Friday Financial Fraud Roundup
Phantom medical debt and payday predators
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Phantom Medical Debt Wrecks Consumer Credit
Phoenix Financial held accountable
Phantom medical debt - that’s debt in collections that sometimes isn’t even owed or that a debt collector can’t substantiate - can wreck a consumer’s credit.
That’s why a recent Consumer Financial Protection Bureau (CFPB) case is good news - a bad actor in the debt collection space is being held accountable.
The Consumer Financial Protection Bureau (CFPB) has initiated an enforcement action against Phoenix Financial Services for illegal medical debt collection.
The action requires Phoenix to pay a fine of $1.675 million and to provide refunds to consumers who paid debts that were not owed.
A CFPB investigation found that Phoenix continued collection actions even after consumer disputes demonstrated that the debt in question was not valid.
“With medical debt looming over so many American families, we are taking action against companies seeking to illegally profit off patients,” said CFPB Director Rohit Chopra. “Given widespread inaccuracies in medical billing and credit reporting, the CFPB will be working to ensure that patients are not coerced into paying debts that they do not owe.”
The CFPB investigation uncovered thousands of cases in which Phoenix continued collecting even after a consumer dispute and even when the debt was not valid.
On the Pain Inflicted by Payday Predators
Payday and title lenders are known for being extractive and a new report from the Center for Responsible Lending (CRL) demonstrates just how much pain these predators can cause.
$3 billion worth - that’s the amount extracted by these lenders from low-wealth communities.
The CFPB found that 75% of payday lender fees are generated from borrowers with more than ten loans per year, demonstrating that these lenders rely on a business model of churning loans to borrowers who cannot afford to pay them off without reborrowing.
“The scale of this wealth extraction is troubling, with much of the $3 billion flowing through storefronts positioned in low-wealth communities. They are set up to systematically draw borrowers into the long-term cycle that underpins the predatory lending business model. But even this calculation is conservative as longer-term payday lending and online lending are burgeoning and much of that activity is not reported to state regulators,” said Charla Rios, deputy director of research for CRL. “Policymakers should cap annual interest rates at no more than 36% to stop the extraction of wealth from communities and consumers already struggling with financial instability. They should also pass laws to prevent predatory lenders from evading state consumer protections.”
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