As of July 1, medical collection debt paid will no longer be included in consumer credit reports. Additionally, the time period before unpaid medical collection debt appears in a consumer report will be increased from 6 months to 1 year, giving consumers more time to process their debt with insurance and health care providers before it is reported.
In the first half of 2023, Equifax, Experian and TransUnion will also not include medical collection debts of less than at least $500.
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The three credit reporting companies cover more than 1.6 billion credit accounts of more than 200 million adults each month.
“Medical collection debts often arise from unforeseen medical conditions. These changes are another step we are taking together to help people across the United States focus on their financial and personal well-being,” said Equifax CEO Mark Bigor and Experian CEO Brian Cassin, and TransUnion CEO, Chris Cartwright said in a joint statement Friday. “As an industry, we remain committed to helping achieve fair and affordable access to credit for all consumers.”
The Consumer Financial Protection Bureau estimates that there is at least $88 billion in medical debt on 43 million credit reports as of June 2021.
“The total amount of medical debt in collections in the United States is likely to be higher, since not all medical debt in collections is served to consumer reporting companies,” the CFPB noted in Report “Medical Debt in the United States” for February 2022.
The majority of medical debt collection business lines on consumer credit reports are under $500, although many people with medical debt have multiple medical collections.
Past due medical debt can lower an individual’s credit score, which can reduce their access to credit and make it difficult to find a home or job. The CFPB asserts that medical debt collection is less predictive of future payment problems than other debt collection.
Blacks and Hispanics, young adults, and low-income individuals of all races and ethnicities are more likely to have higher rates of medical debt than the general population. Seniors and veterans are also severely affected by medical debt. Medical debt is more prevalent in the southeastern and southwestern United States.
The Consumer Protection Board has committed to ensuring that the consumer credit reporting system is not coercively used against patients and their families to force them to pay questionable medical bills. A CFPB spokesperson told FOX Business that the agency “looks forward to closely reviewing the details of the credit reporting agencies’ plans.”
Equifax disclosed in its annual report for 2021 The CFPB is currently investigating whether the company has followed the requirements of the Fair Credit Reporting Act to properly handle consumer disputes. The sources told the Wall Street Journal, The first to report an announcement on FridayExperian and TransUnion are also under investigation for their handling of consumer disputes.
“As the CFPB is our primary regulator, we have an ongoing engagement with them on a variety of issues,” a TransUnion spokesperson told FOX Business. Experian representatives did not immediately respond to a FOX Business request for comment.
The last move comes after Equifax, Experian and TransUnion reached a settlement In 2015 with the New York State Attorney General to improve the accuracy of credit reports, increase the fairness and effectiveness of consumer dispute resolution procedures for credit reporting errors and protect consumers from unfair harm to their credit history due to medical debt.
In recent years, credit reporting companies have agreed To clear debts that did not arise from a contract or agreement for payment from credit reports, such as library fees or fines, parking tickets, speeding tickets, court fees or fines. In 2017, they also agreed to implement changes to begin removing civil judgments and tax lien statements from credit reports.
President Biden called Friday’s move a “step in the right direction,” adding that his administration “will continue to fight for consumers — from increasing transparency to preventing surprise bills and more.”