Medical Debt Furnishers and CRAs May Face Increased Scrutiny from the CFPB

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Featured Medical Debt Furnishers and CRAs May Face Increased Scrutiny from the CFPB

Medical debt is notorious for happening unexpectedly and for unavoidable reasons. The COVID-19 pandemic is an example of such hardship. And when insurers or providers add discrepancies to the medical debt, the matter worsens. Moreover, should these debts result in negative reports to consumer reporting agencies, it can damage an individual’s credit report and hurt their chances of obtaining credit in the future.

Due to the adverse effects such debt cause consumers, the Consumer Financial Protection Bureau is addressing the concerns about credit reports including medical debt. The Bureau has published three guidance documents concerning this, as of this year. 

The first document by the Bureau is a reminder for the consumer reporting agencies and debt collectors furnishing their information. It states how they must comply with the Fair Credit Reporting Act (FCRA) and the Fair Debt Collections Practices Act (FDCPA) when handling debts covered by the No Surprises Act. In addition, collecting or reporting medical debt charges beyond what is permitted by the No Surprises Act may be considered a violation of the FCRA or FDCPA.

The second document outlined the Bureau’s concerns about how medical debt affects consumer reports. The report stated that many people with medical debts in collection generally choose to pay other obligations on time. Because of this, along with the Bureau’s finding that medical debt is susceptible to inaccuracies that consumers often have difficulty finding and resolving, the Bureau stated how including medical debt in consumer credit reports threatens the integrity and accuracy of the credit reporting system, creating discrepancies for patients and creditors.

The third document dealt with medical billing and consumer complaints submitted to the Consumer Financial Protection Bureau. The Bureau concluded from these complaints that credit reports were being used as weapons to try and force payments from people, even when they don’t recognize they owe the money or possibly don’t owe it.

The Bureau also found that medical debt has a low predictive value, so including it in consumer reports may not be that useful. As a result, the three major reporting agencies changed how they treat medical debt on consumer reports after the Bureau released its guidance.

These agencies no longer include medical debt placed for collection in consumer reports if subsequently paid, nor medical debt that has been furnished but is below $500. They will also not report unpaid medical debt for one year instead of six months to give consumers more time to address the problem.

It remains to be seen if the Consumer Financial Protection Bureau will find these changes sufficient. In addition, the White House published a Fact Sheet that encourages federal agencies to remove medical debt as consideration for credit underwriting, which would also remove it from credit reports.

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