Rulemaking by Advisory Opinion: Like making turducken without a recipe

For anyone uninitiated to turducken, let me explain that this is a dish created by renowned chef Paul Prudomme. It consists of a deboned chicken stuffed into a deboned duck, stuffed inside a turkey. Between each bird, and inside the chicken is a layer of stuffing, each one different with different seasonings and bases. The recipe itself is lengthy and detailed. Anyone who wants to try to create such a feast can find a recipe and instructions here.

I compare the process that any debt collector will have to go through to comply with the Advisory Opinion issued under Regulation F and called Debt Collection Practices (Regulation F) Deceptive and Unfair Collection of Medical Debt to making turducken without a recipe because the advisory opinion is not written in form for a Rule, such as Regulation F. Regulation F, for which we had a year to prepare to comply, is organized. It contains clear language about what debt collectors must do to comply and practices that debt collectors must avoid to prevent violating the rule. The Advisory Opinion takes up 10 pages in the Federal Register and contains 93 footnotes. The advisory opinion is applicable on December 3, 2024, which Is merely 60 days from its publication date. 

While at first glance the advisory opinion may seem simple, the more you try to figure it out, the more complex it becomes.  First, the rule provides a list of unlawful practices it defines, including: 

• Collecting an amount not owed because it was already paid.
• Collecting amounts not owed due to Federal or State law. 
• Collecting amounts above what can be charged under Federal or State Law.
• Colleting amounts for services not received.
• Misrepresenting the nature of legal obligations.
• Collecting unsubstantiated medical bills. 

That seems simple enough - medical debt collectors at first glance could say “We already avoid those practices.” But it is not as simple as that. The Background section of the Advisory Opinion explains the CFPB’s understanding of the billing practices of medical providers, the influence of insurance claims practices, the fact that consumers can’t usually shop around for the best price for their medical needs because of limitations of their medical insurance or the fact that their need for medical care is emergent leaving no time to shop around. No data is provided about how many consumers experience the unlawful practices the rule seeks to eliminate, but the CFPB does mention that it has “gotten reports” from consumers who feel they have suffered at the hands of debt collectors, presumably through complaints, and it has brought several enforcement actions against debt collectors who attempted to collect medical debts without substantiation.

While it feels like the main takeaway from the rule is that the CFPB requires that debt collectors have in hand, and have examined debt substantiation for the debts, this rule goes farther than that. Let’s look at a single aspect of each of the unlawful practices. There are undoubtedly other examples for each described practice. 

Collecting an amount not owed because it was already paid

“Because payments toward a debt can be made at any time, debt collectors are responsible for ensuring that the correct collection amount is sought during each attempt at collection." FedR, v. 89 no.193, 10/4/2024, p.80718. Having substantiation about the debt will not support this process. Scenarios in which the consumer thinks the debt balance should be reduced occur not only when insurance makes another payment, but also at the consumer’s own hands. For example, consumers may literally take a payment to the business office at the hospital. If they have had service since the date that relates to the bill assigned to a debt collector, the hospital will gladly accept their payment and apply it to any current balance on other services rendered more recently. Balances of accounts written off to collections may not even be visible to whomever accepted the consumer’s payment. Yet the consumer believes the balance of their bill in collections should be reduced by that payment.  

Collection of Amounts Not Owed Due to Federal or State Laws

“Debt collectors are responsible for ensuring that they do not collect or attempt debts that are not legally owed by the relevant consumer, whether by operation of State or Federal Law.” FedR, v. 89 no.193, 10/4/2024, p.80719. The rule cites several state and federal laws that may protect consumers from having to pay medical bills in certain circumstances, including State workers’ compensation laws, the Federal Nursing Home Reform Act. While substantiation would include any contract or agreement a consumer signed when medical service was provided, the rule contends that state and federal laws can negate contract provisions. Even with substantiation in hand before attempting to collect a debt, the debt collector may not know that a workers’ compensation claim is pending. While we realize it can be disconcerting for a consumer to hear from a debt collector about a debt they feel they do not owe, the FDCPA and Regulation F provide a dispute process in which consumers may inform a debt collector about the nature of their injury and provide information that may not have been included in substantiation. 

Collection of Amounts Above That Permitted by Federal or State Law

The CFPB itself acknowledges that there are a multitude of impacts that may determine what a patient should be billed, e.g., “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.” FedR, v. 89 no.193, 10/4/2024, p.80719 (Emphasis added). People show up at the emergency room often without the bare essentials such as shoes and identification and may even be unconscious. Many people do not carry their health insurance information on them. The fact that they may never provide their information during the course of treatment at an emergency department impacts the amount they may be billed. They might be overbilled without having provided their insurance information. They may never get a bill, and if they do, they might ignore it, thinking their insurance will handle it, even when they did not provide insurance information to the provider. The dispute process is provided to set the course of resolving these problems. When substantiation shows there was no insurance information, the debt collector will have to reach out to the consumer and assert the amount that was placed for collection, and then walk the consumer through the dispute process and help the consumer resolve the problem by seeking and even receiving insurance information the consumer never provided before. In the rule, the CFPB asserts repeatedly that “[...] the FDCPA imposes strict liability [and] debt collectors should ensure that they only collect or attempt to collect amounts that may be charged under applicable State law.” The footnote related to this assertion says that “⁵⁵ 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.”  This is merely a misguided assertion in the advisory opinion. Just like debt collectors are held responsible for training, testing, monitoring and auditing their own employees, health care providers have similar duties.

We’ve only made it through half of the unlawful practices outlined in the Rule. If we were making a turducken, we might have the birds boned and dressing started. The problem here is the recipe. There isn’t one. Debt collectors who continue to collect medical debt will need to initiate conversations with their clients, ask for audits or conduct them themselves (if allowed by the facility), determine if No Suprises Act and Financial Assistance practices are being met properly. How can we manage our clients in this way, especially those owned by private equity or have governing boards who don’t want to hear it? Debt collectors can analyze their own policies and procedures and try to make sure that their dispute processes, account intake policies and processes and even scripts collectors use to speak with patients can follow the intent of this rule. New policies will be required, as well. Then we might just be cooking with fire.