Yesterday, the American Financial Services Association (AFSA) submitted comments to the Consumer Financial Protection Bureau (CFPB) on its proposed rule concerning medical debt. In the letter, AFSA highlighted four specific issues with the proposed rule.
Firstly, AFSA argued that "the CFPB lacks authority for this rulemaking." According to AFSA, the Fair Credit Reporting Act (FCRA) limits the CFPB’s rulemaking to the “uses” of medical information but does not explicitly grant authority to restrict that information from being included in consumer reports. The FCRA specifically permits providing medical information as long as it is properly coded to mask the provider or nature of services.
Secondly, AFSA noted that "the rule does not provide a clear definition of medical debt." The organization suggested that the final rule should clearly state that “medical debt information” does not include medical payment products or general-purpose credit. A broader definition could make it difficult for consumer reporting agencies or lenders to determine which transactions were for medical purposes.
Thirdly, AFSA raised concerns about conflicts with existing regulations and CFPB’s own enforcement actions. They stated that "the proposed rule does not adequately address potential conflict with lenders’ obligations under Regulation Z and Unfair, Deceptive, or Abusive Acts or Practices (UDAAP)." If enforceable medical debt is excluded from analysis, it could lead to a cycle-of-debt situation where delinquent borrowers might have no choice but to refinance existing credit. This scenario could increase lending costs across the board due to heightened risk.
Furthermore, AFSA pointed out an inconsistency in recent CFPB enforcement actions. They cited a case where "the Bureau accused a finance company of not being thorough enough in its ability-to-repay analysis," yet now considers removing medical debt from consumer reports—a move they argue contradicts previous enforcement actions.
Lastly, AFSA contended that "the rulemaking would disrupt a working consumer reporting system." They emphasized that accurate and comprehensive information in consumer reports serves as a truthful reflection of consumers' financial conditions and history managing credit. The proposal suggests making the system more selective about what information is reported, which AFSA believes is misguided.
In summary, AFSA's comments reflect significant concerns over both legal authority and practical implications related to CFPB's proposed changes regarding medical debt reporting.
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