Yesterday’s announcement of a new report finding stupefying amounts of medical debt on consumer credit reports continues the Biden Consumer Financial Protection Bureau’s focus on identifying and responding to consumer pain points caused by a financial marketplace that doesn’t always work for consumers. Overdraft fees, junk fees, Big Tech’s entry into payments, illegal auto repossessions, prepaid card contractors “siphoning” government benefits, for-profit college schemes and on and on — the CFPB’s got your back! Here are a few highlights:
Pain Point–Medical debt: Yesterday’s medical debt report finds that at least $88 billion of medical debt sits on consumer credit reports, squashing their hopes and dreams.
From the report: “Medical debt is the most common collection tradeline reported on consumer credit records. People also report being contacted by debt collectors about medical debt more than any other type of debt.”
CFPB Director Rohit Chopra explained that families are caught in a “doom loop” as medical debt collectors have “weaponized” the credit reporting system:
“In the United States, it is all too common for patients and their families to be caught in a doom loop between their provider and their insurance company. Even when a patient tries to battle to get an accurate bill or an insurance claim paid, medical debt collectors have a weapon that is hard to fight against: the credit report. I am concerned that the credit reporting system is being weaponized as a tool of coercion to get people to pay medical bills they may not even owe. […] In many ways, it’s hard to call medical debt a real debt.”
For decades, Congress has attempted to address the medical debt problem in numerous both modest and profound bi-partisan ways but has been stymied by the Big 3 credit bureaus and their creditor allies. It makes no sense for medical debt to have such an outsize effect on consumer lives despite that the CFPB report finds:
“This impact is particularly pronounced when lenders, insurers, landlords, and others rely on outdated credit scoring models that fail to take into account that medical collections are less predictive than nonmedical collections of future credit performance.”
Of course, medical debt is not the only problem with the credit bureaus. Another recent CFPB report found that “the big three credit reporting companies are giving consumers the runaround.” The CFPB’s on it!
Pain Point–Junk Fees: The CFPB’s request for comments on Junk Fees has already generated over 1,000 comments! You can comment until the end of March.
Junk fees! Talk about a pain point! The CFPB has already received over one thousand comments, most from consumers. You can comment or browse comments here. Today’s selected excerpt from a recent comment:
“…There’s also a really frustrating effect from punitive fees on services like banking that are nearly impossible to live without. My bank has “Overdraft Protection,” but that just means they’ll shift money from my savings account and THEN charge me $35.”
Pain point—Overdraft fees: The CFPB has also taken action on overdraft fees directly and some banks have responded.
Since a December CFPB report on overdraft fees, some big banks have announced significant changes to or elimination of their overdraft and non-sufficient fees (NSF) policies. It’s about time, but remember, it took a new CFPB for the big banks to realize that tricking mostly lower-income and younger consumers into over-drafting their debit cards at point of sale (the worst overdraft problem but there are others) was a bad look for them. As an old actor used to shill in financial ads: “We make money the old-fashioned way. We earn it.”
Why can’t the banks?
The CFPB also regularly seeks consumer advice. For instance, you can also comment on its Buy Now Pay Later inquiry until March 25th. Learn more.
That’s a quick 30,000 foot overview of some of the ways that the only federal financial agency with just one job – protecting consumers – is doing its job. It’s identifying and responding to consumer pain points in a financial marketplace full of tricks and traps. Under the Biden administration, it’s good to see that the CFPB has gotten back to work and even redoubled its efforts to help families recover from the financial hit of the pandemic, too.
The CFPB has your back, all of your backs.
Senior Director, Federal Consumer Program, PIRG
Ed oversees U.S. PIRG’s federal consumer program, helping to lead national efforts to improve consumer credit reporting laws, identity theft protections, product safety regulations and more. Ed is co-founder and continuing leader of the coalition, Americans For Financial Reform, which fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including as its centerpiece the Consumer Financial Protection Bureau. He was awarded the Consumer Federation of America's Esther Peterson Consumer Service Award in 2006, Privacy International's Brandeis Award in 2003, and numerous annual "Top Lobbyist" awards from The Hill and other outlets. Ed lives in Virginia, and on weekends he enjoys biking with friends on the many local bicycle trails.