News and Commentary

The “Doom Loop”: Federal No Surprises Act Enacts CFPB To Raise Medical Billing Concerns

Updated: Jun 2


The Consumer Financial Protection Bureau (CFPB), on March 1st, 2022, released a report summarizing key areas of concern in medical debt collections and reporting. The report showed that $88 billion in medical debt were on American consumer credit records as of June 2021, or around 58% of all outstanding debt. The CFPB is considering options to limit the amount of medical debt apparent in credit reports.


According to the CFPB, medical debt is often inaccurate and not representative of a consumer’s creditworthiness. Data showed consumers rarely planned to take on medical debt, and two-thirds of medical debts are the result of a one-time or short-term medical expense arising from an acute medical need. Emergencies during the COVID-19 pandemic highlighted this.


Payment of medical debt can also be difficult. Coining it the “doom loop”, CFPB Director Rohit Chopra said that Americans are often caught in a never-ending battle between their medical provider and insurance company. This lowers consumers’ credit scores and harms their future purchasing and borrowing ability.


A new federal ban, the No Surprises Act, gives the CFPB a path to address how much medical debt is posted to consumer credit reports. The Act, which went into effect January 1, 2022, prohibits hospitals and health care providers from billing patients for more than their in-network co-payment, co-insurance, or deductible in cases of emergencies. In accordance with the ban, the CFPB can supervise and enforce both the debt collectors and credit reporting companies to ensure that they are reporting accurate debts to credit bureaus. Specifically, the CFPB intends to:

· Hold credit reporting companies accountable;

· Work with federal partners to reduce coercive credit reporting, and;

· Determine whether unpaid medical billing data should be included in credit reports.


What does this mean for mortgage companies? The CFPB will continue to use all its tools and authorities available to tackle issues that harm consumers. Companies will need to be vigilant and keen on rising compliance and regulatory issues.


Want to stay in the know? At Firstline, we specialize in helping protect you and your company by staying in front of compliance rules and regulations and navigating the journey with you. Contact us at (831) 325-3369 or info@firstlinecompliance.com for questions and comments.