., 836 F.3d 507, 513
(5th Cir. 2016) (‘‘[A] collection letter seeking
payment on a time-barred debt (without disclosing
its unenforceability) but offering a ‘settlement’ and
inviting partial payment (without disclosing the
possible pitfalls) could constitute a violation of the
FDCPA.’’); Buchanan v. Northland Grp., Inc., 776
F.3d 393, 399 (6th Cir. 2015) (consumer stated
claim under section 807(2)(A) when debt collector
offered to ‘‘settle’’ time-barred debt at a discount
and noting that rule under Michigan law that partial
payment revives a time-barred debt ‘‘is almost
assuredly not within the ken of most people,
whether sophisticated, whether reasonably
unsophisticated, or whether unreasonably
unsophisticated’’).
66 C.f. Shula v. Lawent, 359 F.3d 489, 491–92 (7th
Cir. 2004) (affirming finding of liability under
section 807 where debt collector attempted to
collect amount of court costs that were not in fact
awarded in State law action); Van Westrienen v.
Americontinental Collection Corp., 94 F. Supp. 2d
1087, 1101–02 (D. Or. 2000) (consumer stated claim
under section 807(2)(A) when debt collector’s
communications suggested that wage garnishment
or asset seizure would occur ‘‘within 5 days’’ when
such legal action was not procedurally possible in
that time span); Biber v. Pioneer Credit Recovery,
Inc., 229 F. Supp. 3d 457, 473–74 (E.D. Va. 2017)
(consumer stated claim under section 807(2)(A)
when debt collector threatened to garnish wages
without disclosing that it had not in fact taken
preliminary procedural steps required to do so).
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information provided by the medical
provider. When dealing with
uncertainty arising from the lack of
express agreement, debt collectors may
be able to minimize their risk of
engaging in violations by
communicating clearly and
conspicuously with consumers about
the legal status of the debt and the
amount owed, for example, as
appropriate, that an enforceable
payment obligation may not exist until
proven in court.
V. Substantiation of Medical Debts
Section 807(2)(A) prohibits any false
representation of ‘‘the character,
amount, or legal status of any debt.’’
When a debt collector makes a demand
for payment of a debt or otherwise
represents that a consumer owes a debt,
the collector makes an implied
representation that it has a reasonable
basis to assert the character, amount,
and legal status of the debt.67 A debt
collector violates the prohibition against
false representations if the collector has
no reasonable basis on which to
represent that the specific amount
demanded is due and legally collectible.
The many unique features of the
markets for medical care and services
present particularly acute risks of
uncertainty as to the ‘‘character,
amount, or legal status’’ of debts that are
incurred in these markets. As described
above, the health care market is
complex, variable, and opaque. Prices
charged by providers vary widely even
for the same treatment or procedure and
are often conditional, changing based on
factors that often cannot be known
before services are rendered. A variety
of State and Federal laws may impact a
consumer’s liability for payment, in
whole or in part, or for the amount that
may be charged. Billing and payment
are complicated by the involvement of
third-party payors such as insurers,
public compensation programs, or
tortfeasors. And the nature or legal basis
of a provider’s claim for payment may
be unclear, often due to a lack of express
agreements. While this level of
uncertainty may arise from the
inherently complex reality of medical
care and the broader heath care system,
it underscores the need for debt
collectors to properly substantiate the
character, amount, and legal status of
67 See Debt Collection Practices (Regulation F),
Final Rule, 85 FR 76734, 76857 (Nov. 30, 2020)
(codified at 12 CFR part 1006) (‘‘[I]it is clear that
a debt collector must have (or have access to)
records reasonably substantiating its claim that a
consumer owes a debt in order to avoid engaging
in deceptive or unfair collection practices in
violation of the FDCPA when it attempts to collect
the debt.’’).
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medical debt before they begin
collection, in accord with consumer’s
expectations that debt collectors have a
reasonable basis for their demands.68
Although a debt collector must be
able to substantiate claims regarding the
amount and validity of the debt made to
a consumer, including those made at the
outset of collection, the type and
amount of information that is necessary
to substantiate a particular
representation will vary depending
upon the claim itself, the circumstances
surrounding the claim, and the need to
observe patients’ privacy rights under
relevant law. The inherently uncertain
and conditional nature of the costs of
and payments for medical care means
that debt collectors should exercise
heightened care to ensure that they have
a reasonable basis to assert that the debt
is legally collectible and the specific
amount is owed. For example, consider
a debt collector that receives summary
information concerning accounts for
collection from a provider group that
operates within a hospital. An initial
reasonable step to substantiate the debts
prior to collection may include
obtaining any relevant patient
agreements or contracts executed by the
relevant patients. If, as is often the case,
there is no contract between patients
and the provider group, the debt
collector may need documents sufficient
to make a prima facie case for the
demanded amount under the applicable
State law. Consider another example
where a debt collector is onboarding a
hospital client. The debt collector may
reduce risk of liability if it has access to
full payment histories for the patient
accounts, including any payments from
third parties covering any portion of an
overall demanded amount, and to
confirm the hospital’s compliance with
any affirmative legal obligations, such as
requirements to assess consumers under
financial assistance policies if the
hospital is a non-profit 69 or otherwise
participates in financial assistance
programs, to ensure that there is a
reasonable basis for the demanded
amount.70
Regulators, including the CFPB, have
brought actions against debt collectors
for failing to substantiate collection
68 As noted above, nothing in this Advisory
Opinion should be interpreted to mean that in order
to mitigate risk of violations of the FDCPA debt
collectors are encouraged to obtain access to
documents beyond relevant patient contracts or
bills as permitted under applicable privacy laws.
69 See 26 U.S.C. 501(r).
70 This example is provided merely as an
illustration of the kinds of information that may be
necessary to properly substantiate debt collection
information in a given circumstance and is not
offered as a complete or exhaustive list that would
guarantee compliance in all circumstances.
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information for accuracy and
completeness before beginning
collection efforts when there were
indications that the information suffered
from a high degree of uncertainty or
unreliability.71 For example, many debt
collectors operate as ‘‘debt buyers,’’
purchasing large portfolios of debts from
creditors or other debt collectors at
significant discounts from the face value
of the underlying debts.72 These
‘‘portfolios’’ of debts may functionally
be little more than spreadsheets
containing purported information
concerning debts and may not be
accompanied by underlying contracts,
customer agreements, or other
documentation evidencing the existence
and amount of the debts.73 This
information may be facially unreliable,
such as when the sellers of the debt
explicitly disclaim its accuracy or
collectability or when it is readily
apparent that the information is
inaccurate.74 In these circumstances, the
CFPB and other regulators have alleged
that the debt collectors were on notice
that collecting or attempting to collect
the purported debts based on the
information in their possession could
lead to widespread or repeated
violations of section 807(2)(A).75
Proceeding to collect the purported
debts based on that unsubstantiated
information misrepresented to the
affected consumers that the collectors
had a reasonable basis for their
collection attempts.76 Importantly, this
misrepresentation did not rely on a
finding that the claimed amount was
incorrect—for which a debt collector
can be separately liable, see generally
section II, supra—but on their failure to
substantiate the validity and amounts of
the debts that were sought.
Debt collectors working with medical
debts are responsible for ensuring that
they possess a reasonable basis for
collecting or attempting to collect those
71 See, e.g., Complaint for Civil Penalties,
Injunctive and Other Relief, United States v. Asset
Acceptance, LLC, No. 12–00182 (M.D. Fla. Jan. 30,
2012), ECF No. 1 (Asset Acceptance Compl.);
Consent Order, Encore Capital Grp., Inc., CFPB No.
2015–CFPB–0022 (Sept. 9, 2015) (Encore Consent
Order); Consent Order, Portfolio Recovery Assocs.,
LLC, CFPB No. 2015–CFPB–0023 (Sept. 9, 2015)
(PRA Consent Order).
72 See Asset Acceptance Compl. ¶¶ 9–10; Encore
Consent Order, ¶ 22; PRA Consent Order, ¶ 24.
73 See Asset Acceptance Compl., ¶ 11; Encore
Consent Order, ¶ 23; PRA Consent Order, ¶ 27.
74 See Asset Acceptance Compl., ¶ 11–16, 49–52;
Encore Consent Order, ¶¶ 24–35; PRA Consent
Order, ¶¶ 28–32.
75 See Asset Acceptance Compl., ¶ 81–83; Encore
Consent Order, ¶ 112–114; PRA Consent Order,
¶ 103–105.
76 See Asset Acceptance Compl., ¶ 54–55; Encore
Consent Order, ¶ 45–47, 78–81, 103–105; PRA
Consent Order, ¶ 63–66, 94–96,.
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debts. Collecting or attempting to collect
medical debts without substantiation
violates section 807(2)(A).
VI. Defining Default Under the FDCPA
The prohibitions imposed by sections
807 and 808 of the FDCPA apply only
to ‘‘debt collectors.’’ 77 As relevant here,
Section 803 of the FDCPA defines ‘‘debt
collector’’ in two ways: (1) ‘‘any person
who uses any instrumentality of
interstate commerce or the mails in any
business the principal purpose of which
is the collection of any debts,’’ or (2) any
person ‘‘who regularly collects or
attempts to collect, directly or
indirectly, debts owed or due or
asserted to be owed or due another.’’ 78
The statute also provides a limited
number of exemptions from the
definition of ‘‘debt collector.’’ One of
those exemptions carves out of the
definition ‘‘any person collecting or
attempting to collect any debt owed or
due or asserted to be owed or due
another to the extent such activity . . .
concerns a debt which was not in
default at the time it was obtained by
such person.’’ 79 In the context of
medical debt collection, for purposes of
section 803(6)(F)(iii)’s exemption,
whether a debt is ‘‘in default’’ is
determined by the terms of any
agreement between the consumer and
the medical provider under applicable
law governing the agreement.80
77 15 U.S.C. 1692e (‘‘A debt collector may not use
any false, deceptive, or misleading representation or
means in connection with the collection of any
debt.) (emphasis added); 15 U.S.C. 1692f (‘‘A debt
collector may not use unfair or unconscionable
means to collect or attempt to collect any debt.’’)
(emphasis added).
78 15 U.S.C. 1692a(6). Section 803 also provides
that the term ‘‘debt collector’’ ‘‘includes any
creditor who, in the process of collecting his own
debts, uses any name other than his own which
would indicate that a third person is collecting or
attempting to collect such debts’’ as well as, ‘‘[f]or
the purpose of section 808(6), . . . any person who
uses any instrumentality of interstate commerce or
the mails in any business the principal purpose of
which is the enforcement of security interests.’’ 15
U.S.C. 1692a(6). The term ‘‘creditor’’ is defined as
‘‘any person who offers or extends credit creating
a debt or to whom a debt is owed, but such term
does not include any person to the extent that he
receives an assignment or transfer of a debt in
default solely for the purpose of facilitating
collection of such debt for another.’’ 15 U.S.C.
1692a(4).
79 15 U.S.C. 1692a(6)(F)(iii). The exemptions
under section 803a(6)(F)—including the exemption
for debt collection activity that ‘‘concerns a debt
which was not in default at the time it was obtained
by such person’’—explicitly apply only to persons
collecting or attempting to collect debts ‘‘owed or
due another.’’ Compare 15 U.S.C. 1692a(6)(F)
(exemption that references ‘‘owed or due another’’)
with 15 U.S.C. 1692a(6)(A)–(E) (exemptions that do
not use ‘‘owed or due another’’ language).
80 De Dios v. Int’l Realty & Invs., 641 F.3d 1071,
1074 (9th Cir. 2011). Outcomes for non-express
agreements may vary considerably under relevant
State law, and this Advisory Opinion takes no
position on the correct interpretation of those laws.
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The term ‘‘default’’ is not specifically
defined in the FDCPA, so the meaning
of the term should first be determined
by its ordinary meaning.81 ‘‘Default’’ is
commonly defined as the failure to
satisfy an agreement, promise, or
obligation, especially a failure to make
a payment when due.82 These
definitions are consistent with the
longstanding common law use of the
word as a party’s failure to perform
contractual obligations at the time they
come due.83 Further, applicable law—
typically State contract law—may
determine when obligations are due
under a contract.
