Compliance Blog

Last month, the Consumer Financial Protection Bureau’s (CFPB) Office of Servicemember Affairs released its annual report identifying trends among consumer complaints submitted by servicemembers, veterans, and their families. The report highlights credit and consumer reporting issues and medical billing and collection issues as some of the most common types of complaints received by the Office of Servicemember Affairs.

Credit or Consumer Reporting 

The CFPB received its highest volume of complaints related to incorrect information on individual credit reports. These complaints involved data furnishers, consumer reporting companies, or sometimes both. Nationwide consumer reporting companies such as Equifax, Experian, and Transunion made up more than 60 percent of these complaints. The types of issues servicemembers face include the appearance of an unknown debt on the servicemember’s report, identify theft, and only learning of a debt after receiving a copy of the servicemember’s credit report. Medical debt is another source of incorrect information found on servicemembers’ credit reports.

When these errors were found on credit reports, servicemember reported having issues removing the incorrect information. The Fair Credit Reporting Act (FCRA) provides servicemembers and consumers the right to cure incorrect information by raising a dispute. If a dispute is raised by a servicemember based on the incompleteness or inaccuracy of the servicemember’s information, the reporting agency is under a legal obligation to investigate. The report documents issues servicemembers have run into when trying to cure incorrect information during the dispute process with credit reporting agency. On one occasion, a servicemember reported to the CFPB a credit reporting agency failed to complete an investigation and kept the investigation open even after the investigation window had expired. Credit unions may have obligations in this area as well, as Regulation V requires credit unions to investigate “direct disputes” members file about data a credit union furnishes. This NAFCU compliance blog discusses a credit union's obligations to investigate disputes.  

Incorrect information on credit reports also may have real-world consequences. For example, the report documents how errors on credit reports may jeopardize security clearance status. This occurs because the Department of Defense (DoD) monitors servicemembers’ credit histories to ensure there are no potential security risks. The DoD may revoke a security clearance if the DoD finds “excessive debt or having a high debt-to-income ratio” during one of these security checks. In addition, these errors may also have an impact on a servicemember’s housing and transportation status given how often servicemembers move.

Medical Billing and Collections

Another issue plaguing servicemembers, veterans, and their families is medical billing and debt collections. According to the CFPB’s report, the most common issue servicemembers face is the collection of a debt not owed. The CFPB in its report identified several factors that may lead to medical bill collection errors for active duty servicemembers. First, a servicemember who receives treatment at a civilian healthcare provider, such as at a referred outpatient service or an emergency service. Another factor is healthcare providers that are not used to treating active duty servicemembers and, as a result, do not have policies in place to process TRICARE claims. Some complaints showed these healthcare providers “failed to collect key information for their TRICARE claims, did not associate their coverage with their account, or failed to submit the claim to TRICARE for processing.” Other servicemembers complained of untimely processing as well. The report identified frequent moves as another factor that may lead to debt that is not owed appearing on a servicemember’s credit report. Servicemembers who move frequently may not always receive hospitals bills or the notifications that are sent to former addresses.

These issues relating to medical bills and collections are not reserved only for those on active duty. National Guardsmen and Reservists may also face these issues. These issues sometimes occur because healthcare providers bill the wrong entity, whether it is a private healthcare provider or TRICARE.

To combat these issues, the Department of Veteran Affairs (VA) promulgated a rule, ensuring medical debt is only reported if (1) The VA has exhausted all other debt collection efforts, (2) The VA has determined the individual responsible is not catastrophically disabled or entitled to free medical care from the VA, and (3) The outstanding debt is over $25. Credit reporting agencies such as Experian, Transunion, and Equifax have also taken steps toward alleviating servicemembers from unnecessarily reported medical debt. The report also proposes four additional policy recommendations that may help to curb the issues leading to these complaints.

In addition to this report, the CFPB has taken other recent action to highlight issues that servicemembers face. Last week, the CFPB and the Department of Justice (DOJ) issued a joint letter to auto lending and leasing companies to remind them of their obligations to comply with the requirements of the Servicemembers Civil Relief Act (SCRA).

If there are any questions, please do not hesitate to contact NAFCU’s compliance tea at compliance@nafcu.org.

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