Debt Traps: Medical Credit Cards and Student Loans
Friday Financial Fraud Roundup - July 7, 2023
Debt can be deflating.
The impact can be even more frustrating if the debt you are facing is over medical expenses or student loans.
The rise of so-called “medical credit cards” and other financing products for medical expenses highlights the real crime: America’s healthcare system is broken.
People should not go into debt because they get sick. Only profiteers would design a healthcare system like the one we currently have - insurance companies get rich and patients see sickness become mountains of debt.
These financing instruments only serve to mask the inadequacy of the current system.
Fortunately, some federal regulators are now taking a look at the medical financing industry:
The Consumer Financial Protection Bureau (CFPB) is joining with the Department of Health and Human Services (HHS) and the Department of the Treasury on a formal inquiry into high-cost lending products offered to medical patients.
The aim of the inquiry is to find ways to alleviate the burden of medical debt and determine necessary consumer protection measures in the medical finance marketplace.
“Financial firms are partnering with health care players to push products that can drive patients deep into debt,” said CFPB Director Rohit Chopra. “We are opening a public inquiry to better understand how these practices are affecting patients in our country.”
It’s absolutely good news that regulators are taking a consumer protection stance here. It will be even better when they adopt rules to prevent the worst acts of predators in the medical debt space.
However, there’s one way to actually solve this problem: A universal healthcare system.
Harry Truman suggested it back in 1948. Until we make it a reality, the rich will stay healthy and the sick will stay poor.
On another debt front, student loan debt has been in the news recently with a Supreme Court decision blocking President Biden’s debt relief plan.
Perhaps more insidious than student debt is the debt “relief” industry that preys on borrowers eager for more manageable debt repayment.
One such agency is now paying a settlement for collecting $699 upfront from borrowers looking to renegotiate the terms of their student loan repayment.
According to the CFPB's case, from 2016 through October 2019, the company (Timemark) used telemarketing campaigns to convince people with federal student loans to pay up to $699 in fees to file paperwork to reduce or eliminate their monthly payments, through loan consolidation, forgiveness, or income-driven repayment plans. The U.S. Department of Education, however, offers these options to student loan borrowers for free.
Collecting fees in advance for debt relief services is illegal under the Telemarketing Sales Rule.
Even more egregious, the company was charging unwitting borrowers $699 for services offered by the federal government for free.
Speaking of student loans . . .
A Nashville lawyer made national news recently due to a series of tweets in which he explained winning a fight against a student loan debt collector.
Brian Manookian explained how he used the Fair Debt Collections Practices Act to push back against a debt collector and win. The bottom line: Always be sure the company attempting to collect on your debt (student loan or otherwise) has the right to collect.
The company should be able to prove (with documentation) that they are the rightful owner of the debt and that you owe them the money.