Consumer Reports applauds CFPB’s rule that will benefit millions of Americans
WASHINGTON – In a major victory for families working to pay off health care expenses, the Consumer Financial Protection Bureau today banned the listing of medical debt on credit reports. Consumer Reports had urged the Bureau to adopt the ban, since research has shown that medical debt is not a good indicator of a person’s creditworthiness. The CFPB’s rule eliminates an estimated $49 billion in medical debt from the credit reports of about 15 million Americans.
“Medical debt burdens millions of families across the country and can unfairly tarnish a person’s credit record, making it more difficult to qualify for an affordable loan, get a job, or even rent an apartment,” said Chuck Bell, advocacy program director for Consumer Reports. “Many consumers have medical debt on their credit reports that is inaccurate or under dispute because our medical billing and insurance reimbursement system is so complex and confusing.”
Bell continued, “No one’s credit record should be ruined by medical debt since it’s not a reliable predictor of credit risk. The CFPB’s ban on medical debt reporting provides critical protection to consumers and will help ensure they can get the health care they need without fearing that their credit record will be damaged beyond repair.”
According to the CFPB, twenty percent of Americans have at least one medical debt collection item on their credit reports, and over half of collection items on credit reports are for medical debts. The problem disproportionately affects people of color: 28 percent of Blacks and 22 percent of Latinx people carry medical debt versus 17 percent of whites. While the national credit reporting agencies voluntarily agreed not to report medical debt under $500, many consumers throughout the U.S. have medical debt on their credit reports higher than this threshold.
Medical billing is both confusing and difficult to navigate. Patients often receive multiple bills and insurance forms for the same visit, which are hard to decipher and interpret, especially for non-native speakers. Providers and insurers often go back and forth over whether a particular treatment or service is covered and the patient is caught in the middle. Frequently, providers go ahead and send bills to collections even when they are still arguing with the insurance company over whether the service is covered.
After billing, providers or their collection agencies often send unpaid accounts to credit reporting agencies. The credit reporting agencies don’t have access to provider and insurance records and make it difficult for patients to dispute the accuracy of their debt or to make corrections if there is a billing reporting error.
The CFPB’s nationwide ban on medical debt credit reporting follows similar bans adopted in recent years by a number of states, including California, Colorado, Connecticut, Illinois, Minnesota, New Jersey, New York, Rhode Island, and Virginia.
Contact: Michael McCauley, michael.mccauley@consumer.org