However, some third-party firms
collecting on past-due medical bills
have argued that the bills were not in
default because the firm or the creditor
did not consider or treat the accounts as
in default until some later date.84 To the
contrary, under the plain meaning of
‘‘default,’’ when a ‘‘default’’ has
occurred for purposes of section
803(6)(F)(iii) with respect to medical
bills is determined based on the terms
of the relevant consumer-provider
81 See, e.g., Lawson v. FMR LLC, 571 U.S. 429, 440
(2014); see also, e.g., Taniguchi v. Kan Pac. Saipan,
Ltd., 566 U.S. 560, 566 (2012) (‘‘When a term goes
undefined in a statute, we give the term its ordinary
meaning.’’).
82 See, e.g., Default Merriam-Webster.com
Dictionary, https://www.merriam-webster.com/
dictionary/default/ (accessed Aug. 19, 2024)
(‘‘failure to do something required by duty or law
. . . a failure to pay financial debts’’; Default,
Black’s Law Dictionary (11th ed. 2019) (‘‘The
omission or failure to perform a legal or contractual
duty; esp., the failure to pay a debt when due.’’);
Default, Ballentine’s Law Dictionary (3d ed. 1969)
(‘‘Fault; neglect; omission; the failure to perform a
duty or obligation; the failure of a person to pay
money when due or when lawfully demanded.’’).
83 See, e.g., The Restatement (First) of Contracts
Index D80 (1932) (‘‘Default: See Breach of
Contract.’’); Restatement (Second) of Contracts sec.
235(2) (1981) (‘‘When performance of a duty under
a contract is due any non-performance is a
breach.’’); 23 Williston on Contracts sec. 63:16 (4th
ed.) (‘‘It is a material breach of a contract to fail to
pay any substantial amount of the consideration
owing under the contract.’’); Butler Mach. Co. v.
Morris Constr. Co., 682 NW2d 773, 778 (S.D. 2004)
(‘‘Morris was to make monthly payments of $5,547
and its failure to make such monthly payments
constituted a default under the terms of that
agreement.’’).
84 See Ward v. NPAS, Inc., 63 F.4th 576, 583–84
(6th Cir. 2023) (Though medical provider’s bill said
‘‘due on receipt’’ court considered evidence that
provider ‘‘didn’t treat Ward’s failure to pay
immediately as a breach’’ dispositive to the
question of whether debt was in default when
placed with third-party.); Prince v. NCO Fin. Servs.,
Inc., 346 F. Supp. 2d 744, 749 (E.D. Pa. 2004) (‘‘This
evidence of Capital One’s State of mind with regard
to whether the debt was in default is a satisfactory
initial showing that Capital One did not consider
Prince’s account to be ‘‘in default.’’); Roberts v.
NRA Grp., LLC, No. CIV.A. 3:11–2029, 2012 WL
3288076, at *6 (M.D. Pa. Aug. 10, 2012) (‘‘[W]hether
Plaintiff’s account was in default will be
determined by looking at the ‘state of mind’ of the
creditor to see whether the creditor considered the
debt to be in default.’’).
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agreements under applicable law. It is
the terms of the contract—the
‘‘[o]bjective indicators of the debt’s
status’’ at the time it was obtained 85—
that governs when collection of medical
debts is covered by the FDCPA, not the
subjective state of mind of the medical
debt collector.86
In addition to being consistent with
the term’s plain meaning, reading
‘‘default’’ as coextensive with
contractual breach under applicable law
is consistent with Congress’s intent to
apply this exemption to ‘‘servicers’’ of
debt that is not in default at the time the
person obtains it. The FDCPA’s
legislative history explains that
Congress ‘‘[did] not intend the
definition [of debt collector] to cover the
activities of . . . mortgage service
companies and others who service
outstanding debts for others, so long as
the debts were not in default when
taken for servicing.’’ 87 These references
make clear the intended distinction
between a consumer who has failed to
meet their contractual obligation to pay
and a consumer who has an outstanding
debt but under their contract repays it
over a defined period of time (i.e., their
failure to pay the entire outstanding
balance on a payment due date does not
breach the contract).88 Courts and the
Federal Trade Commission (FTC) have
likewise recognized a distinction
between a debt that may yet be
85 Mavris v. RSI Enters., 86 F. Supp. 3d 1079,
1088 (D. Ariz. 2015).
86 Echlin v. Dynamic Collectors, Inc., 102 F. Supp.
3d 1179, 1185 (W.D. Wash. 2015) (rejecting
defendant’s argument that it did not ‘‘consider’’
plaintiffs debt to be in default until a particular
dunning letter was sent because ‘‘Dynamic’s belief
that Echlin’s account was not in default is not
dispositive of whether default had in fact
occurred’’); Hartman v. Meridian Fin. Servs., Inc.,
191 F. Supp. 2d 1031, 1043–44 (W.D. Wis. 2002)
(holding that defendant did not meet section
803(6)(F)(iii) exception and rejecting argument that
defendant does not ‘‘consider’’ a buyer to be in
default before end of 30-day cure period when
buyer’s contract with creditor expressly provided
that buyer would be in default ‘‘if he fails to pay
on time’’).
87 S. Rep. No. 95–382, at 3–4 (1977), as reprinted
in 1977 U.S.C.C.A.N. 1695, 1698. In its section-bysection discussion of the bill, the report reiterates
that ‘‘The term [debt collector] does not include
. . . persons who service debts for others.’’ S. Rept.
No. 95–382, at 7, 1977 U.S.C.C.A.N. 1695, 1701.
88 Of course, an entity that operates as a mortgage
servicer does not enjoy a blanket exemption from
the FDCPA for all its activities and can still satisfy
the definition of ‘‘debt collector’’ for those debts
that were in default when they were obtained by the
entity. See, e.g., Babadjanian v. Deutsche Bank
Nat’l Tr. Co., No. CV1002580MMMRZX, 2010 WL
11549894, at *5 (C.D. Cal. Nov. 12, 2010) (collecting
cases); S. Rep. No. 95–382, at 3–4 (1977), as
reprinted in 1977 U.S.C.C.A.N. 1695, 1698 (‘‘so long
as the debts were not in default when taken for
servicing).
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‘‘outstanding’’ but for which a consumer
is not necessarily ‘‘in default.’’ 89
In the context of medical debt,
amounts owed are not typically paid on
a regular, recurring schedule over time
pursuant to the terms of a contract. To
the contrary, as noted above, medical
debts are contractually generally due in
full at a given time. Medical debt
collectors therefore do not ‘‘service’’
debts on an ongoing basis like the
mortgage servicers intended to be
covered by this exemption.
To be sure, the terms of a given
contract or the principles of applicable
law may differentiate between one (or
more) missed payments and contractual
breach, in which case the debt may not
be ‘‘in default’’ if a single payment is
missed. But absent such terms or
applicable legal principle, failure to
make full payment by the given time
constitutes a breach of the consumer’s
contractual obligation. If a person
obtains that debt (or the right to collect
it) after that failure to make full
payment, that person has obtained a
debt ‘‘in default at the time it was
obtained’’ and therefore does not qualify
for the section 803(6)(F)(iii) exemption.
Finally, defining ‘‘default’’ for
purposes of section 803(6)(F)(iii) by
reference to relevant consumer-provider
agreements and background legal
principles also best effectuates the
statute’s purpose and Congress’ intent,
closes off avenues for regulatory
evasion, and is consistent with prior
regulatory interpretations. The FDCPA
is a remedial consumer protection
statute aimed at curbing abusive and
unscrupulous conduct by debt
collectors and establishing
comprehensive national standards for
the debt collection industry.90 As such,
the statute’s provisions are interpreted
liberally in favor of consumers’
interests.91 Defining ‘‘default’’ by
89 See, e.g., Alibrandi v. Fin. Outsourcing Servs.,
Inc., 333 F.3d 82, 86 (2d Cir. 2003) (collecting cases
that ‘‘distinguish[] between a debt that is in default
and a debt that is merely outstanding’’); FTC,
Annual Report to Congress on the Fair Debt
Collection Practices Act (2000), (available at:
https://www.ftc.gov/reports/annual-report-congressfair-debt-collection-practices-act-0) (‘‘[Section
803(6)(F)(iii)] was designed to avoid application of
the FDCPA to mortgage servicing companies, whose
business is accepting and recording payments on
current debts.’’) (emphasis in original) (citing S.
Rep. No. 95–382).
90 See 15 U.S.C. 1692(e) (‘‘It is the purpose of this
subchapter to eliminate abusive debt collection
practices by debt collectors, to insure that those
debt collectors who refrain from using abusive debt
collection practices are not competitively
disadvantaged, and to promote consistent State
action to protect consumers against debt collection
abuses.’’).
91 See, e.g., Salinas v. R.A. Rogers, Inc., 952 F.3d
680, 683 (5th Cir. 2020) (‘‘Because Congress
intended the FDCPA to have a broad remedial
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80723
reference to the relevant consumer
agreements and applicable governing
law advances consumer interests
because it is an objective, transparent
standard that a consumer or their
advocate can apply to ascertain the
status of a party seeking to collect
money that is claimed to be owed by the
consumer. Relatedly, an objective
standard for defining ‘‘default’’ prevents
debt collectors from attempting to
expand the section 803(6)(F)(iii)
exemption by reference to the subjective
intent or belief of the collector or
creditor or by reference to agreements or
policy documents that the consumer has
no access to.92 And this interpretation is
consistent with prior staff advisory
opinions on this definition issued by the
FTC in the period when that agency had
primary regulatory authority over the
FDCPA.93
VII. Regulatory Matters
The CFPB has concluded that the
advisory opinion is an interpretive rule
in part and a general statement of policy
in part. Insofar as the advisory opinion
constitutes an interpretive rule, it is
issued under the CFPB’s authority to
interpret the Fair Debt Collection
Practices Acts and Regulation F,
including under section 1022(b)(1) of
the Consumer Financial Protection Act
of 2010, which authorizes guidance as
may be necessary or appropriate to
enable the CFPB to administer and carry
scope, the FDCPA should be construed broadly and
in favor of the consumer.’’) (internal quotations
omitted); Brown v. Card Serv. Ctr., 464 F.3d 450,
453 (3d Cir. 2006) (‘‘Because the FDCPA is a
remedial statute . . . we construe its language
broadly, so as to effect its purpose. . . .’’); Johnson
v. Riddle, 305 F.3d 1107, 1117 (10th Cir. 2002)
(‘‘Because the FDCPA, like the Truth in Lending
Act (TILA), 15 U.S.C. 1601 et seq., is a remedial
statute, it should be construed liberally in favor of
the consumer.’’).
92 See. e.g., Alibrandi v. Fin. Outsourcing Servs.,
Inc., 333 F.3d 82, 88 (2d Cir. 2003) (rejecting
argument by debt collector that default status of
debt should be determined by a ‘‘letter agreement’’
between the collector and creditor); Echlin v.
Dynamic Collectors, Inc., 102 F. Supp. 3d 1179,
1185 (W.D. Wash. 2015) (‘‘Dynamic’s belief that
Echlin’s account was not in default is not
dispositive of whether default had in fact
occurred.’’); Mavris v. RSI Enters., 86 F. Supp. 3d
1079, 1086 (D. Ariz. 2015) (‘‘[T]he lender’s
subjective choice that the debtor has not defaulted
cannot be dispositive of whether default has in fact
occurred. If it were, debtors’ access to FDCPA
protections would be subject to the whim of
creditors, who could leave debtors completely in
the dark about when, if ever, those protections
commence. Objective indicia of a creditor’s
treatment of a debt are entitled to greater weight.’’).
93 See, e.g., FTC, Staff Opinion Letter, 1989 WL
1178045 at *1 n.2 (Apr. 25, 1989) (‘‘Whether a debt
is in default is generally controlled by the terms of
the contract creating the indebtedness and
applicable state law.’’).
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out the purposes and objectives of
Federal consumer financial laws.94
Insofar as the advisory opinion
constitutes a general statement of
policy, it provides background
information about applicable law and
articulates considerations relevant to the
CFPB’s exercise of its authorities. It does
not confer any rights of any kind.
The CFPB has determined that this
rule does not impose any new or revise
any existing recordkeeping, reporting, or
disclosure requirements on covered
entities or members of the public that
would be collections of information
requiring approval by the Office of
Management and Budget under the
Paperwork Reduction Act.95
Pursuant to the Congressional Review
Act,96 the CFPB will submit a report
containing this interpretive rule and
other required information to the United
States Senate, the United States House
of Representatives, and the Comptroller
General of the United States prior to the
rule’s published effective date. The
Office of Information and Regulatory
Affairs has designated this interpretive
rule as a ‘‘major rule’’ as defined by 5
U.S.C. 804(2).
