InfoBytes Blog
Chopra says credit reporting on medical debt needs review
On April 6, CFPB Director Rohit Chopra expressed cautious optimism about medical debt credit reporting changes during remarks to the CFPB’s Consumer Advisory Board. The Bureau has studied the burden of medical debt on consumers since the agency’s inception and has issued reports examining the impact of including data related to unpaid medical bills on credit reports. Chopra noted that a report released by the Bureau last month (covered by InfoBytes here) found that $88 billion of outstanding medical bills in collections affect one in every five consumers, with medical debt accounting for 58 percent of all uncollected debt tradelines reported to credit reporting agencies (CRAs). Shortly after the Bureau released the report, the three major CRAs announced they planned to eliminate nearly 70 percent of medical collection debt tradelines from consumer credit reports. As previously covered by InfoBytes, beginning July 1, paid medical collection debt will no longer be included on consumer credit reports issued by those three companies, and unpaid medical bills will only be reported if they remain unpaid for at least 12 months. Additionally, starting in 2023, medical collection debt under $500 will no longer be included on credit reports issued by these CRAs.
In response to the announcement from the CRAs, Chopra cautioned that “[i]mportant decisions about credit reporting should not be left up to three firms that arbitrarily decide how reporting will impact consumers’ access to credit.” While he acknowledged the importance of providing more time for providers and insurance companies to process claims before debts are reported, he stated that the announcement failed to “fundamentally address the concern that the credit reporting system can be used as a tool to coerce patients into paying bills they may not even owe.” Chopra presented three questions to the Consumer Advisory Board for consideration: (i) should unpaid medical bills be treated as a typical “debt”? (ii) if medical bills are not a good factor in predicting repayment on future loan obligations, should they be included in credit reports? and (iii) how should the inclusion of allegedly unpaid medical bills in credit reports be reviewed as part of the broader question of how data is used in consumer finance markets?