July 27, 2022

CFPB: Analysis Published on Potential Impacts of Medical Debt Credit Reporting Changes

Removing Paid Collections Will Have Limited Benefit Across Consumer Groups

Today, the Consumer Financial Protection Bureau (CFPB) published an analysis of how actions announced by the three largest national consumer reporting companies – Experian, Equifax, and TransUnion – will affect people who have allegedly unpaid medical debt on their credit reports. Nearly half of those with medical collections appearing on their credit reports will continue to see them there even after the changes fully go into effect next year. The medical collection tradelines that will remain on credit reports after the changes will likely represent a majority of the dollar amount of all medical collections currently reported.

“The credit reporting system should not be used to coerce people into paying medical bills that they do not owe,” said CFPB Director Rohit Chopra. “Today’s report analyzes recent changes announced by the Big Three credit reporting conglomerates, and it is clear that more work must be done to address medical debt credit reporting problems.”

The report finds the changes likely will result in the majority of individual medical collections tradelines being removed from credit reports. However, in terms of dollar amount, a large majority of reported medical collections likely will still remain. The report also highlights the characteristics of consumers with reported medical collections currently, and provides a state-by-state breakout of how the credit reporting changes will impact consumers’ credit reports.

Past research by the CFPB  and others suggest that medical collections are less predictive of future repayment risk than other collections or payment history on loans. Despite that, many lenders, insurers, landlords, and others continue to rely on older credit scoring models that penalize individuals with medical collections included on their credit report. This can impact an individual’s ability to buy or rent a home, raise the cost of an auto loan or car insurance, or make it more difficult to find or keep a job.

Among other findings from today’s report:

The changes announced by Experian, Equifax, and TransUnion followed a CFPB reportpublished earlier this year that highlighted how medical bills are a burden on one in every five consumers who are forced into an opaque system to resolve billing and credit reporting issues.

Because of the nature of the data used, the CFPB report does not examine the impact of the national credit reporting companies’ extension of the time between referral of the medical bill for collections and the reporting of the medical bill from six months to one year. The change, like the Department of Veterans Affairs (VA) February announcement that it would require all other collection efforts to be exhausted before credit reporting VA benefits or medical debts, should reduce the impact of coercive credit reporting, and mean that many more medical billing disputes are resolved before credit reporting occurs.

Read the full report, Paid and Low-Balance Medical Collections on Consumer Credit Reports.

Consumers can submit credit reporting complaints by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

This post was originally published here.