Rohit Chopra,
Director, Consumer Financial Protection
Bureau.
[FR Doc. 2024–22962 Filed 10–3–24; 8:45 am]
BILLING CODE 4810–AM–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2024–0768; Project
Identifier AD–2022–00504–R; Amendment
39–22825; AD 2024–16–19]
RIN 2120–AA64
Airworthiness Directives; Bell Textron
Inc. Helicopters
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
AGENCY:
The FAA is adopting a new
airworthiness directive (AD) for certain
Bell Textron Inc. Model 212, 412,
412CF, and 412EP helicopters. This AD
was prompted by reports of cracked tail
boom attachment barrel nuts (barrel
nuts). This AD requires replacing all
steel alloy barrel nuts with nickel alloy
barrel nuts, replacing or inspecting
other tail boom attachment point
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SUMMARY:
94 12
U.S.C. 5512(b)(1).
U.S.C. 3501–3521.
96 5 U.S.C. 801 et seq.
95 44
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hardware, repetitively inspecting
torque, and repetitively replacing tail
boom attachment bolts (bolts). This AD
also prohibits installing steel alloy
barrel nuts. The FAA is issuing this AD
to address the unsafe condition on these
products.
DATES: This AD is effective November 8,
2024.
The Director of the Federal Register
approved the incorporation by reference
of certain publications listed in this AD
as of November 8, 2024.
ADDRESSES:
AD Docket: You may examine the AD
docket at regulations.gov under Docket
No. FAA–2024–0768; or in person at
Docket Operations between 9 a.m. and
5 p.m., Monday through Friday, except
Federal holidays. The AD docket
contains this final rule, any comments
received, and other information. The
address for Docket Operations is U.S.
Department of Transportation, Docket
Operations, M–30, West Building
Ground Floor, Room W12–140, 1200
New Jersey Avenue SE, Washington, DC
20590.
Material Incorporated by Reference:
• For Bell material identified in this
AD, contact Bell Textron Inc., P.O. Box
482, Fort Worth, TX 76101; phone: (450)
437–2862 or 1–800–363–8023; fax: (450)
433–0272; email: productsupport@
bellflight.com; or website:
bellflight.com/support/contact-support.
• You may view this material at the
FAA, Office of the Regional Counsel,
Southwest Region, 10101 Hillwood
Parkway, Room 6N–321, Fort Worth, TX
76177. For information on the
availability of this material at the FAA,
call (817) 222–5110. It is also available
at regulations.gov under Docket No.
FAA–2024–0768.
FOR FURTHER INFORMATION CONTACT:
Jacob Fitch, Aviation Safety Engineer,
FAA, 1801 S Airport Road, Wichita, KS
67209; phone: (817) 222–4130; email:
jacob.fitch@faa.gov.
SUPPLEMENTARY INFORMATION:
Background
The FAA issued a notice of proposed
rulemaking (NPRM) to amend 14 CFR
part 39 by adding an AD that would
apply to certain serial-numbered Bell
Textron Inc. (Bell) Model 212, 412,
412CF, and 412EP helicopters. The
NPRM published in the Federal
Register on May 8, 2024 (89 FR 38841).
The NPRM was prompted by reports of
cracked barrel nuts on Model 412EP
helicopters. According to Bell, the root
cause for cracking can vary from
corrosion damage, high time in service,
or hydrogen embrittlement. Barrel nut
cracking can also cause loss of torque on
PO 00000
Frm 00010
Fmt 4700
Sfmt 4700
the associated bolt and subsequent bolt
cracking. Due to design similarities,
Model 212, 412, and 412CF helicopters
are also affected.
In the NPRM, the FAA proposed to
require, for certain serial-numbered
Model 212, 412CF, 412, and 412EP
helicopters, replacing the upper lefthand (LH) steel alloy barrel nut and bolt
with a new nickel alloy barrel nut,
retainer, and bolt. For certain other
serial-numbered Model 412 and 412EP
helicopters, the FAA proposed to
require removing the upper LH steel
alloy barrel nut, inspecting the removed
upper LH steel alloy barrel nut and
replacing it with a nickel alloy barrel
nut and retainer, and either inspecting
or replacing the upper LH bolt. For
those serial-numbered Model 212, 412,
412CF, and 412EP helicopters, the FAA
also proposed to require removing the
upper right-hand (RH), lower LH, and
lower RH steel alloy barrel nuts,
inspecting those removed steel alloy
barrel nuts and replacing them with
new nickel alloy barrel nuts and
retainers, and either inspecting or
replacing the upper RH, lower LH, and
lower RH bolts. Thereafter for those
helicopters, as well as for one additional
serial-numbered Model 412/412EP
helicopter, the FAA proposed to require
inspecting the torque applied on each
bolt to determine if the torque has
stabilized and, depending on the results,
replacing and inspecting certain tail
boom attachment point hardware and
repeating the torque inspections, or
applying torque stripes. For all
applicable helicopters, the FAA
proposed to require repetitively
inspecting the torque applied on each
bolt within a longer-term compliance
time interval and, depending on the
results, replacing and inspecting certain
tail boom attachment point hardware
and repeating the torque inspections
and stabilization, or applying torque
stripes. Additionally, for all applicable
helicopters, within a longer-term
compliance time interval, the FAA
proposed to require repetitively
replacing the upper LH bolt and
inspecting the other three bolts and,
depending on the results, taking
corrective action. Following
accomplishment of those actions, the
FAA proposed to require inspecting the
torque applied on each bolt to
determine if the torque has stabilized
and, depending on the results, replacing
and inspecting certain tail boom
attachment point hardware and
repeating the torque inspections, or
applying torque stripes. Lastly, the FAA
proposed to prohibit installing steel
alloy barrel nuts on any helicopter. The
E:\FR\FM\04OCR1.SGM
04OCR1
]]>Agencies
- CONSUMER FINANCIAL PROTECTION BUREAU
[Federal Register Volume 89, Number 193 (Friday, October 4, 2024)]
[Rules and Regulations]
[Pages 80715-80724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-22962]
=======================================================================
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CONSUMER FINANCIAL PROTECTION BUREAU
12 CFR Part 1006
Debt Collection Practices (Regulation F); Deceptive and Unfair
Collection of Medical Debt
AGENCY: Consumer Financial Protection Bureau.
ACTION: Advisory opinion.
-----------------------------------------------------------------------
SUMMARY: The Consumer Financial Protection Bureau (CFPB) is issuing
this advisory opinion to remind debt collectors of their obligation to
comply with the Fair Debt Collection Practices Act (FDCPA) and
Regulation F's prohibitions on false, deceptive, or misleading
representations or means in connection with the collection of any
medical debt and unfair or unconscionable means to collect or attempt
to collect any medical debts.
DATES: This advisory opinion is applicable as of December 3, 2024.
FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory
Implementation & Guidance Program Analyst, Office of Regulations, at
202-435-7700 or at: https://reginquiries.consumerfinance.gov/. If you
require this a document in an alternative electronic format, please
contact [email protected].
SUPPLEMENTARY INFORMATION:
I. Executive Summary
The CFPB is issuing this advisory opinion through the procedures
for its Advisory Opinions Policy.\1\ Refer to those procedures for more
information.
---------------------------------------------------------------------------
\1\ 85 FR 77987 (Dec. 3, 2020).
---------------------------------------------------------------------------
This advisory opinion explains that debt collectors are strictly
liable under the FDCPA and Regulation F (12 CFR part 1006) for engaging
in the following
[[Page 80716]]
unlawful practices when collecting medical bills:
[cir] Collecting an amount not owed because it was already paid.
This includes instances when a bill was already fully or partially paid
by insurance or a Government payor.
[cir] Collecting amounts not owed due to Federal or State law. This
includes where law prohibits obligating a person on certain debts. For
example, a State workers' compensation scheme may make employers or
insurers responsible for qualifying medical expenses, rather than the
patients. In addition, the Nursing Home Reform Act prohibits nursing
homes from requiring third parties to pay for a patient's expenses in
certain circumstances.
[cir] Collecting amounts above what can be charged under Federal or
State law. This includes, for example, collecting amounts that exceed
limits in the No Surprises Act. It also includes collection of amounts
that exceed a State's common law remedies for claims when there is no
express contract.
[cir] Collecting amounts for services not received. This includes
``upcoding'' where a patient is charged for medical services that are
more costly, more extensive, or more complex than those actually
rendered.
[cir] Misrepresenting the nature of legal obligations. This
includes collecting on uncertain payment obligations that are presented
to consumers as amounts that are certain, fully settled, or determined.
[cir] Collecting unsubstantiated medical bills. Debt collectors
must have a reasonable basis for asserting that the debts they collect
are valid and the amounts correct. Debt collectors may be able to
satisfy this requirement by obtaining appropriate information to
substantiate those assertions, consistent with patients' privacy. This
information could include payment records (including from insurance);
records of a hospital's compliance with any applicable financial
assistance policy; copies of executed contracts or, in the absence of
express contracts, documentation that the creditor can make a prima
facie claim for an alleged amount under State law (e.g., ``reasonable''
or ``market rates'').
This advisory opinion also interprets the meaning of ``in default''
for purposes of FDCPA section 803(6)(F)(iii) in the medical debt
context to be determined by the terms of any agreement between the
consumer and the medical provider under applicable law governing the
agreement.
II. Background
Medical debt is a major burden for many Americans. Recent estimates
place total medical debt owed by people in the United States at $220
billion.\2\ Medical debt is known to disproportionately impact young
and low-income adults, Black and Hispanic people, veterans, older
adults, and people in the Southern United States.\3\
---------------------------------------------------------------------------
\2\ Shameek Rakshmit et al., The Burden of Medical Debt in the
United States, KFF (Feb. 12, 2024), https://www.kff.org/health-
costs/issue-brief/the-burden-of-medical-debt-in-the-united-states/
#:~:text=This%20analysis%20of%20government%20data,debt%20of%20more%20
than%20%2410%2C000.
\3\ CFPB, Medical Debt Burden in the United States at 2 (Mar. 1,
2022), https://www.consumerfinance.gov/data-research/research-reports/medical-debt-burden-in-the-united-states/.
---------------------------------------------------------------------------
Medical debt is unique because consumers rarely plan to take on
medical debt or choose among providers based on price. Most medical
debt arises from acute or emergency care.\4\ In many cases, patients
lack the ability to substantively comparison-shop between medical
service providers due to emergency need, restrictive insurance
networks, price opacity, or limited provider availability.\5\ This
leaves many patients subject to the pricing and policies of the medical
service providers available to them.
---------------------------------------------------------------------------
\4\ See Lunna Lopes et al., Health Care Debt in the U.S.: The
Broad Consequences of Medical and Dental Bills, KFF (June 16, 2022),
https://www.kff.org/report-section/kff-health-care-debt-survey-main-findings/ (finding that 50 percent of the people in the United
States who have medical debt have it because of emergency care and
72 percent have it because of acute care).
\5\ CFPB, Medical Debt Burden in the United States, at 3 (Mar.
1, 2022), https://www.consumerfinance.gov/data-research/research-reports/medical-debt-burden-in-the-united-states/.
---------------------------------------------------------------------------
Healthcare providers send medical bills to consumers to obtain
compensation for care rendered to patients. In some cases, providers
and patients enter into express contractual relationships, which may
define patients' payment obligations or providers' pricing for the
care. Yet contracts between providers and patients may still be vague,
as some do not define specific prices for the care provided.\6\ In
other cases, such as in emergency settings or where independent
contractors or provider groups are involved (e.g., lab work or
anesthesiology), consumers may not have any contractual relationship
with a medical provider that provides care and then sends a bill.\7\
---------------------------------------------------------------------------
\6\ George A. Nation III, Contracting for Healthcare: Price
Terms in Hospital Admission Agreements, at 106, 124 Dick. L. Rev. 91
(2019) (describing how it is ``very common'' for admissions
agreements to not include exact prices).
\7\ Id. at 92 (``self-pay patients, who enter the hospital
through the emergency department, simply lack capacity to contract
due to the rushed, stressful and tension-laden emergency
circumstances''). As described below, the issue of whether this
constitutes an implied contract is a matter of State law.
