The Consumer Financial Protection Bureau (CFPB) has taken action against a medical debt collection company it says mishandled consumer credit reporting disputes and prevented consumers from exercising their debt collection rights.
The CFBP is ordering Syndicated Office Systems to provide more than $5.4 million in relief to harmed consumers, correct its businesses practices, and pay a $500,000 penalty.
Syndicated Office Systems, which does business as Central Financial Control, is a debt collection agency that primarily collects medical debt on behalf of hospitals, doctors and other healthcare providers. More than 43 million Americans have medical debt adversely affecting their credit reports, and more than half of all overdue debt on consumer credit reports is from medical debt.
The federal agency found that Syndicated Office Systems failed to respond to more than 13,000 consumer credit report disputes within the 30-day timeframe required by law. On average, it took the company more than 90 days to respond and in some cases, more than a year. With no formal policies regarding credit disputes, the company treated them like run-of-the-mill consumer complaints with no deadline to respond.
Like other debt collectors, Syndicated Office Systems typically initiates collection efforts through letters and telephone calls to consumers. Within five days of their initial communication, debt collectors are generally required to send debt validation notices to alert consumers about their right to request proof that a debt is valid or dispute the debt. The company, however, failed to send debt validation notices to more than 10,000 customers and continued to collect more than $2 million from consumers who did not receive these notices.
Syndicated Office Systems will be required to provide more than $5 million in relief to harmed consumers. Consumers who were never sent a debt validation notice and who made payments to the company will receive a full refund and have remaining account balances forgiven. The company will pay $100 to consumers who were never sent a debt validation notice and did not make any payments to the company. The company must also pay damages ranging from $100-$1,000 to each consumer who did not receive a timely response to his or her credit report dispute. The company will also correct errors on credit reports.
Additionally, the company is required to end illegal reporting and debt collection practices and establish consumer safeguards. The company will also pay a civil penalty of $500,000.