Millions of Americans have medical debt and will benefit from CFPB’s proposed rule
WASHINGTON, D.C. – Under a new proposed rule announced by the Consumer Financial Protection Bureau (CFPB) today, credit reporting agencies will be prohibited from listing medical debt on consumers’ credit reports. Consumer Reports praised the CFPB’s proposed ban on medical debt on credit reports, which will help 15 million Americans who have an estimated $49 billion in outstanding medical bills in collections. The CFPB’s action follows similar state bans, including in New York and Connecticut, which CR supported and helped to enact.
“Millions of families have been hit with steep medical bills, which can greatly hamper their ability to access affordable credit,” said Chuck Bell, advocacy program director for Consumer Reports. “The CFPB’s proposed rule will help ensure consumers won’t see their credit records damaged because of medical bills that pile up and bust their budgets. By banning medical debt on credit reports, the CFPB will help families obtain the health care they need without fear of having their credit scores unfairly ruined.”
The CFPB’s research has shown that “medical billing data on a credit report is less predictive of future repayment than reporting on traditional credit obligations. Mistakes and inaccuracies are common and can be compounded by problems such as disputes over insurance payments or complex billing practices.”
Millions of Americans have medical debt and one in five report being contacted by a debt collector over an unpaid medical bill. According to the CFPB, twenty percent of Americans also have at least one medical debt collection item in their credit reports, and over half of collection items are for medical debts. The problem disproportionately affects people of color: 28 percent of Black and 22 percent of Hispanic people carry medical debt compared with 17 percent of whites.
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 go back and forth over whether a particular treatment or service is covered by the patient’s insurance, 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.
Providers or their collection agencies often send unpaid accounts to credit reporting agencies. The credit reporting agencies do not 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.
Michael McCauley, michael.mccauley@consumer.org