Tag: CFPB

Medical Debt

Medical Credit Cards Drive Patient Debt and Inflate Costs of Health Care, according to CFPB Report

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The Biden administration has issued a word of caution to consumers about the growing concerns they have behind medical credit cards and other loans used to pay down medical bills. These concerns have been expressed in a new report published, which warns consumers that high interest rates on these cards can only increase the patient’s debt and eventually threaten their financial situation.

In the report, issued by the Consumer Financial Protection Bureau (CFPB), they reported that U.S. consumers paid $1 billion in deferred interest on medical credit cards and other types of medical financing between the years 2018 and 2020. The interest rates on these cards can be particularly high, which is why the CFPB found that medical credit card interest rates can inflate medical bills by approximately 25 percent (25%).

Credit Card Debt, Credit Score

How Credit Card Debt Impacts Your Credit Score

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Most consumers utilize a credit card at some point in their lives, and many of them carry credit card debt from month-to-month. While using credit cards responsibly can help increase a person’s credit score, having too much credit card debt can cause significant harm to that score.

The amount of debt you owe on your credit card is one of the biggest factors affecting your credit score. That’s why it is never a good idea to max out your credit card. And when your credit score goes down, you could end up having to pay higher interest rates on loans or any other credit you apply for. A low credit score can impact your applications for apartment rentals, cell phone plans, and more. Research by the Consumer Financial Protection Bureau has indicated that high income earners are as prone to financial stress because of debt as low-income earners.

Consumer Debt, Credit Score

Millions of Debt Collections Disappear from American Consumers’ Credit Reports

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Millions of debt collections disappeared from American consumers’ credit reports during the COVID-19 pandemic, according to reports from the Consumer Financial Protection Bureau (CFPB). Even though a large number of collections cases dropped off credit reports, overdue medical debt still remains a major consumer problem.

According to the CFPB, the total number of debt collection cases on consumer credit reports went from 261 million in 2018 to 175 million in 2022, dropping 33 percent (33%). Additionally, the number of consumers who had a debt collection on their credit report decreased by 20 percent (20%) between 2018 and 2022.

Medical Debt

Medical Debt May No Longer Affect Your Credit Score

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Relief may be on the way for consumers struggling with medical debt. As of July 1, 2022, the three largest credit bureaus, TransUnion, Equifax, and Experian, are removing cleared medical debts from consumers’ credit reports.

What this means is if the consumer has paid his or her medical bill in full, and that debt is still plaguing his or her credit report, this negative mark will now be removed. This announcement comes as part of a larger endeavor by the Biden administration to either decrease or eliminate medical debt as part of government lending determinations.

Consumer News, Predatory Lending Practices

Consumers Being Lured Into Predatory Car Repair Loans

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Predatory lending practices are becoming more common when it comes to companies attempting to “help” consumer fund car repairs. Many of the major car repair shops, including AAMCO, Jiffy Lube, Midas, Precision Tune Auto Care, Grease Monkey, and Meineke, are offering financial assistance to consumers who are not able to pay for their car repair expenses. The problem is, these car repair loans can end up charging up to 189 percent interest, according to a recent study by Consumer Reports.

Many states have laws issuing caps on interest rates to avoid predatory lending practices. However, companies have become wise to these laws and evade them by teaming up with a bank in a state that does not have an interest rate cap. This practice is also known as “rent-a-bank,” and it falls into a legal gray area.

Debt Collection

What Consumers Need to Know About Debt Collection Rules ‘Regulation F’

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Several new debt collection rules have been announced by the Consumer Financial Protection Bureau (CFPB). These rules, through what is called Regulation F, offer greater control to consumers over the various method and times they will be able to be contacted by debt collectors.

Regulation F was implemented by the CFPB on October 30, 2020, and December 18, 2020. The regulation was created to interpret the Fair Debt Collection Practices Act (FDCPA). The FDCPA is meant to protect consumers from abusive collection tactics by third-party debt collectors. Regulation F officially went into effect on November 30, 2021. The FDCPA and the regulations included in Regulation F apply only to third-party debt collectors and not original creditors.

Debt Collection, Debt Consolidation, Debt Settlement

Can Settling a Debt Harm Your Credit?

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Escaping debt can be a long, arduous process. Many times, consumers find success in working with the creditor directly on settling the total amount owed, satisfying the debt by paying an amount that is much smaller than what was originally owed. While debt settlement can lift the burden carrying a large amount of debt places on a consumer, it also comes with its negative attributes, as well. In fact, according to new reports, debt settlement can actually end up harming a consumer’s credit score more than it helps.

A debt settlement can lower a person’s credit score by 100 points or more, according to the National Foundation for Credit Counseling. It can take up to seven years to recover from that negative hit.  

Medical Debt

Major Credit Reporting Agencies to Remove Majority of Medical Debt from Consumers’ Credit Reports

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Beginning in July 2022, the three major credit reporting agencies, Equifax, Experian, and TransUnion, announced they will remove approximately 70 percent of medical collection debt from their credit reports.

Specifically, paid medical collection debt will be the debt no longer included on consumer’s credit reports. The hope behind these efforts is to allow consumers more time to address their medical debt with their healthcare providers and insurance companies prior to the debt being reported.

Debt Collection, Debt Relief

CFPB Announces Two Final Debt Collection Rules to Go into Effect November 30

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The Consumer Financial Protection Bureau (CFPB) announced two final debt collection rules which are scheduled to take effect on November 30, 2021. These two rules clarify and add further detail to provisions of the Fair Debt Collection Practices Act (FDCPA), the law that offers protections to consumers from abusive or unfair collection practices from third-party debt collectors.

These rules were originally going to be made effective in the spring, but the CFPB delayed the effective date by 60 days to allow all affected parties time to comply due to the COVID-19 pandemic. However, after making the announcement regarding a 60-day delay, the CFPB determined that the extension was not needed and published the official notice in the Federal Register officially withdrawing the extension.

Debt Collection

Can Debt Collectors Contact You on Social Media?

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Debt collectors will attempt to contact a consumer through any means necessary to collect on a debt. As more consumers communicate with each other via social media, debt collectors are utilizing these platforms as another means to contact consumers.

A federal agency issued a new rule that would allow debt collectors to contact people by email, text message, and social media platforms, including Twitter, Facebook, and Instagram.

The new rule limits how many times the collection agency can contact the consumer via telephone. Collectors will be limited to seven debt-collection phone calls weekly, but they are allowed to send an unlimited number of text messages, email messages, and social media private posts.