On December 15, the Consumer Financial Protection Bureau (CFPB) announced it had reached a settlement with medical debt collector Commonwealth Financial Systems, Inc. (Commonwealth) in its lawsuit over alleged illegal debt collection practices. Specifically, the CFPB alleged that Commonwealth failed to conduct reasonable investigations of disputes and violated the Fair Debt Collection Practices Act (FDCPA) by attempting to collect disputed debt without obtaining substantiating documentation. Under the settlement agreement, Commonwealth is banned from debt collection activities, must request CRAs to delete all consumer accounts to which it had previously furnished information, and must pay a $95,000 penalty to the CFPB’s victims relief fund.

Specifically, the consent order alleged that:

  • When investigating disputes, Commonwealth did not have any documentation supporting the debt and had insufficient data for investigating certain types of disputes.

    Commonwealth did not receive any images or documentation from its clients, such as itemized bills from the medical facilities, insurance information, or prior dispute or complaint information. Instead, Commonwealth simply confirmed that it received from the client all the data elements that it expected and checked that the data points provided appeared to be valid and consistent based on formatting.

  • Regardless of the nature of the dispute, Commonwealth’s indirect disputes procedures directed its agents to: “Glance over information populated. Check to see that social security number matches. If social security number is completely different delete tradeline.”

    According to the CFPB, this does not constitute a reasonable investigation of many types of disputes because it assumes that the consumer’s social security number is relevant to the dispute, and that the social security number in its system is the number of the debtor rather than of a different consumer who had been wrongly targeted.

    Matching social security numbers would also not be sufficient in disputes related to account balances, past settlements, or bankruptcy.

  • To adequately address many disputes, a dispute agent would need to investigate further. However, Commonwealth’s indirect disputes procedures contained no instruction to request supporting documents, which types of supporting documents it should request, or how to handle disputes where such documents are contradicted by the consumer’s allegations.

  • Commonwealth’s practice of routinely deleting tradelines is particularly problematic for medical debts, which are often re-placed with other debt collectors, meaning that many accounts are later passed along to another debt collector that may furnish the inaccurate information again. According to the CFPB, had Commonwealth conducted a reasonable investigation instead of just deleting the tradeline, it could have identified the root cause of the inaccuracy.

    Between 2017 and 2021, two nationwide CRAs notified Commonwealth at least five times that it had an abnormally high deletion rate in response to indirect disputes. One CRA sent an email to Commonwealth stating: “your file will be going to our committee due to the high amount of deleted disputes that we are receiving from you” and asking is there “a reason that you are deleting the data instead of validating and responding that it is valid.”

  • Commonwealth also did not have enough dispute agents to handle the volume of disputes. For example, on one day in 2021, one dispute agent responded to 1,052 disputes, spending less than 30 seconds per dispute on average.

In the consent order, Commonwealth did not admit or deny any of the findings or conclusions except those necessary to establish jurisdiction.

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