What happens when you combine expensive — and often unanticipated — medical bills and overzealous debt collectors? An environment ripe for abusive, unfair collection practices. At least that appears to be the case for an operation that must pay $5.4 million in relief to consumers for allegedly mishandling credit reporting disputes and preventing individuals from exercising their debt collection rights.

The Consumer Financial Protection Bureau announced today that improper practices employed by Syndicated Office Systems, LLC – also doing business as Central Financial Control – affected the credit scores of thousands of individuals and caused consumers distress and confusion though a series of improper collection practices.

Syndicated Office Systems primarily collects medical debt on behalf of hospitals, doctors, and other healthcare providers.

According to the CFPB complaint [PDF], the company failed to respond within 30 days to consumer disputes about the inflation furnished to consumer reporting agencies and failed to provide consumers with a “debt validation notice” within five days of its initial communication with the consumer in connection with the collection of a debt.

Syndicated Office Systems typically initiates collection efforts through letters and telephone calls to consumers, the complaint states.

Under the Fair Credit Reporting Act, 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.

A CFPB investigation, however, uncovered that Syndicated Office Systems failed to send debt validation notices to nearly 10,000 consumers.

Despite its failure to abide by notice standards, the company continued to collect over $2 million from consumers.

“Failing to provide notices denies consumers the opportunity to assess whether the debt is valid and whether the amount or source is correct,” the CFPB says. “These notices can be an especially important consumer safeguard with regard to medical debt, where issues like insurance reimbursements and medical billing processes are commonly fraught with complexity, confusion, and delay, and can lead to consumers being unsure of how much to pay or even whom to pay.”

Additionally, regulators found that the company mishandled consumer credit reporting disputes by failing to investigate and respond to more than 13,000 consumers within the 30-day timeframe required under the law.

“Consumers spent time and money attempting to follow-up on unresolved disputes and experienced distress and confusion due to the delays,” the Bureau says in a statement.

The CFPB found that the company had no policies or procedures in place to investigate these consumer credit report disputes. Instead, the company treated consumer credit report disputes in the same way as other consumer complaints and had no deadline for responding.

Under a proposed consent order, Syndicated Office Systems must identify all affected consumers, fix errors on their credit reports and provide $5.4 million in monetary relief.

Additionally, the company must pay a $500,000 fine for its actions and establish safeguards to ensure it has the staffing, facilities, systems, and information necessary to timely and completely respond to consumer credit report disputes.

CFPB Takes Action Against Medical Debt Collector [Consumer Financial Protection Bureau]

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