CFPB Proposes Prohibiting Inclusion of Medical Debt on Consumer’s Credit Reports
On August 10, 2023, CCLP celebrated our 25th anniversary, bringing friends new and old to the Carriage House at the Governor's Residence.
Katie Wallat, CCLP’s Senior Attorney, provided testimony at the August 11, 2023, meeting of the Medical Services Board.
HB23-1126 provides first-in-the-nation protections for Coloradans with medical debt.
Rule change reduces the burden for SNAP recipients who are accidentally ‘over-paid’
Coloradans experiencing poverty will benefit from a recent rule change by the State Board of Human Services regarding over-payments in the Supplemental Nutrition Assistance Program (SNAP).
Under Colorado’s old rules, participants who received too much in SNAP benefits due to a mistake in reporting their household data were effectively penalized at the same level as those who deliberately misrepresented the information. This meant that a household could end up owing hundreds or even thousands of dollars for an honest mistake in reporting.
An over-payment occurs when an agency uses incorrect information to figure out how much a SNAP household should be paid and gives the household too much in benefits. Over-payments can be a result of errors by the agency, errors in reporting by program participants or misrepresentation of data by program participants. Most over-payments are caused by agency or participant error.
Even when the over-payment is the result of an agency’s error, the program participant is still expected to pay it back under federal law. The repayment period can span as long as six years, but states have the option of using a shorter time period. (The penalty for an intentional program violation is fixed by federal law at six years.)
Until recently, Colorado opted for the most stringent look-back period for calculating an over-payment based on client error. Fortunately, the Feb. 7 ruling from the State Board of Human Services will alleviate this stringent financial burden by limiting the “look-back period” for calculating over-payments to just one year.
Under the old rule, if a SNAP household made a reporting mistake and the agency kept issuing the incorrect benefits for years afterwards, program participants could unknowingly amass large debts until the mistake was discovered. Families who were overpaid and still receiving SNAP could have their monthly grant reduced by $10 or 10 percent, whichever was greater, until the amount they owed was paid. Families that were no longer on the program were required to enter a repayment plan or have collection actions taken against them, including seizure of tax refunds or wage garnishment.
A six-year look-back period also sets an unrealistically high burden of proof for participants who wanted to demonstrate they were not overpaid. Few people keep pay stubs and other financial information for six years. Even if participants suspected they were not overpaid and the error was caused by the agency, they frequently did not have enough evidence to support their side of the story.
Either way, families already experiencing poverty could be repaying on the surprise debt for years. With the rule change, even if a mistake goes undiscovered for more than a year, the household will only have to repay one year’s worth of over-payments.
Advocates united over change
CCLP first learned about the issue through our partner agency, Colorado Legal Services (CLS). Attorneys for CLS were seeing clients who had SNAP debts for $30,000 or more. These families had no hope of paying off such large sums in a reasonable time-frame. CCLP conducted research into the issue and found that many other states, including other Western states like Utah, North Dakota, and South Dakota were using a one-year look-back to calculate client error over-payment claims.
We then teamed up with Hunger Free Colorado (HFC) to advocate for this change with partners at Colorado Department of Human Services, which involved many meetings over the span of years. This advocacy also involved participating in State/County Work Group meetings, and speaking out to address concerns raised by a few counties that were participating. We also brought this issue to the attention of the Blueprint to End Hunger, a coalition of stakeholders working to end hunger in Colorado. Ultimately, this rule change was supported by that coalition, HFC and the Colorado Health Foundation, which signed off on a letter of support that was distributed to the State Human Services Board.
Now that the look-back period for calculating over-payment claims caused by inadvertent household error is one year, we estimate this could save SNAP households as much as $1 million per year in repayments. In terms of next steps, we are hoping to see this policy change applied to existing cases in which a household owes a debt that exceeds one year’s worth of over-payment.
We are hopeful that the shorter look-back period will make the program more attractive to eligible individuals, who may have feared signing up would land them in years of debt for making a reporting mistake. Only about 60 percent of eligible Colorado households are signed up for SNAP, which puts our state near the bottom of all states. Removing barriers such as the six-year look-back period will make it easier for Coloradans to get the food and nutrition they and their families need.
We applaud our partners at the Colorado Department of Human Services for implementing this policy, which will remove another barrier to SNAP participation for Coloradans experiencing food insecurity. We also gratefully acknowledge the advocacy support of our colleagues at Colorado Legal Services, Hunger Free Colorado, the Blueprint to End Hunger and the Colorado Health Foundation.
-By Sara Lipowitz