Consumer complaints show coercive credit reporting and privacy intrusions based on unverified and inaccurate medical billing
A report issued today by the Consumer Financial Protection Bureau (CFPB) examines the financial consequences of medical billing and collections endured by individuals and families across the country. The report draws from the rising volume of medical billing and collection complaints submitted to the CFPB. The CFPB is using today’s research to strengthen its across government and industry efforts to support patients and families suffering the consequences of medical billing and collections.
“Many Americans feel forced to pay medical bills that they have already paid or never owed to begin with,” said CFPB Director Rohit Chopra. “The credit reporting system should not be used as a weapon to coerce patients into paying medical bills they do not owe.”
People report that they receive medical bills that are inaccurate or not owed, and they describe the subsequent and significant difficulties identifying, verifying, or eliminating the bills. People also report learning of an outstanding medical bill only after experiencing a drop in their credit score and being told that only paying the bill would remove the negative collections information from their credit report. When they did receive prior notice of medical bills in collections, people reported that debt collectors included detailed medical information that resulted in privacy breaches of sensitive medical information. Many people reported paying medical bills to avoid adverse financial and privacy consequences, even when they did not believe the bill to be valid.
When allegedly unpaid or unresolved medical bills get referred to collections and reported to the credit reporting system, people face reduced access to credit, increased risk of bankruptcy, and difficulty securing employment and housing. These negative consequences can occur even when the underlying bill is erroneous, not owed, or unverified.
Among the key findings from today’s reports are that people:
- Do not recognize or owe alleged medical bills, but they continue to be contacted by debt collectors. Debt collectors are required to take reasonable steps to verify debts. Yet, in some complaints, individuals stated that they did not recognize the company sending them collection notices or that the notices did not contain sufficient information to identify and verify the alleged debt. People also submitted complaints about being contacted by debt collectors for bills that had already been paid in full, covered by insurance, or resolved through charity care. From 2018 to 2021, complaints about collection attempts on medical bills that were not owed increased by 31%.
- Suspect unpaid medical bills are being surreptitiously and unlawfully placed on their credit reports. Many people submitting complaints about medical bills state that they only realized the bills were in collections when they checked their credit report or when they were applying for credit. This coercive use of the credit reporting system by debt collectors is an illegal but common debt collection tactic, especially for error-prone debts, such as medical bills.
- Experience their credit reports being used as weapons to force payments. People reported that once medical bills were placed in collections and furnished to credit reporting agencies, their credit scores stopped reflecting their ability to repay debts. Their lower credit scores became weapons debt collectors could use against them to force payment. In some instances, individuals reported becoming so frustrated trying to resolve allegedly unpaid bills that they gave in and paid the debt collector. They just wanted to make the collection efforts stop and to increase their credit scores.
- Report that collection notices contained large amounts of highly sensitive medical information. Individuals described feeling that collection notices included more personal medical information than authorized or permissible under the Health Insurance Portability and Accountability Act (HIPAA). The notifications they received often included detailed bills, which listed procedures, tests, and medications.
The consumer experiences in today’s report strongly suggest that many medical bills reported on credit reports are disputed, inaccurate, or not owed. This finding supports previous research by the CFPB that found medical bills are less predictive of future repayment than other bills or credit obligations. Specifically, medical bills do less to help lenders determine the likelihood that a credit applicant will repay a new credit extension, like a personal loan.
To mitigate the impact allegedly owned medical bills can have on a person’s ability to participate in the financial marketplace, the CFPB is committed to:
- Engaging with the healthcare industry. The CFPB is engaging with a wide cross-section of the healthcare industry to learn more about medical billing practices, patient access to charity care, and consumer and patient-centric approaches to medical billing and collections.
- Supporting patients and families. The CFPB will continue to publish information designed to help patients and families navigate the complex medical billing system, and it will hold bad actors in the consumer financial services marketplace accountable.
- Working with federal partners to reduce coercive credit reporting. The CFPB will continue to partner with agencies across government to ensure medical billing and collections are not stopping people from accessing jobs, housing, and credit. Earlier this month, federal agencies announced a series of actions to reduce the impact of medical debt as a barrier to opportunity.
- Determining whether unpaid medical billing data should be included in credit reports.Today’s report calls into further question the practical usefulness of including medical bills in the credit reporting system. Due to the various concerns around accuracy and validity, as well as lower predictive value, the inclusion appears to be of little use to creditors and other market participants.