---------------------------------------------------------------------------
Consumers consistently report being confused about medical billing
practices.\8\ One reason for this is the variation in how medical
providers bill their patients. In most cases, medical providers charge
different rates for the same services to different payors, for example
charging patients far more than what Medicare would pay for a given
procedure if the patient is not covered by Medicare.\9\ This, in part,
stems from the fact that the pricing of medical services is heavily
negotiated between providers and certain institutional payors such as
insurance companies, and set by Government programs like Medicare and
Medicaid. As a result, healthcare providers are incentivized to
initially set high list prices as starting offers in negotiations with
insurers.\10\ As a result, uninsured and out-of-network patients are
often charged much higher prices than those ultimately agreed to with
insurers for patients in their networks.\11\ Even within network,
prices sometimes vary by facility or department.\12\ These rates often
vastly exceed the cost of providing care.\13\ Research has also shown
that healthcare markups are higher at hospitals with
[[Page 80717]]
more Black and Hispanic patients and at investor-owned, for-profit
hospitals.\14\
---------------------------------------------------------------------------
\8\ See CFPB, Medical Debt Burden in the United States, at 3
(Mar. 1, 2022), https://www.consumerfinance.gov/data-research/research-reports/medical-debt-burden-in-the-united-states/
(``medical billing and collections practices can be confusing and
difficult to navigate'').
\9\ See Eric Lopez et al., How Much More Than Medicare Do
Private Insurers Pay? A Review of the Literature, KFF (Apr. 15,
2020), https://www.kff.org/medicare/issue-brief/how-much-more-than-medicare-do-private-insurers-pay-a-review-of-the-literature/; Frank
Griffin, Fighting Overcharged Bills from Predatory Hospitals, 51
ARIZ. ST. L.J. 1003 (2019).
\10\ Hospitals generally have no limit on their ``chargemaster''
rate, the rate they initially charge most private payors, and
chargemaster rates are typically significantly higher than the
actual cost of services rendered. See National Nurses United,
Fleecing Patients: Hospitals Charge Patients More Than Four Times
the Cost of Care'' (Nov. 2020), https://www.nationalnursesunited.org/sites/default/files/nnu/graphics/documents/1120_CostChargeRatios_Report_FINAL_PP.pdf.
\11\ See Jennifer Tolbert et al., Key Facts about the Uninsured
Population, KFF (Dec. 18, 2023), https://www.kff.org/uninsured/issue-brief/key-facts-about-the-uninsured-population/.
\12\ See Matthew Panhans et al., Prices for Medical Services
Vary Within Hospitals, but Vary More Across Them, Medical Care
Research and Review 78(2), 157 (June 19, 2019); Xu, Tim, Angela Park
and Ge Bai, Variation in Emergency Department vs Internal Medicine
Excess Charges in the United States,'' JAMA Internal Medicine
(2017), https://pubmed.ncbi.nlm.nih.gov/28558093/.
\13\ See Ge Bai and Gerard F. Anderson, ``Extreme Markup: The
Fifty US Hospitals With The Highest Charge-To-Cost Ratios,'' Health
Affairs (June 2015), https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2014.1414.
\14\ See CFPB, Medical Debt Burden in the United States, at 11
(Mar. 1, 2022), https://www.consumerfinance.gov/data-research/research-reports/medical-debt-burden-in-the-united-states/
(referencing Faiz Gani, et al., Hospital markup and operation
outcomes in the United States, Surgery (July 2016), https://www.sciencedirect.com/science/article/abs/pii/S0039606016300022?via%3Dihub; Tim Xu, Angela Park, and Ge Bai,
Variation in Emergency Department vs Internal Medicine Excess
Charges in the United States, Jama Internal Medicine (2017), https://pubmed.ncbi.nlm.nih.gov/28558093/).
---------------------------------------------------------------------------
Further, healthcare providers sometimes charge patients for
``upcoded'' services, or services more expensive than what the consumer
actually received.\15\ A 2024 study found that, from 2010-2019, the
total of upcoding expenses for Medicare Parts A, B, and C was $656
million, $2.39 billion, and $10-15 billion, respectively.\16\ Upcoding
is relatively widespread and has been estimated to account for 5-10
percent of total healthcare expenditures in the United States.\17\
---------------------------------------------------------------------------
\15\ Medical care providers often calculate and itemize charges
for care using a standardized set of codes. These codes indicate the
various aspects of care a patient received along with the type and
scope of that care. Typically, more serious, more urgent, or more
involved forms of care will incur higher charges. If a medical
provider designates an aspect of a patient's care with a code that
denotes a higher or more involved level of care than was actually
received, the provider is said to be ``upcoding.''
\16\ Keith Joiner, Jianjing Lin, and Juan Pantano, Upcoding in
medicare: where does it matter most, Health Economics Review 14(1)
(2024), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10759668/ PMC10759668/.
\17\ William Hsiao, Fraud and Abuse in Healthcare Claims,
California HHS (Jan. 2022), https://www.chhs.ca.gov/wp-content/uploads/2022/01/Commissioner-William-Hsiao-Comments-on-Fraud-and-Abuse-in-Healthcare-Claims.pdf.
---------------------------------------------------------------------------
After an individual receives a medical service, they and their
insurer are billed, if the individual is insured. Some healthcare
providers also market medical payment products or other external
financing options to their patients.\18\ In some cases, providers are
obligated by State or Federal laws to perform certain affirmative
functions involving the medical bill or refrain from specific
collection actions.\19\ After any insurance payments or payment via a
medical payment product are received, unpaid amounts, if any, are
collected by phone calls, letters, emails, and offers of payment plans
or settlements.\20\ Hospitals and other healthcare providers in the
United States are increasingly outsourcing medical billing and
collection activities to third parties, such as ``Revenue Cycle
Management'' firms, which are often funded by private equity.\21\ One
estimate projects the domestic market for Revenue Cycle Management
companies to grow by 10.2 percent annually until 2030.\22\ Unpaid
medical bills may also be assigned to more traditional debt collectors,
including those that specialize in medical debt, placed with an
attorney for litigation, or, more rarely, sold to a debt buyer.
---------------------------------------------------------------------------
\18\ Consumers are increasingly using medical credit cards and
other financing options to pay for medical care, and the CFPB has
done significant work studying and addressing this issue. See CFPB,
Medical Credit Cards and Financing Plans'' (May 4, 2023), https://www.consumerfinance.gov/data-research/research-reports/medical-credit-cards-and-financing-plans/; see also Lorelei Salas, Ensuring
consumers aren't pushed into medical payment products'' (June 18,
2024), https://www.consumerfinance.gov/about-us/blog/ensuring-consumers-arent-pushed-into-medical-payment-products/; CFPB, Request
for Information on Medical Payment Products,'' 88 FR 44281 (July 12,
2023).
\19\ Certain Federal laws, such as the No Surprises Act and the
Nursing Home Reform Act, limit collection activities for certain
kinds of medical debt. Non-profit hospitals may lose their non-
profit tax status if they fail to evaluate patients for eligibility
for financial assistance before the hospital takes certain types of
collection actions. See 26 U.S.C. 501(r)(6). Some State laws
similarly limit medical debt collections activities. For example,
states have enacted additional requirements that broaden the
applicability of hospital financial assistance, covering additional
services for those patients deemed eligible. See Washington State
Charity Care Law, RCW 70.170.060 (2024) (requiring non-profit
hospitals to provide charity care for patients and their guarantors
with incomes less than 300 percent of the Federal poverty
guidelines). Medicare and Medicaid requirements also vary by State
and may limit medical debt collections activities.
\20\ See CFPB, Medical Debt Burden in the United States, at 12
(Mar. 1, 2022), https://www.consumerfinance.gov/data-research/research-reports/medical-debt-burden-in-the-united-states/.
\21\ See Jacqueline LaPointe, What's Behind Private Equity's
Interest in RCM Vendors, TechTarget (Mar. 5, 2024), https://www.techtarget.com/revcyclemanagement/answer/Whats-Behind-Private-Equitys-Interest-in-RCM-Vendors.
\22\ See Grand View Research, U.S. Revenue Cycle Management
Market Size, Share, and Trends Analysis Report, https://www.grandviewresearch.com/industry-analysis/us-revenue-cycle-management-rcm-market.
---------------------------------------------------------------------------
The CFPB has observed and reported on many issues with how debt
collectors collect medical debt in the United States. For example, the
CFPB has brought enforcement actions against debt collectors for
collecting on disputed medical debts without adequate
substantiation.\23\ The CFPB has also previously described reports from
consumers who have received collections notices for medical debts they
should or do not owe. Specifically, consumers have reported receiving
collections notices for debts that have or should have been covered by
insurance, government payors, hospital financial assistance programs,
or that the patient has otherwise paid.\24\ Consumers also have
reported receiving collections notices for debts they believe they do
not owe under State or Federal law.\ \
---------------------------------------------------------------------------
\23\ See Consent Order, Commonwealth Fin. Sys., Inc., CFPB No.
2023-CFPB-0018 (Dec. 15, 2023); Consent Order, Phoenix Fin. Servs.,
LLC, CFPB No. 2023-CFPB-0004 (June 8, 2023).
\24\ See CFPB, Fair Debt Collection Practices Act CFPB Annual
Report 2023 (Nov. 16, 2023); https://www.consumerfinance.gov/data-research/research-reports/fair-debt-collection-practices-act-cfpb-annual-report-2023/.
\25\ See CFPB, Fair Debt Collection Practices Act CFPB Annual
Report 2023 (Nov. 16, 2023), https://www.consumerfinance.gov/data-research/research-reports/fair-debt-collection-practices-act-cfpb-annual-report-2023/; CFPB, Nursing Home Debt Collection (Sept. 9,
2022), https://www.consumerfinance.gov/data-research/research-reports/issue-spotlight-nursing-home-debt-collection/; see also,
e.g., Complaint for Civil Penalties, Injunctive and Other Relief,
Washington v. Providence Health & Services, No. 22-2-01754-6 SEA
(King Cnty. Sup. Ct. Feb. 24, 2024), ]] 70-77 (alleging that
hospital system sent the accounts of patients it knew were eligible
for financial assistance under state law to debt collectors).
---------------------------------------------------------------------------
Further, many debt collectors do not have timely access to
healthcare providers' billing and payment information, increasing the
likelihood that the debt collector collects on an amount that is not
owed, such as a bill that has already been paid.\26\ Many consumers
have reported difficulties receiving verification of medical debts for
which they have received collections notices.\27\ In some cases, debt
collectors either may not have or refuse to provide to a consumer upon
request proof of insurance payments, documentation confirming that the
amount billed complies with State law and other affirmative collection
requirements, such as hospital financial assistance, or other documents
that would demonstrate the validity of the debt and the accuracy of the
demanded amount.
---------------------------------------------------------------------------
\26\ John McNamara, Debt collectors re-evaluate medical debt
furnishing in light of data integrity issues (Feb. 14, 2023),
https://www.consumerfinance.gov/about-us/blog/debt-collectors-re-evaluate-medical-debt-furnishing-in-light-of-data-integrity-issues/.
\27\ See CFPB, Medical Debt Burden in the United States, at 4
(Mar. 1, 2022), https://www.consumerfinance.gov/data-research/research-reports/medical-debt-burden-in-the-united-states/.
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The FDCPA's protections are enforced by the CFPB, by other Federal
regulators, by individual consumers, and, under certain circumstances,
by States.\28\ And the CFPB is responsible for issuing rules regarding
the FDCPA.\29\ To the extent a person qualifies as a ``debt collector''
under the FDCPA and its implementing Regulation F, that person is
subject to the FDCPA and
[[Page 80718]]
Regulation F.\30\ The FDCPA and Regulation F prohibit the use of ``any
false, deceptive, or misleading representation or means in connection
with the collection of any debt,'' \31\ including, for example, any
false representation of ``the character, amount, or legal status of any
debt.'' \32\The FDCPA and Regulation F also prohibit the use of
``unfair or unconscionable means to collect or attempt to collect any
debt,'' \33\ including, for example, the ``collection of any amount
(including any interest, fee, charge, or expense incidental to the
principal obligation) unless such amount is expressly authorized by the
agreement creating the debt or permitted by law.'' \34\ The CFPB
reminds debt collectors that these FDCPA prohibitions interact with
other Federal and State laws in a variety of ways that could create
liability for debt collectors operating in the medical debt market.
---------------------------------------------------------------------------
\28\ 15 U.S.C. 1692l, 1692k; see 87 FR 31940, 31941 (May 26,
2022) (explaining state authority to address violations of the
federal consumer financial laws committed by ``covered persons'' and
``service providers'' under the Consumer Financial Protection Act).
\29\ 12 U.S.C. 5481(12)(F), (H), 5512(b), 5514(c); 15 U.S.C.
