The CFPB announced last week that it has entered into a consent order with Commonwealth Financial Systems, Inc. (Commonwealth), a third-party debt collection company that collects past-due medical debts and furnishes information about consumers to consumer reporting agencies (CRAs), to resolve Commonwealth’s alleged violations of the Fair Credit Reporting Act (FCRA) and the Fair Debt Collection Practices Act (FDCPA).  In addition to requiring Commonwealth to pay a $95,000 civil money penalty, the order permanently bans Commonwealth from participating in or assisting others in any debt collection activities, debt buying, debt selling, and consumer reporting activities, and requires Commonwealth to submit to all CRAs to whom it previously furnished information about any consumer a request to delete all collection accounts for such consumers.

FCRA violations.  The CFPB’s findings and conclusions included the following:

  • In developing its policies and procedures regarding the accuracy and integrity of information it furnished to CRAs, Commonwealth violated Regulation V by failing to consider and incorporate, as appropriate, the guidelines set forth in Appendix E of Regulation V.  The guidelines direct a furnisher, in developing policies and procedures, to address establishing and implementing internal controls regarding the accuracy and integrity of furnished information and to identify practices or activities of the furnisher that can compromise the accuracy or integrity of furnished information.  Over a five-year period, Commonwealth received repeated notifications of problems and concerns from CRAs that could indicate a lack of accuracy and integrity in the data furnished by Commonwealth.  Despite these notifications, Commonwealth did not make any corresponding changes to its written policies and procedures relating to the furnishing  of information to CRAs that addressed those problems and concerns.  Commonwealth’s policies and procedures did not require it to verify random samples of information furnished to CRAs, audit its dispute handling procedures, or review records reflecting historic dispute trends.
  • Commonwealth violated the FCRA by failing to conduct reasonable investigations of direct and indirect consumer disputes.  With regard to indirect disputes, Commonwealth’s written procedures instructed dispute-handling agents to perform a cursory review of information provided in the dispute and to only match the Social Security number provided in the dispute with the Social Security number in Commonwealth’s system, did not instruct agents to review relevant information in Commonwealth’s possession such as prior correspondence with the consumer, and  for certain indirect disputes, instructed agents to delete the tradeline without conducting any investigation.  With regard to direct disputes, Commonwealth’s written procedures did not require any investigation if a direct dispute was received before a debt validation was sent to the consumer and, for disputes received after a validation notice was sent, such procedures nominally directed the dispute-handling agent to conduct an investigation without any instruction on how to conduct an investigation beyond requesting an itemized bill or “other source of media depending on client” with no further specification.  Because an itemized bill obtained from a client in response to a dispute typically reflects the same data that Commonwealth received from its client in the first instance and is the same information that the consumer claims is erroneous, an agent’s reliance on an itemized bill could result in a circular inquiry that does not address the substance of the consumer’s dispute.
  • Commonwealth violated the FCRA by failing to report the results of direct dispute investigations to consumers.  For up to 28% of the direct disputes it received over a nearly four and one-half year period, Commonwealth did not report the results of its direct dispute investigations to consumers.
  • Commonwealth violated the FCRA by furnishing disputed information to CRAs without notice that the information was disputed by the consumer.  In at least 10,906 instances, after receiving a dispute from a consumer about furnished information, Commonwealth continued to furnish such information without notifying the CRA that such information was disputed.

The CFPB’s FCRA-related findings also include findings about Commonwealth’s staffing.  The CFPB found that Commonwealth did not have a sufficient number of dispute-handling agents to effectively handle the volume of disputes received which resulted in its agents handling hundreds of disputes per day and spending only seconds on average to resolve each dispute.  The CFPB also found that Commonwealth was aware of these statistics based on internal documents and its tracking of employee productivity.

FDCPA violations.  The CFPB’s findings and conclusions included the following

  • Commonwealth violated the FDCPA’s prohibition on the use of false, deceptive or misleading representations or means to collect a debt by communicating debt information to a CRA after receiving a dispute from the consumer without informing the CRA that the debt was disputed.
  • Commonwealth violated the FDCPA  prohibition on continuing collection activity after receiving a written dispute within 30 days of the consumer’s receipt of the notice by sending consumers a collection letter after receiving a written dispute within the 30-day period but before obtaining verification of the debt or a copy of the judgment and mailing it to the consumer.
  • Commonwealth violated the FDCPA prohibition on the use of false, deceptive or misleading representations or means to collect a debt by sending collection letters or making collection calls in which Commonwealth represented directly or indirectly, expressly or by implication, that the consumer owed a debt to Commonwealth’s client in the amount indicated in the letter or call and Commonwealth had a reasonable basis for representing that the consumer owed the debt.  Commonwealth sent such a letter or made such a call to numerous consumers after receiving a written or oral dispute from the consumer about the validity or accuracy of the debt but without having obtained substantiation for the debt, after receiving the dispute, sufficient to provide a reasonable basis for asserting that the consumer owed the debt at the time the letter was sent or the call was made.  The CFPB found that Commonwealth’s continued collection activity on the disputed accounts “reflected” its dispute procedures which indicated that an employee could still “work accounts” when a dispute was received more than 30 days after the consumer’s receipt of a validation notice.

The CFPB also found that Commonwealth’s FDCPA and FCRA violations constituted violations of the Consumer Financial Protection Act.

In September 2023,  the CFPB launched a rulemaking process to remove medical bills from  credit reports.  The CFPB’s action followed its release in May 2023 of a report on the positive impacts of removing medical debt tradelines from credit reports.