Medical Debt Collector Fined for Illegal Practices

The Consumer Financial Protection Bureau (CFPB) has recently announced an enforcement action against Syndicated Office Systems, LLC (SOS), a medical debt collection company, for allegedly mishandling disputes over consumer credit-reporting while preventing consumers from exercising their own debt-collection rights.SOS, a debt collection agency and subsidiary of Conifer Health Solutions, LLC, specializes in collecting medical debts on behalf of health care providers, including doctors and hospitals. The CFPB’s consent order seeks over $5.4 million in compensation from the company for affected consumers, and SOS must also work to correct its harmful business practices and pay a penalty of $500,000.“Syndicated Office Systems mistreated consumers and prevented them from exercising critical debt collection rights,” said Richard Cordray, Director of the CFPB. “These violations are particularly egregious given the challenges many consumers already face who are attempting to navigate the medical debt maze. Today we are putting a stop to these illegal practices and getting consumers the relief they deserve.”While the CFPB holds supervisory authority over all collection agencies with more than $10 million in annual revenues (“Large Market Participants”), this rule excludes medical debt above that threshold, which leads some medical debt companies to believe that they cannot be reviewed or regulated by the CFPB. However, violations of the Fair Credit Reporting Act (FCRA) and the Fair Debt Collection Practices Act (FDCPA) do fall under the CFPB’s jurisdiction.The consent order charges SOS with violating both of these acts in two main ways:- Preventing consumers from exercising debt-collection rights – The company failed to send more than 10,000 debt-validation notices to individual consumers, during which time it continued to collect money (over $2 million) from those who never received the notices.- Mishandling disputes over consumer credit-reporting – Over 13,000 consumer credit report disputes were left unaddressed before their legally required time-frames (30 days) expired. On average, SOS took more than three months to respond to these disputes, and some were unaddressed for over one year. SOS treated credit report disputes in the same general way as consumers’ complaints and had no policies or procedures implemented for investigating them.SOS will be required by the CFPB to do the following:- Provide over $5 million in compensation to affected consumers – All consumers who paid the company without receiving the appropriate debt-validation notices will be refunded and their remaining account balances will be forgiven. According to insideARM, “the company will pay $100 to consumers who were never sent a debt validation notice and did not make any payments to the company,” and “damages ranging from $100-$1,000 to each consumer who did not receive a timely response to his/her credit report dispute.”- Correct credit report errors – All inaccuracies in all consumer accounts affected by SOS’s illegal practices will be fixed.- End illegal practices related to credit reporting and debt collection – The company must also begin to “develop new policies to comply with federal consumer credit reporting and debt collection laws.”- Establish consumer safeguards – The company must ensure it will have adequate facilities, systems, information, and staff to handle credit report disputes as quickly and conveniently as possible.- Pay a civil monetary fine of $500,000 for illegal practices.