1692l(d).
\30\ 15 U.S.C. 1692a(6) (defining ``debt collector''); 12 CFR
1006.2(i) (same).
\31\ 15 U.S.C. 1692e; 12 CFR 1006.18(a).
\32\ 15 U.S.C. 1692e(2)(A); 12 CFR 1006.18(b)(2)(i).
\33\ 15 U.S.C. 1692f; 12 CFR 1006.22(a).
\34\ 15 U.S.C. 1692f(1); 12 CFR 1006.22(b).
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The CFPB also reminds debt collectors that sections 1692e(2)(A) and
1692f(1) impose strict liability. First, these two provisions include
no scienter requirement, in contrast to several others that do.\35\
Second, the statute differentiates between intentional and
unintentional violations.\36\ As many courts have held,\37\ imposing
strict liability for violations of these provisions is therefore the
best reading of the plain language, consistent with the statute's
overall structure, and consonant with Congress' intent.\38\
---------------------------------------------------------------------------
\35\ See, e.g., 15 U.S.C. 1692e(8) (prohibiting
``[c]ommunicating or threatening to communicate to any person credit
information which is known or which should be known to be false'')
(emphasis added); 15 U.S.C. 1692d(5) (prohibiting debt collectors
from ``causing a telephone to ring or engaging any person in
telephone conversation repeatedly or continuously with intent to
annoy, abuse, or harass'') (emphasis added); 15 U.S.C. 1692j(a)
(making it unlawful to ``design, compile, and furnish any form
knowing that such form would be used'' to deceive consumers in a
specified way'') (emphasis added).
\36\ See, e.g., 15 U.S.C. 1692k(b)(1) (including as a factor for
calculating statutory damages ``the extent to which [the debt
collector's] noncompliance was intentional''). Entities may also
have an affirmative defense to liability for violations described in
this advisory opinion, but only if they maintain procedures that are
reasonably designed to prevent unintentional violations that are the
result of bona fide errors. See 15 U.S.C. 1692k(c) (providing
affirmative defense for violations if they are: (1) ``not
intentional,'' (2) the result of ``a bona fide error,'' and (3)
occurred despite ``the maintenance of procedures reasonably adapted
to avoid any such error''). Further, ``the broad statutory
requirement of procedures reasonably designed to avoid `any' bona
fide error indicates that the relevant procedures are ones that help
to avoid errors like clerical or factual mistakes. Such procedures
are more likely to avoid error than those applicable to legal
reasoning. . . .'' Jerman v. McNellie, et al., 559 U.S. 573, 587
(2010).
\37\ Every Federal Circuit Court of Appeals to address this
issue has held that the FDCPA is a strict liability statute. See,
e.g., Vangorden v. Second Round, Ltd. P'ship, 897 F.3d 433, 437-38
(2d Cir. 2018) (``The FDCPA is `a strict liability statute' and,
thus, there is no need for a plaintiff to plead or prove that a debt
collector's misrepresentation . . . was intentional.''); Allen ex
rel. Martin v. LaSalle Bank, N.A., 629 F.3d 364, 368 (3d Cir. 2011)
(``The FDCPA is a strict liability statute to the extent it imposes
liability without proof of an intentional violation.''); Stratton v.
Portfolio Recovery Assocs., LLC, 770 F.3d 443, 448-49 (6th Cir.
2014) (``The FDCPA is a strict-liability statute: A plaintiff does
not need to prove knowledge or intent.'').
\38\ Congress enacted the FDCPA in 1977 to ``eliminate abusive
debt collection practices by debt collectors, to ensure that those
debt collectors who refrain from using abusive debt collection
practices are not competitively disadvantaged, and to promote
consistent State action to protect consumers against debt collection
abuses.'' Public Law 95-109, sec. 802(e), 91 Stat. 874, 874
(codified at 15 U.S.C. 1692(e)).
---------------------------------------------------------------------------
III. Collection of Debts Invalid Under Law
A. Collection of Amounts Not Owed Because Already Paid
Section 808(1) of the FDCPA prohibits, in relevant part, the
collection of any amount ``unless such amount is expressly authorized
by the agreement creating the debt or permitted by law.'' \39\ And
section 807(2)(A) prohibits any false representation of ``the
character, amount, or legal status of any debt.'' \40\
---------------------------------------------------------------------------
\39\ 15 U.S.C. 1692f(1); 12 CFR 1006.22(b).
\40\ 15 U.S.C. 1692e(2)(A); 12 CFR 1006.18(b)(2)(i).
---------------------------------------------------------------------------
Under these provisions, debt collectors must only collect or
attempt to collect the amount that a consumer, in fact, owes at the
time of a debt collection action after all appropriate deductions for
partial payments by the consumer or third parties are made. The amounts
due on a medical bill can often be adjusted multiple times, in light of
payments made by consumers themselves or by third parties, such as
insurers. Providers may also agree to accept a reduced amount in full
satisfaction of the bill, or reduce the amount billed pursuant to a
financial assistance policy or program.
Under the FDCPA, the ``amount [ ] expressly authorized by the
agreement creating the debt'' refers only to the remaining balance on a
debt that is fully owed by the consumer after any payments that reduce
the debt's remaining balance are deducted because such payments reduce
the amount that the consumer is obligated to pay under the original
agreement. Accordingly, seeking to collect an amount that does not
account for partial payments or changes to the bill made by the
provider would violate the FDCPA's prohibitions against unfair or
unconscionable debt collection practices because the amount has not
been expressly agreed to. In other words, once a partial payment has
been made toward an agreed-to amount, collection or attempted
collection of the full amount without accounting for the partial
payment is collection of an amount greater than that agreed to or
permitted by law. Such collection or attempted collection would also
violate the FDCPA's prohibitions against deceptive or misleading debt
collection practices because it would misrepresent the amount of the
debt actually owed.\41\ Because payments toward a debt might be made at
any time, debt collectors are responsible for ensuring that the correct
collection amount is sought during each attempt at collection.
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\41\ See Vangorden v. Second Round, L.P., 897 F.3d 433, 437-38
(2d Cir. 2018) (consumer stated claim under FDCPA sections 807 and
808 when debt collector sought to collect debt that consumer had
already settled with creditor); Gonzalez v. Allied Collection
Servs., Inc., No. 216CV02909MMDVCF, 2019 WL 489093, at *8-9 (D. Nev.
Feb. 6, 2019), aff'd, 852 F. App'x 264 (9th Cir. 2021) (debt
collector violated FDCPA sections 807 and 808 when it sought to
collect full amount of debt that had been partially paid); see also
Complaint for Permanent Injunction and Other Equitable Relief, FTC
v. Midwest Recovery Systems, LLC, No. 12-00182 (E.D. Mo. Nov. 25,
2020), https://www.ftc.gov/system/files/documents/cases/01_-_complaint.pdf (pleading violation of FDCPA section 807 where, among
other things, ``[t]he debt was medical debt in the process of being
re-billed to the consumer's medical insurance'').
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B. Collection of Amounts Not Owed Due to Federal or State Law
Section 808(1) of the FDCPA prohibits, in relevant part, the
collection of any amount ``unless such amount is expressly authorized
by the agreement creating the debt or permitted by law.'' \42\ An
``amount expressly authorized by the agreement creating the debt or
permitted by law'' means only a debt that the consumer is legally
obligated to pay. If a Federal or State law relieves consumers of the
obligation to pay for medical costs, in whole or in part, then
collection of those costs is not ``permitted by law'' but rather
prohibited by law. Thus, any amount that a consumer is not obligated to
pay by operation of Federal or State law, is not an ``amount . . .
permitted by law.'' Nor is the amount collectible as an ``amount [ ]
expressly authorized by the agreement creating the debt'' since
contractual terms that contravene Federal or State law are
unenforceable as contrary to public policy.\43\
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\42\ 15 U.S.C. 1692f(1); 12 CFR 1006.22(b).
\43\ See Restatement (Second) of Contracts sec. 178 (``A promise
or other term of an agreement is unenforceable on grounds of public
policy if legislation provides that it is unenforceable. . . .'');
see also, e.g., United States v. Blue Cross/Blue Shield of Ala., 999
F.2d 1542, 1547 (11th Cir. 1993) (``The application of a regulatory
statute that is otherwise valid may not be defeated by private
contracts.'') (citing Connolly v. Pension Benefit Guaranty Corp.,
475 U.S. 211, 224 (1986)); SodexoMAGIC, LLC v. Drexel Univ., 24
F.4th 183, 219-20 (3d Cir. 2022) (``[A] voluntarily-agreed-to
contract term is enforceable unless a statute or the common law
specifically prevents enforcement of that term.'') (applying
Pennsylvania law); Metcalfe v. Grieco Hyundai LLC, 698 F. Supp. 3d
239, 2442 (D.R.I. 2023) (``Because the [Rhode Island State statute]
explicitly allows collective actions, the class action waiver
provision in the Leasing Agreement is unenforceable as against
public policy in Rhode Island.'') (applying Rhode Island law).
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[[Page 80719]]
A range of laws protect consumers from the legal obligation to pay
medical bills in certain circumstances. For example, a State workers'
compensation scheme may provide that a medical provider only has
recourse against a patient's employer or workers' compensation insurer
for the treatment of a work-related injury.\44\ And the Federal Nursing
Home Reform Act prohibits, among other things, nursing care facilities
that participate in Medicaid or Medicare from requesting or requiring a
third-party guarantee of payment as a condition of admission, expedited
admission, or continued stay in the facility, and thus nursing care
facilities cannot collect the debt from third parties in violation of
this law.\45\
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\44\ See, e.g., Kottler v. Gulf Coast Collection Bureau, Inc.,
460 F. Supp. 3d 1282, 1293 (S.D. Fla. 2020), aff'd, 847 F. App'x 542
(11th Cir. 2021) (debt collector violated section 807(2)(A) when it
attempted to collect a debt for which consumer had pending workers'
compensation claim); Young v. NPAS, Inc., 361 F. Supp. 3d 1171, 1196
(D. Utah 2019) (debt collector violated FDCPA sections 807(2)(A) and
808(1) when it attempted to collect a debt that consumer did not owe
under Utah workers' compensation law); Raytman v. Jeffrey G. Lerman,
P.C., No. 17 CIV. 9681 (KPF), 2018 WL 5113952, at *5-6 (S.D.N.Y.
Oct. 19, 2018) (consumer stated claim for violations of FDCPA
sections 807 and 808 when debt collector sought to collect debt that
consumer did not owe under New York Medicaid payment rules).
\45\ See generally CFPB Circular 2022-05: Debt collection and
consumer reporting practices involving invalid nursing home debts
(Sept. 8, 2022), available at: https://www.consumerfinance.gov/compliance/circulars/circular-2022-05-debt-collection-and-consumer-reporting-practices-involving-invalid-nursing-home-debts/.
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A debt collector that collects or attempts to collect a debt from a
consumer who is not legally obligated on the debt by operation of State
or Federal law violates the FDCPA's prohibitions against unfair or
unconscionable debt collection practices because the amount is not
expressly authorized by the agreement creating the debt or permitted by
law \46\ and also violates the FDCPA's prohibitions against deceptive
or misleading debt collection practices because it would falsely
represent the amount of the debt. Debt collectors are responsible for
ensuring that they do not collect or attempt to collect debts that are
not legally owed by the relevant consumer, whether by operation of
State or Federal law.
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\46\ This may be the case even if terms of the contract creating
the debt would make a given consumer liable. See, e.g., Tuttle v.
Equifax Check, 190 F.3d 9, 13 (2d Cir. 1999) (noting that it would
be a violation of section 1692f(1) to collect a fee if State law
expressly prohibits such fees, even if the contract allows it).
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C. Collection of Amounts Above That Permitted by Federal or State Law
Section 807 prohibits any false representation of ``the character,
amount, or legal status of any debt.'' \47\ Section 808(1) of the FDCPA
prohibits, in relevant part, the collection of any amount ``unless such
amount is expressly authorized by the agreement creating the debt or
permitted by law.'' \48\ Debt collectors would violate the FDCPA when
they collect or attempt to collect amounts that exceed limits or
calculation methods provided by State or Federal law, thus
misrepresenting the consumer's obligation to pay the debt and
collecting or attempting to collect an amount not permitted by law.
Here again, a range of laws may operate to limit or control the amount
that a medical provider may bill a patient in certain circumstances.
