Think the CFPB is a problem? Imagine if a jury had heard this …

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Jun 22, 2015

Last Thursday, the Consumer Financial Protection Bureau announced an enforcement action against a medical debt collector named Syndicated Office Systems, LLC.

Among other things, the CFPB alleges that Syndicated violated the Fair Credit Reporting Act by failing to respond to consumer disputes within 30 days. According to the CFPB, it took Syndicated, on average, 90 days to respond to consumer disputes. These violations were not isolated instances, but happened nearly 14,000 times between January 2011 and October 2013. That’s about 400 botched reinvestigations every month.

Under the circumstances, it’s hard to argue that the violations were merely negligent, and not willful, which is probably why the enforcement order contained a Redress Plan under which affected consumers can receive compensation mimicking a statutory damages award under the FCRA. The total available to pay affected consumers totals about $5.1 million.

In addition to establishing new procedures to prevent such violations from occurring in the future, Syndicated will also have to pay the CFPB a civil money penalty of $500,000.

Did Syndicated “get off light”? It’s hard to say that any company forced to pay $5.6 million got off light, but things could have been far worse if this matter had gone to litigation or a jury. Medical debt may be the single most frustrating credit issue that consumers face. The Byzantine nature of medical billing makes credit card and auto loan billing seem simple by comparison. Furthermore, consumers facing medical debt present a sympathetic case, one to which most people can easily relate.

So, yes, in comparison to litigation, Syndicated did get off light. If this case had gone to a jury, Syndicated might well have ended up paying significantly more in damages, plus punitive damages and attorneys fees.

Craig E. Bertschi, Partner — McRae Bertschi LLC