CFPB Warns on Collection of Inflated, Double-Billed Medical Debt

Debt collectors pursuing inflated medical charges that violate federal and state cost caps or seeking payment for charges already covered by insurance are violating federal law, the Consumer Financial Protection Bureau said.

Collectors are required to validate outstanding medical debt before contacting consumers and provide accurate information about consumers’ ability to contest an alleged debt, the CFPB said in a Tuesday advisory opinion.

The CFPB’s guidance comes amid a broader push against medical debt at the agency and in states around the country.

The CFPB is working on a rule that would bar the reporting of medical debt on consumer credit reports. California Gov. Gavin Newsom (D) signed a bill last week (SB 1061) to bar medical debt on credit reports, joining New York and Colorado among states that already do so.

Around 100 million Americans owe a combined $220 billion in medical debt, the CFPB said.

The Tuesday advisory opinion is intended to ensure that people aren’t “unfairly chased by debt collectors over unsubstantiated or invalid medical bills,” CFPB Director Rohit Chopra said in a statement.

“Medical billing is often riddled with errors, including inflated or duplicative charges, fees for services the patient never received, or charges already paid,” he said.

Upcoding Ban

Collectors are barred from pursuing bills that have been “upcoded,” or exaggerated to increase the fee paid for a service, the CFPB’s advisory opinion said.

From 2010 to 2019, upcoding resulted in annual overcharges of $656 million for Medicare Part A, $2.38 billion for Medicare Part B, and $10 billion to $15 billion for Medicare Part C, according to a 2024 study from researchers at the University of Arizona and the Rensselaer Polytechnic Institute cited in the advisory opinion.

Collectors are additionally barred from going after debts that exceed limits set by the No Surprises Act, a 2020 federal ban on surprise billing signed into law by then-President Donald Trump, the CFPB said. Debt collectors would also violate federal law if they pursue people for medical bills above state caps, the advisory opinion said.

Debt collectors will also have to ensure they don’t collect on double-billed debt that an insurer or patient has already covered under the advisory opinion.