For example, the Federal No Surprises Act of 2020 restricts the charges
that certain medical providers can bill to certain patients depending
on a number of factors such as their insured status and whether a
billing provider is in- or out-of-network for a patient's health
insurance plan.\49\ As the CFPB has previously stated, the FDCPA's
prohibition on misrepresentations includes misrepresenting that a
consumer must pay a debt stemming from a charge that exceeds the amount
permitted by the No Surprises Act.\50\ Thus, for example, a debt
collector who represents that a consumer owes a debt arising from out-
of-network charges for emergency services would violate the prohibition
on misrepresentations if those charges exceed the amount permitted by
the No Surprises Act. Relatedly, if a Federal law limits or caps the
amount a consumer may be billed in a given circumstance, then
collection or attempted collection of an amount over the relevant limit
or cap would run afoul of the FDCPA's prohibition on collection of
amounts unless permitted by law.
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\47\ 15 U.S.C. 1692e(2)(A); 12 CFR 1006.18(b)(2)(i).
\48\ 15 U.S.C. 1692f(1); 12 CFR 1006.22(b).
\49\ See Requirements Related to Surprise Billing; Part II, 86
FR 55980 (Oct. 7, 2021).
\50\ See CFPB Bulletin 2022-01: Medical Debt Collection and
Consumer Reporting Requirements in Connection With the No Surprises
Act, 87 FR 3025, 3026 (Jan. 20, 2022).
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State law may also provide a limit on the allowable amount that a
medical provider can bill a consumer. Many States have enacted laws to
protect consumers from unexpected medical bills in much the same vein
as the Federal No Surprises Act and which may provide additional
protections beyond those in the Federal law.\51\ While State laws vary
considerably, many include limits on the amounts that medical
providers, both emergency and non-emergency, can bill certain consumers
and provide specific standards to guide billing calculations.\52\ As
with the Federal statute, where one of these State laws applies to
limit the amount that a medical provider can bill a consumer, a debt
collector that collects or attempts to collect an amount that exceeds
the relevant limits would violate the FDCPA's prohibition against
misrepresenting the amount of the debt owed and the prohibition against
collecting or attempting to collect an amount unless permitted by law.
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\51\ See State Surprise Billing Laws and the No Surprises Act,
accessible at: https://www.cms.gov/files/document/nsa-state-laws.pdf, at 2 (``The No Surprises Act supplements State surprise
billing law protections; it does not replace them.'').
\52\ See, e.g., Conn. Gen. Stat. secs. 38a-477aa, 20-7f; Mich.
Comp. Laws sec. 333.24507.
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Finally, State contract or common law may also provide limits on
the allowable amount that a medical provider can bill a consumer in
certain circumstances. For example, consumers are sometimes billed by
medical service providers that the consumer did not enter into an
express agreement with prior to receiving the services. In these
circumstances, some courts have held that State contract law provides
that the relationship between the consumer and provider is governed by
an implied-in-fact agreement, the price term of which may be limited to
a ``reasonable'' amount.\53\ Courts have also interpreted some States'
laws to require that when an express contract for medical services
contains no explicit price term, a ``reasonable'' price term should be
inserted.\54\ Courts have even invalidated
[[Page 80720]]
explicit price terms in contracts when those terms were determined to
be unconscionable under State law, often limiting the price that must
be paid to some ``reasonable'' amount as a remedy.\55\
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\53\ See, e.g., Leslie v. Quest Diagnostics, Inc., No.
CV171590ESMAH, 2019 WL 4668140, at *7 (D.N.J. Sept. 25, 2019)
(``Plaintiffs sufficiently allege that Quest's chargemaster prices
are unreasonable based on Quest's internal cost structure, the usual
and customary rates charged, and payments received for these
services by both Quest and other laboratory testing services.'').
\54\ Colomar v. Mercy Hosp., Inc., No. 05-22409-CIV-SEITZ, 2007
WL 2083562, at *4 (S.D. Fla. July 20, 2007) (``Florida law is
settled that when the price term in a contract for hospital services
is left `open' or undefined, then the courts will infer a reasonable
price.'').
\55\ See, e.g., Ahern v. Knecht, 563 NE2d 787, 793 (Ill. App.
1990) (price term in contract for appliance repair was
unconscionable and repairman would be allowed only ``the actual
value of his services''); Toker v. Westerman, 274 A.2d 78, 81 (N.J.
Super. 1970) (price term in contract for sale of refrigerator was
unconscionably high; court refused to enforce term, relieving the
defendant-consumer from obligation to pay remaining balance owed);
Restatement (Second) of Contracts sec. 208--Unconscionable Contract
or Term, cmt. g (1981) (``the offending party [to an unconscionable
contract] will ordinarily be awarded at least the reasonable value
of performance rendered by him''); see also De La Torre v. CashCall,
Inc., 422 P.3d 1004, 1009 (Cal. 2018) (``As long established under
California law, the doctrine of unconscionability reaches contract
terms relating to the price of goods or services exchanged.'').
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The CFPB reminds debt collectors that State law may determine or
limit the amount that medical providers may charge to consumers, and
that collection of or an attempt to collect an amount that exceeds the
allowable amount under State law (including applicable State case law)
may misrepresent the amount of the debt in violation of the FDCPA.
Collection or an attempt to collect an amount that exceeds the
allowable amount under State law may also violate the prohibition
against collecting or attempting to collect an amount unless permitted
by law. These State law cases make clear that the collection amount
that is ``permitted by law'' may be much less than the amount asserted
to be owed by the medical provider. Debt collectors are responsible for
ensuring that they do not collect or attempt to collect amounts above
that which the relevant consumer(s) can be charged under applicable
State and Federal laws. Because, as noted above, the FDCPA imposes
strict liability, debt collectors should ensure that they only collect
or attempt to collect amounts that may be charged under applicable
State law.\56\
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\56\ Debt collectors may be able to minimize risk of
misrepresentations in these circumstances by working with client
medical providers to ensure that pricing and billing practices
comply with applicable legal limits.
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D. Collection of Amounts Not Owed Because Services Not Received
Section 808(1) of the FDCPA prohibits, in relevant part, the
collection of any amount ``unless such amount is expressly authorized
by the agreement creating the debt or permitted by law.'' \57\ And
section 807(2)(A) prohibits any false representation of ``the
character, amount, or legal status of any debt.'' \58\ As relevant
here, the ``amount [] expressly authorized by the agreement creating
the debt'' means amounts due for services actually rendered under the
relevant agreement. Similarly, a ``false representation of the . . .
amount . . . of any debt'' includes a representation to a consumer that
they owe an amount for services that have not been rendered.
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\57\ 15 U.S.C. 1692f(1); 12 CFR 1006.22(b).
\58\ 15 U.S.C. 1692e(2)(A); 12 CFR 1006.18(b)(2)(i).
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Courts have held that it is a violation of the FDCPA for debt
collectors to collect or attempt to collect amounts for services that
were not rendered.\59\ Medical bills, especially for services rendered
in hospitals, are frequently calculated by reference to a standardized
set of codes that indicate the type and degree of medical care a
patient received. Typically, providers will seek greater compensation
for more serious, more urgent, or more involved forms of care. As noted
above, if a medical provider designates an aspect of a patient's care
with a code that denotes a higher or more involved level of care than
was actually received, the provider is said to be ``upcoding.'' \60\
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\59\ Langley v. Statebridge Co., LLC, No. CIV.A. 14-6366 JLL,
2014 WL 7336787, at *3 (D.N.J. Dec. 22, 2014) (consumer stated claim
under FDCPA section 807(2)(A) when debt collector attempt to collect
debt for tax and insurance payments not actually made by creditor);
Fitzsimmons v. Rickenbacker Fin., Inc., No. 2:11-CV-1315 JCM PAL,
2012 WL 3994477, at *3 (D. Nev. Sept. 11, 2012).
\60\ See Centers for Medicare & Medicaid Servs., Common Types of
Healthcare Fraud, at 2 (2016), https://www.cms.gov/files/document/overviewfwacommonfraudtypesfactsheet072616pdf. (``Upcoding is a term
that is not defined in [] regulations but is generally understood as
billing for services at a higher level of complexity than the
service actually provided or documented in the file.''); U.S. ex
rel. Harris v. Bernad, 275 F. Supp. 2d 1, 4 (D.D.C. 2003) (``The
government alleges that the defendants engaged in `upcoding'--that
is, submitted claims with CPT codes that represented a level of care
higher than the defendants actually provided.'').
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A debt collector that collects or attempts to collect a debt that
has been ``upcoded'' violates the FDCPA's prohibitions against unfair
or unconscionable debt collection practices because the amount is not
expressly authorized by the agreement for services actually rendered
and also violates the FDCPA's prohibitions against deceptive or
misleading debt collection practices because it would falsely represent
the amount of the debt. Debt collectors are responsible for ensuring
that they do not collect or attempt to collect amounts that have been
charged for services that have not actually been rendered.\61\
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\61\ Nothing in this Advisory Opinion should be interpreted to
mean that in order to mitigate risk of violations of the FDCPA debt
collectors should obtain access to documents beyond relevant patient
contracts or bills. Again, debt collectors may be able to minimize
risk of misrepresentations in these circumstances by working with
client medical providers to ensure appropriate billing practices.
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IV. Misrepresentation of the Nature of Legal Obligations
Section 807(2)(A) prohibits any false representation of ``the
character, amount, or legal status of any debt.'' A ``false
representation of the . . . legal status of any debt'' includes
representations to a consumer about the legal nature of the provider's
claim for payment and the legal rights and obligations that arise under
that particular type of claim.
As described above, there are a variety of ways in which medical
bills and the amounts demanded therein differ from consumer
transactions where a consumer agrees to a known and definite price in
exchange for goods or services. In medical billing, consumers sometimes
enter agreements that have undefined price terms or are billed by
providers with whom the consumer has never entered into an express
agreement. The legal basis for a provider's claim for payment in such
circumstances therefore also varies, and each such basis may have
different implications for a consumer's legal rights or obligations.
For example, under some States' laws, providers sometimes demand
payment for services on the basis of an account stated theory, whereby
a party presents another with an alleged statement of account and a
legal obligation to pay that amount arises if the receiving party does
not object within a reasonable period of time.\62\ The inverse is also
true under these State's laws: an account stated claim cannot be
maintained if the receiving party disputes the alleged statement of
account within a reasonable period of time before making payments on
the account.\63\
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\62\ See, e.g., Univ. of S. Ala. v. Bracy, 466 So.2d 148, 150
(Ala. Civ. App. 1985) (stating elements of account stated claim
under Alabama law in medical context); Egge v. Healthspan Servs.
Co., No. CIV. 00-934 ADM/AJB, 2001 WL 881720, at *2 (D. Minn. July
30, 2001) (elements of account stated claim under Minnesota law in
medical context).
\63\ See, e.g., Grandell Rehab. & Nursing Home, Inc. v. Devlin,
809 N.Y.S.2d 481 at *3 (N.Y. Sup. Ct. 2005) (rejecting nursing
home's account stated claim because, among other reasons, receiving
consumer disputed their liability and the amounts) (citing Abbott,
Duncan & Wiener v. Ragusa, 214 A.D.2d 412, 413 (N.Y. App. Div.
1995)).
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However, the variations in medical billing and the associated legal
consequences are not readily apparent or known to most consumers.\64\
Most
[[Page 80721]]
consumers understand a demand for payment from a debt collector to mean
that they owe the full amount demanded. The least sophisticated
consumer presented with a demand for payment may believe that the full
demanded amount is legally owed.\65\ In particular, a consumer may be
unlikely to know that, in the absence of an express agreement and
definite price term, a debt collector's demand for payment may not
accurately reflect the consumer's actual legal obligation to the
provider under State law.\66\
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\64\ When evaluating a claim under section 807 of the FDCPA,
courts apply the ``least sophisticated debtor'' standard. See, e.g.,
Jensen v. Pressler & Pressler, 791 F.3d 413, 420 (3d Cir. 2015)
(applying ``least sophisticated debtor'' standard to evaluate
liability under section 807); McCollough v. Johnson, Rodenburg &
Lauinger, LLC, 637 F.3d 939, 952 (9th Cir. 2011) (same); Jeter v.
Credit Bureau, Inc., 760 F.2d 1168, 1177 n.11 (11th Cir. 1985)
(same).
