ACA International and co-plaintiff Specialized Collection Services Inc. filed a lawsuit (PDF) today in Texas against the Consumer Financial Protection Bureau’s misguided final rule amending Regulation V of the Fair Credit Reporting Act, specifically regarding medical debt credit reporting.
“Americans are frustrated by medical bills. The system is confusing and expensive. But frustration does not justify lawlessness. Here, a federal agency without authority over health care is exploiting this frustration by forcing the suppression of accurate information when enacting a regulation to prevent credit reporting agencies from acknowledging medical debts on credit reports,” the lawsuit, filed in the U.S. District Court for the Southern District of Texas, Houston Division, states. “No agency has the power to do that.”
The lawsuit, filed by ACA’s legal partner Brownstein Hyatt Farber Schreck LLP, is part of ACA’s fight against government overreach and its unreasonable demands on behalf of members to achieve positive solutions and to ensure regulators follow the law.
It seeks to prevent the rule from taking effect for not only its impact on health care providers’ ability to recoup monies owed and patients’ future access to health care, but also for the CFPB’s lack of statutory authority to implement such a rule and its overbroad approach that violates the First Amendment of the U.S. Constitution.
The CFPB as an agency cannot prohibit what Congress has intended and authorized by federal statute.
It’s clear, given the timing of the rule alone, it is for political gain.
The CFPB also failed to explain how this rule is consistent with and not counterproductive to regulations that require creditors to assess using reliable information about consumers’ ability to repay an account.
Consequently, the CFPB violated the Administrative Procedure Act by failing to engage in reasoned decision making, failing to sufficiently explain its reasoning, and failing to support its conclusions with substantial evidence.
ACA also seeks to prevent the rule from taking effect because it is overbroad, content-based and prevents the communication of accurate information without a legitimate state interest. There is also the overarching concern that the bureau is operating unconstitutionally because for several years, the Federal Reserve has not had “earnings” it is allowed to use to fund CFPB activities.
As a parallel effort, ACA’s complaint follows a similar, like-minded lawsuit (PDF) from the Consumer Data Industry Association (CDIA) and Cornerstone Credit Union League in the U.S. District Court for the Eastern District of Texas, Sherman Division.
ACA supports and is working toward shared goals with CDIA and the Cornerstone Credit Union League.
In addition to its members, ACA is working closely with the other impacted stakeholders in the courts and Congress, as well as with the new administration to highlight the many negative impacts of the CFPB’s actions on consumers, patients, creditors, and medical providers across the country.
For example, the day before the final rule that medical debt should not be considered on credit reports was released, the CFPB put out an enforcement action penalizing a mortgage lender for failing to consider medical debt, twisting itself in circles in its arguments.
Medical debt is a serious challenge for many Americans and this CFPB rule does nothing to fix the underlying problems. It does not address the complex web of health insurance. It simply shifts the burden of payment onto doctors, nurses and all other patients to cover those who have not paid. ACA and a significant number of commenters warned the CFPB about these potential long-term negative consequences during the public comment period for the rule.
The CFPB disregarded comments from a wide variety of stakeholders—including lenders, health care providers, and the collections industry—about the rule’s financial and social costs
Perhaps the most troubling aspect of this rule that ACA is challenging is the irony: the Dodd Frank Act created the CFPB, in part, to reduce the likelihood of consumers receiving loans they can’t afford to repay.
ACA will continue to provide additional updates for members on the final rule and our judicial advocacy strategy in member alerts, ACA Daily, as well as on the ACA Huddle, including a special event from noon-1 p.m. central time, Friday, Jan. 10, about the challenges to the rule.
ACA will provide more details on the Jan. 10 Huddle soon.