There are rules debt collectors are supposed to abide by when they deal with consumers. However, many may break the rules if you’re uninformed.
Here’s what happened to one company that harmed consumers.
Company fined and shut down
Commonwealth Financial Systems, a medical debt collector, illegally tried to collect unverified medical debts after consumers disputed the validity of the debts, according to the Consumer Financial Protection Bureau. Under the order issued Friday, the company will cease operations and pay a $95,000 penalty to the agency’s victims relief fund.
Commonwealth Financial Systems, of Dickson City, Pennsylvania, is a nonbank corporation. It’s a third-party debt collector that specializes in the collection of past-due medical debts and furnishes information about consumer collection accounts to consumer reporting companies.
Commonwealth’s actions violated federal law because the company failed to conduct reasonable investigations of disputed debts and failed to inform consumer reporting companies that some information was being disputed. Commonwealth also violated federal law because it continued to attempt to collect disputed debts without supporting documentation.
Under the CFPB’s order, Commonwealth is required to:
- Shut down permanently.
- Tell consumer reporting companies to delete all information.
- Pay a $95,000 fine.
The medical debt problem
About 20 percent of U.S. households report that they have medical debt. In 2022, the CFPB received thousands of consumer complaints about medical debt collection.
The agency has found that the collection, furnishing, and reporting of medical bills is plagued by inaccuracies.
What debt collection companies can’t do
Federal law bars debt collectors from using obscene or profane language, threatening violence, calling consumers repeatedly or at unreasonable hours, misrepresenting a consumer’s legal rights, disclosing a consumer’s personal affairs to third parties, and obtaining information about a consumer through false pretenses.
What to do if a debt collector contacts you
Here are tips from Consumer Reports if you’re contacted by a debt collector.
- Don’t pay right away.
- Gather as much information as you can.
- Ask the debt collector to send verification of the debt.
- File a dispute within 30 days. Get sample letters here.
- Keep a copy of the correspondence and sent it certified.
Again, it’s important to know what to do if you’re contacted by a debt collector so you don’t get trapped into paying something you don’t owe.
If you're having an issue with debt collection, you can submit a complaint with the CFPB.