\65\ See, e.g., Miller v. Carrington Mortgage Servs., LLC, 607
B.R. 1, 5-6 (D. Me. 2019) (consumer alleged fear that ``he would
never be free from demands for payment'' or that debt collector had
``found a way of getting around the bankruptcy discharge
protections.''); cf. Daugherty v. Convergent Outsourcing, Inc., 836
F.3d 507, 513 (5th Cir. 2016) (``[A] collection letter seeking
payment on a time-barred debt (without disclosing its
unenforceability) but offering a `settlement' and inviting partial
payment (without disclosing the possible pitfalls) could constitute
a violation of the FDCPA.''); Buchanan v. Northland Grp., Inc., 776
F.3d 393, 399 (6th Cir. 2015) (consumer stated claim under section
807(2)(A) when debt collector offered to ``settle'' time-barred debt
at a discount and noting that rule under Michigan law that partial
payment revives a time-barred debt ``is almost assuredly not within
the ken of most people, whether sophisticated, whether reasonably
unsophisticated, or whether unreasonably unsophisticated'').
\66\ C.f. Shula v. Lawent, 359 F.3d 489, 491-92 (7th Cir. 2004)
(affirming finding of liability under section 807 where debt
collector attempted to collect amount of court costs that were not
in fact awarded in State law action); Van Westrienen v.
Americontinental Collection Corp., 94 F. Supp. 2d 1087, 1101-02 (D.
Or. 2000) (consumer stated claim under section 807(2)(A) when debt
collector's communications suggested that wage garnishment or asset
seizure would occur ``within 5 days'' when such legal action was not
procedurally possible in that time span); Biber v. Pioneer Credit
Recovery, Inc., 229 F. Supp. 3d 457, 473-74 (E.D. Va. 2017)
(consumer stated claim under section 807(2)(A) when debt collector
threatened to garnish wages without disclosing that it had not in
fact taken preliminary procedural steps required to do so).
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A debt collector that collects or attempts to collect a debt where
the amount is not based on an express contractual price term risks
violating the FDCPA's prohibitions against deceptive or misleading debt
collection practices if the debt collector gives the misleading
impression that the amount demanded is final and that precise amount is
legally owed. Moreover, because, as noted above, the FDCPA imposes
strict liability, debt collectors are responsible for ensuring that
they do not collect or attempt to collect debts in a way that deceives
or misleads a consumer, explicitly or impliedly, about the legal status
of the medical provider's claim and a consumer's right to object to
claims, as appropriate; a debt collector may misrepresent the legal
status of the debt even if the collector is relying on information
provided by the medical provider. When dealing with uncertainty arising
from the lack of express agreement, debt collectors may be able to
minimize their risk of engaging in violations by communicating clearly
and conspicuously with consumers about the legal status of the debt and
the amount owed, for example, as appropriate, that an enforceable
payment obligation may not exist until proven in court.
V. Substantiation of Medical Debts
Section 807(2)(A) prohibits any false representation of ``the
character, amount, or legal status of any debt.'' When a debt collector
makes a demand for payment of a debt or otherwise represents that a
consumer owes a debt, the collector makes an implied representation
that it has a reasonable basis to assert the character, amount, and
legal status of the debt.\67\ A debt collector violates the prohibition
against false representations if the collector has no reasonable basis
on which to represent that the specific amount demanded is due and
legally collectible.
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\67\ See Debt Collection Practices (Regulation F), Final Rule,
85 FR 76734, 76857 (Nov. 30, 2020) (codified at 12 CFR part 1006)
(``[I]it is clear that a debt collector must have (or have access
to) records reasonably substantiating its claim that a consumer owes
a debt in order to avoid engaging in deceptive or unfair collection
practices in violation of the FDCPA when it attempts to collect the
debt.'').
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The many unique features of the markets for medical care and
services present particularly acute risks of uncertainty as to the
``character, amount, or legal status'' of debts that are incurred in
these markets. As described above, the health care market is complex,
variable, and opaque. Prices charged by providers vary widely even for
the same treatment or procedure and are often conditional, changing
based on factors that often cannot be known before services are
rendered. A variety of State and Federal laws may impact a consumer's
liability for payment, in whole or in part, or for the amount that may
be charged. Billing and payment are complicated by the involvement of
third-party payors such as insurers, public compensation programs, or
tortfeasors. And the nature or legal basis of a provider's claim for
payment may be unclear, often due to a lack of express agreements.
While this level of uncertainty may arise from the inherently complex
reality of medical care and the broader heath care system, it
underscores the need for debt collectors to properly substantiate the
character, amount, and legal status of medical debt before they begin
collection, in accord with consumer's expectations that debt collectors
have a reasonable basis for their demands.\68\
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\68\ As noted above, nothing in this Advisory Opinion should be
interpreted to mean that in order to mitigate risk of violations of
the FDCPA debt collectors are encouraged to obtain access to
documents beyond relevant patient contracts or bills as permitted
under applicable privacy laws.
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Although a debt collector must be able to substantiate claims
regarding the amount and validity of the debt made to a consumer,
including those made at the outset of collection, the type and amount
of information that is necessary to substantiate a particular
representation will vary depending upon the claim itself, the
circumstances surrounding the claim, and the need to observe patients'
privacy rights under relevant law. The inherently uncertain and
conditional nature of the costs of and payments for medical care means
that debt collectors should exercise heightened care to ensure that
they have a reasonable basis to assert that the debt is legally
collectible and the specific amount is owed. For example, consider a
debt collector that receives summary information concerning accounts
for collection from a provider group that operates within a hospital.
An initial reasonable step to substantiate the debts prior to
collection may include obtaining any relevant patient agreements or
contracts executed by the relevant patients. If, as is often the case,
there is no contract between patients and the provider group, the debt
collector may need documents sufficient to make a prima facie case for
the demanded amount under the applicable State law. Consider another
example where a debt collector is onboarding a hospital client. The
debt collector may reduce risk of liability if it has access to full
payment histories for the patient accounts, including any payments from
third parties covering any portion of an overall demanded amount, and
to confirm the hospital's compliance with any affirmative legal
obligations, such as requirements to assess consumers under financial
assistance policies if the hospital is a non-profit \69\ or otherwise
participates in financial assistance programs, to ensure that there is
a reasonable basis for the demanded amount.\70\
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\69\ See 26 U.S.C. 501(r).
\70\ This example is provided merely as an illustration of the
kinds of information that may be necessary to properly substantiate
debt collection information in a given circumstance and is not
offered as a complete or exhaustive list that would guarantee
compliance in all circumstances.
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Regulators, including the CFPB, have brought actions against debt
collectors for failing to substantiate collection
[[Page 80722]]
information for accuracy and completeness before beginning collection
efforts when there were indications that the information suffered from
a high degree of uncertainty or unreliability.\71\ For example, many
debt collectors operate as ``debt buyers,'' purchasing large portfolios
of debts from creditors or other debt collectors at significant
discounts from the face value of the underlying debts.\72\ These
``portfolios'' of debts may functionally be little more than
spreadsheets containing purported information concerning debts and may
not be accompanied by underlying contracts, customer agreements, or
other documentation evidencing the existence and amount of the
debts.\73\ This information may be facially unreliable, such as when
the sellers of the debt explicitly disclaim its accuracy or
collectability or when it is readily apparent that the information is
inaccurate.\74\ In these circumstances, the CFPB and other regulators
have alleged that the debt collectors were on notice that collecting or
attempting to collect the purported debts based on the information in
their possession could lead to widespread or repeated violations of
section 807(2)(A).\75\ Proceeding to collect the purported debts based
on that unsubstantiated information misrepresented to the affected
consumers that the collectors had a reasonable basis for their
collection attempts.\76\ Importantly, this misrepresentation did not
rely on a finding that the claimed amount was incorrect--for which a
debt collector can be separately liable, see generally section II,
supra--but on their failure to substantiate the validity and amounts of
the debts that were sought.
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\71\ See, e.g., Complaint for Civil Penalties, Injunctive and
Other Relief, United States v. Asset Acceptance, LLC, No. 12-00182
(M.D. Fla. Jan. 30, 2012), ECF No. 1 (Asset Acceptance Compl.);
Consent Order, Encore Capital Grp., Inc., CFPB No. 2015-CFPB-0022
(Sept. 9, 2015) (Encore Consent Order); Consent Order, Portfolio
Recovery Assocs., LLC, CFPB No. 2015-CFPB-0023 (Sept. 9, 2015) (PRA
Consent Order).
\72\ See Asset Acceptance Compl. ]] 9-10; Encore Consent Order,
] 22; PRA Consent Order, ] 24.
\73\ See Asset Acceptance Compl., ] 11; Encore Consent Order, ]
23; PRA Consent Order, ] 27.
\74\ See Asset Acceptance Compl., ] 11-16, 49-52; Encore Consent
Order, ]] 24-35; PRA Consent Order, ]] 28-32.
\75\ See Asset Acceptance Compl., ] 81-83; Encore Consent Order,
] 112-114; PRA Consent Order, ] 103-105.
\76\ See Asset Acceptance Compl., ] 54-55; Encore Consent Order,
] 45-47, 78-81, 103-105; PRA Consent Order, ] 63-66, 94-96,.
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Debt collectors working with medical debts are responsible for
ensuring that they possess a reasonable basis for collecting or
attempting to collect those debts. Collecting or attempting to collect
medical debts without substantiation violates section 807(2)(A).
VI. Defining Default Under the FDCPA
The prohibitions imposed by sections 807 and 808 of the FDCPA apply
only to ``debt collectors.'' \77\ As relevant here, Section 803 of the
FDCPA defines ``debt collector'' in two ways: (1) ``any person who uses
any instrumentality of interstate commerce or the mails in any business
the principal purpose of which is the collection of any debts,'' or (2)
any person ``who regularly collects or attempts to collect, directly or
indirectly, debts owed or due or asserted to be owed or due another.''
\78\ The statute also provides a limited number of exemptions from the
definition of ``debt collector.'' One of those exemptions carves out of
the definition ``any person collecting or attempting to collect any
debt owed or due or asserted to be owed or due another to the extent
such activity . . . concerns a debt which was not in default at the
time it was obtained by such person.'' \79\ In the context of medical
debt collection, for purposes of section 803(6)(F)(iii)'s exemption,
whether a debt is ``in default'' is determined by the terms of any
agreement between the consumer and the medical provider under
applicable law governing the agreement.\80\
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\77\ 15 U.S.C. 1692e (``A debt collector may not use any false,
deceptive, or misleading representation or means in connection with
the collection of any debt.) (emphasis added); 15 U.S.C. 1692f (``A
debt collector may not use unfair or unconscionable means to collect
or attempt to collect any debt.'') (emphasis added).
\78\ 15 U.S.C. 1692a(6). Section 803 also provides that the term
``debt collector'' ``includes any creditor who, in the process of
collecting his own debts, uses any name other than his own which
would indicate that a third person is collecting or attempting to
collect such debts'' as well as, ``[f]or the purpose of section
808(6), . . . any person who uses any instrumentality of interstate
commerce or the mails in any business the principal purpose of which
is the enforcement of security interests.'' 15 U.S.C. 1692a(6). The
term ``creditor'' is defined as ``any person who offers or extends
credit creating a debt or to whom a debt is owed, but such term does
not include any person to the extent that he receives an assignment
or transfer of a debt in default solely for the purpose of
facilitating collection of such debt for another.'' 15 U.S.C.
1692a(4).
\79\ 15 U.S.C. 1692a(6)(F)(iii). The exemptions under section
803a(6)(F)--including the exemption for debt collection activity
that ``concerns a debt which was not in default at the time it was
obtained by such person''--explicitly apply only to persons
collecting or attempting to collect debts ``owed or due another.''
Compare 15 U.S.C. 1692a(6)(F) (exemption that references ``owed or
due another'') with 15 U.S.C. 1692a(6)(A)-(E) (exemptions that do
not use ``owed or due another'' language).
\80\ De Dios v. Int'l Realty & Invs., 641 F.3d 1071, 1074 (9th
Cir. 2011). Outcomes for non-express agreements may vary
considerably under relevant State law, and this Advisory Opinion
takes no position on the correct interpretation of those laws.
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The term ``default'' is not specifically defined in the FDCPA, so
the meaning of the term should first be determined by its ordinary
meaning.\81\ ``Default'' is commonly defined as the failure to satisfy
an agreement, promise, or obligation, especially a failure to make a
payment when due.\82\ These definitions are consistent with the
longstanding common law use of the word as a party's failure to perform
contractual obligations at the time they come due.\83\ Further,
applicable law--typically State contract law--may determine when
obligations are due under a contract.
