When Denying Injunction Against CFPB’s Medical Debt Collection Advisory Opinion, Court Confirms Advisory Opinion Creates No New Legal Obligations

ACA International, LLC (along with the Collection Bureau Services, Inc.) and R.M. Galicia, Inc. d/b/a Progressive Management Systems filed separate lawsuits against the Consumer Financial Protection Bureau (CFPB) and Rohit Chopra (in his capacity as the Director of the CFPB). Both lawsuits seek an injunction relating to the CFPB’s October 1, 2024 Advisory Opinion on medical debt collection because the opinion, inter alia, suggests there is a new requirement that medical debt collectors must substantiate medical debt prior to collection.  

Today, on December 16, 2024, the U.S. District Court for the District of Columbia issued an oral ruling denying the filed motions for preliminary injunction. In denying the motions, the Court ruled the Advisory Opinion does notcreate any new legal obligations or make any changes in the law regarding what debt collectors must do prior to collection to have a reasonable belief that a debt is owed.

The Court noted, while the Advisory Opinion provides examples of ways that a debt collector may “substantiate” a debt in order to have a reasonable basis that the debt is owed prior to its first collection attempt, the CFPB’s examples in the Advisory Opinion are mere suggestions, and a debt collector is not obligated to undertake any specific action prior to its first collection attempt. Said differently, the Advisory Opinion does not change the law.

We believe the Court wrongly conflated “substantiation,” a term that does not appear in the FDCPA, with the bona fide error (BFE) defense. The BFE defense allows a debt collector to avoid FDCPA liability if the debt collector maintains procedures reasonably adapted to avoid specific errors. Here, the Court confirmed that a debt collector may have a reasonable basis to believe that the debt is owed prior to collection by maintaining adequate policies and procedures to confirm the accuracy of information provided to it by its clients, and by ensuring its clients appropriately represent and warrant the information provided to the debt collector.

All debt collectors, especially those that collect medical debt, should review their client onboarding processes and procedures, and client contracts, to ensure that they can reasonably rely on their clients’ representations, warranties, and information.

The parties are deciding next steps for the case.

If you have questions about the CFPB’s Advisory Opinion, we are here to help