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\81\ See, e.g., Lawson v. FMR LLC, 571 U.S. 429, 440 (2014); see
also, e.g., Taniguchi v. Kan Pac. Saipan, Ltd., 566 U.S. 560, 566
(2012) (``When a term goes undefined in a statute, we give the term
its ordinary meaning.'').
\82\ See, e.g., Default Merriam-Webster.com Dictionary, https://www.merriam-webster.com/dictionary/default/ (accessed Aug. 19, 2024)
(``failure to do something required by duty or law . . . a failure
to pay financial debts''; Default, Black's Law Dictionary (11th ed.
2019) (``The omission or failure to perform a legal or contractual
duty; esp., the failure to pay a debt when due.''); Default,
Ballentine's Law Dictionary (3d ed. 1969) (``Fault; neglect;
omission; the failure to perform a duty or obligation; the failure
of a person to pay money when due or when lawfully demanded.'').
\83\ See, e.g., The Restatement (First) of Contracts Index D80
(1932) (``Default: See Breach of Contract.''); Restatement (Second)
of Contracts sec. 235(2) (1981) (``When performance of a duty under
a contract is due any non-performance is a breach.''); 23 Williston
on Contracts sec. 63:16 (4th ed.) (``It is a material breach of a
contract to fail to pay any substantial amount of the consideration
owing under the contract.''); Butler Mach. Co. v. Morris Constr.
Co., 682 NW2d 773, 778 (S.D. 2004) (``Morris was to make monthly
payments of $5,547 and its failure to make such monthly payments
constituted a default under the terms of that agreement.'').
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However, some third-party firms collecting on past-due medical
bills have argued that the bills were not in default because the firm
or the creditor did not consider or treat the accounts as in default
until some later date.\84\ To the contrary, under the plain meaning of
``default,'' when a ``default'' has occurred for purposes of section
803(6)(F)(iii) with respect to medical bills is determined based on the
terms of the relevant consumer-provider
[[Page 80723]]
agreements under applicable law. It is the terms of the contract--the
``[o]bjective indicators of the debt's status'' at the time it was
obtained \85\--that governs when collection of medical debts is covered
by the FDCPA, not the subjective state of mind of the medical debt
collector.\86\
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\84\ See Ward v. NPAS, Inc., 63 F.4th 576, 583-84 (6th Cir.
2023) (Though medical provider's bill said ``due on receipt'' court
considered evidence that provider ``didn't treat Ward's failure to
pay immediately as a breach'' dispositive to the question of whether
debt was in default when placed with third-party.); Prince v. NCO
Fin. Servs., Inc., 346 F. Supp. 2d 744, 749 (E.D. Pa. 2004) (``This
evidence of Capital One's State of mind with regard to whether the
debt was in default is a satisfactory initial showing that Capital
One did not consider Prince's account to be ``in default.'');
Roberts v. NRA Grp., LLC, No. CIV.A. 3:11-2029, 2012 WL 3288076, at
*6 (M.D. Pa. Aug. 10, 2012) (``[W]hether Plaintiff's account was in
default will be determined by looking at the `state of mind' of the
creditor to see whether the creditor considered the debt to be in
default.'').
\85\ Mavris v. RSI Enters., 86 F. Supp. 3d 1079, 1088 (D. Ariz.
2015).
\86\ Echlin v. Dynamic Collectors, Inc., 102 F. Supp. 3d 1179,
1185 (W.D. Wash. 2015) (rejecting defendant's argument that it did
not ``consider'' plaintiffs debt to be in default until a particular
dunning letter was sent because ``Dynamic's belief that Echlin's
account was not in default is not dispositive of whether default had
in fact occurred''); Hartman v. Meridian Fin. Servs., Inc., 191 F.
Supp. 2d 1031, 1043-44 (W.D. Wis. 2002) (holding that defendant did
not meet section 803(6)(F)(iii) exception and rejecting argument
that defendant does not ``consider'' a buyer to be in default before
end of 30-day cure period when buyer's contract with creditor
expressly provided that buyer would be in default ``if he fails to
pay on time'').
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In addition to being consistent with the term's plain meaning,
reading ``default'' as coextensive with contractual breach under
applicable law is consistent with Congress's intent to apply this
exemption to ``servicers'' of debt that is not in default at the time
the person obtains it. The FDCPA's legislative history explains that
Congress ``[did] not intend the definition [of debt collector] to cover
the activities of . . . mortgage service companies and others who
service outstanding debts for others, so long as the debts were not in
default when taken for servicing.'' \87\ These references make clear
the intended distinction between a consumer who has failed to meet
their contractual obligation to pay and a consumer who has an
outstanding debt but under their contract repays it over a defined
period of time (i.e., their failure to pay the entire outstanding
balance on a payment due date does not breach the contract).\88\ Courts
and the Federal Trade Commission (FTC) have likewise recognized a
distinction between a debt that may yet be ``outstanding'' but for
which a consumer is not necessarily ``in default.'' \89\
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\87\ S. Rep. No. 95-382, at 3-4 (1977), as reprinted in 1977
U.S.C.C.A.N. 1695, 1698. In its section-by-section discussion of the
bill, the report reiterates that ``The term [debt collector] does
not include . . . persons who service debts for others.'' S. Rept.
No. 95-382, at 7, 1977 U.S.C.C.A.N. 1695, 1701.
\88\ Of course, an entity that operates as a mortgage servicer
does not enjoy a blanket exemption from the FDCPA for all its
activities and can still satisfy the definition of ``debt
collector'' for those debts that were in default when they were
obtained by the entity. See, e.g., Babadjanian v. Deutsche Bank
Nat'l Tr. Co., No. CV1002580MMMRZX, 2010 WL 11549894, at *5 (C.D.
Cal. Nov. 12, 2010) (collecting cases); S. Rep. No. 95-382, at 3-4
(1977), as reprinted in 1977 U.S.C.C.A.N. 1695, 1698 (``so long as
the debts were not in default when taken for servicing).
\89\ See, e.g., Alibrandi v. Fin. Outsourcing Servs., Inc., 333
F.3d 82, 86 (2d Cir. 2003) (collecting cases that ``distinguish[]
between a debt that is in default and a debt that is merely
outstanding''); FTC, Annual Report to Congress on the Fair Debt
Collection Practices Act (2000), (available at: https://www.ftc.gov/reports/annual-report-congress-fair-debt-collection-practices-act-0)
(``[Section 803(6)(F)(iii)] was designed to avoid application of the
FDCPA to mortgage servicing companies, whose business is accepting
and recording payments on current debts.'') (emphasis in original)
(citing S. Rep. No. 95-382).
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In the context of medical debt, amounts owed are not typically paid
on a regular, recurring schedule over time pursuant to the terms of a
contract. To the contrary, as noted above, medical debts are
contractually generally due in full at a given time. Medical debt
collectors therefore do not ``service'' debts on an ongoing basis like
the mortgage servicers intended to be covered by this exemption.
To be sure, the terms of a given contract or the principles of
applicable law may differentiate between one (or more) missed payments
and contractual breach, in which case the debt may not be ``in
default'' if a single payment is missed. But absent such terms or
applicable legal principle, failure to make full payment by the given
time constitutes a breach of the consumer's contractual obligation. If
a person obtains that debt (or the right to collect it) after that
failure to make full payment, that person has obtained a debt ``in
default at the time it was obtained'' and therefore does not qualify
for the section 803(6)(F)(iii) exemption.
Finally, defining ``default'' for purposes of section
803(6)(F)(iii) by reference to relevant consumer-provider agreements
and background legal principles also best effectuates the statute's
purpose and Congress' intent, closes off avenues for regulatory
evasion, and is consistent with prior regulatory interpretations. The
FDCPA is a remedial consumer protection statute aimed at curbing
abusive and unscrupulous conduct by debt collectors and establishing
comprehensive national standards for the debt collection industry.\90\
As such, the statute's provisions are interpreted liberally in favor of
consumers' interests.\91\ Defining ``default'' by reference to the
relevant consumer agreements and applicable governing law advances
consumer interests because it is an objective, transparent standard
that a consumer or their advocate can apply to ascertain the status of
a party seeking to collect money that is claimed to be owed by the
consumer. Relatedly, an objective standard for defining ``default''
prevents debt collectors from attempting to expand the section
803(6)(F)(iii) exemption by reference to the subjective intent or
belief of the collector or creditor or by reference to agreements or
policy documents that the consumer has no access to.\92\ And this
interpretation is consistent with prior staff advisory opinions on this
definition issued by the FTC in the period when that agency had primary
regulatory authority over the FDCPA.\93\
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\90\ See 15 U.S.C. 1692(e) (``It is the purpose of this
subchapter to eliminate abusive debt collection practices by debt
collectors, to insure that those debt collectors who refrain from
using abusive debt collection practices are not competitively
disadvantaged, and to promote consistent State action to protect
consumers against debt collection abuses.'').
\91\ See, e.g., Salinas v. R.A. Rogers, Inc., 952 F.3d 680, 683
(5th Cir. 2020) (``Because Congress intended the FDCPA to have a
broad remedial scope, the FDCPA should be construed broadly and in
favor of the consumer.'') (internal quotations omitted); Brown v.
Card Serv. Ctr., 464 F.3d 450, 453 (3d Cir. 2006) (``Because the
FDCPA is a remedial statute . . . we construe its language broadly,
so as to effect its purpose. . . .''); Johnson v. Riddle, 305 F.3d
1107, 1117 (10th Cir. 2002) (``Because the FDCPA, like the Truth in
Lending Act (TILA), 15 U.S.C. 1601 et seq., is a remedial statute,
it should be construed liberally in favor of the consumer.'').
\92\ See. e.g., Alibrandi v. Fin. Outsourcing Servs., Inc., 333
F.3d 82, 88 (2d Cir. 2003) (rejecting argument by debt collector
that default status of debt should be determined by a ``letter
agreement'' between the collector and creditor); Echlin v. Dynamic
Collectors, Inc., 102 F. Supp. 3d 1179, 1185 (W.D. Wash. 2015)
(``Dynamic's belief that Echlin's account was not in default is not
dispositive of whether default had in fact occurred.''); Mavris v.
RSI Enters., 86 F. Supp. 3d 1079, 1086 (D. Ariz. 2015) (``[T]he
lender's subjective choice that the debtor has not defaulted cannot
be dispositive of whether default has in fact occurred. If it were,
debtors' access to FDCPA protections would be subject to the whim of
creditors, who could leave debtors completely in the dark about
when, if ever, those protections commence. Objective indicia of a
creditor's treatment of a debt are entitled to greater weight.'').
\93\ See, e.g., FTC, Staff Opinion Letter, 1989 WL 1178045 at *1
n.2 (Apr. 25, 1989) (``Whether a debt is in default is generally
controlled by the terms of the contract creating the indebtedness
and applicable state law.'').
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VII. Regulatory Matters
The CFPB has concluded that the advisory opinion is an interpretive
rule in part and a general statement of policy in part. Insofar as the
advisory opinion constitutes an interpretive rule, it is issued under
the CFPB's authority to interpret the Fair Debt Collection Practices
Acts and Regulation F, including under section 1022(b)(1) of the
Consumer Financial Protection Act of 2010, which authorizes guidance as
may be necessary or appropriate to enable the CFPB to administer and
carry
[[Page 80724]]
out the purposes and objectives of Federal consumer financial laws.\94\
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\94\ 12 U.S.C. 5512(b)(1).
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Insofar as the advisory opinion constitutes a general statement of
policy, it provides background information about applicable law and
articulates considerations relevant to the CFPB's exercise of its
authorities. It does not confer any rights of any kind.
The CFPB has determined that this rule does not impose any new or
revise any existing recordkeeping, reporting, or disclosure
requirements on covered entities or members of the public that would be
collections of information requiring approval by the Office of
Management and Budget under the Paperwork Reduction Act.\95\
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\95\ 44 U.S.C. 3501-3521.
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Pursuant to the Congressional Review Act,\96\ the CFPB will submit
a report containing this interpretive rule and other required
information to the United States Senate, the United States House of
Representatives, and the Comptroller General of the United States prior
to the rule's published effective date. The Office of Information and
Regulatory Affairs has designated this interpretive rule as a ``major
rule'' as defined by 5 U.S.C. 804(2).
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\96\ 5 U.S.C. 801 et seq.
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2024-22962 Filed 10-3-24; 8:45 am]
BILLING CODE 4810-AM-P
