On March 1, 2022, the Consumer Financial Protection Bureau (CFPB) issued a report titled Medical Debt Burden in the United States (Report) highlighting the complicated and burdensome nature of the medical billing system in the United States. In the Report, the CFPB attributes its heightened interest in medical debt collections and reporting to the COVID-19 pandemic, which has caused many consumers and frontline workers to incur pandemic-related medical debt.
The CFPB addresses the impact of medical debt on credit scores at length in its Report, and states clearly that it intends to act to ensure that the consumer credit reporting system is not used to coerce patients and their families into paying questionable medical bills. The CFPB explains that research has found that “medical collections are less predictive of future consumer credit performance than nonmedical collections,” and that “paid medical collections are less predictive of future performance than unpaid medical collections.” The CFPB further suggests that consumers with medical debt may be negatively impacted if creditors use older “common credit score models” that may overweight medical debt as opposed to “newer” scoring models that ignore paid collections of any kind, including medical collections. Thus, the CFPB concludes that consumer reporting agencies that include this type of information in consumers' credit reports “threaten[] the integrity and accuracy of the credit reporting system as a whole, creating inefficiencies for creditors as well as patients.”
Additionally, the CFPB points to its final rule on debt collection, which Goodwin covered in a separate post. The CFPB states that “[v]arious provisions of the rule could affect the collection of medical debt.” For example, the CFPB notes that the FDCPA and Regulation F require debt collectors, including medical debt collectors, to provide certain information about the debt to consumers at or near the outset of collections, including an itemization of the current amount of the debt. The CFPB claims that this itemization may help individuals recognize and understand medical debts in collection.
Going forward, the CFPB intends to hold credit reporting companies accountable for having reasonable procedures in place to assure that medical debt information is accurate and take action against furnishers who report inaccurate information. If furnishers of medical debt are contaminating the credit reporting system with inaccurate reports, the CFPB expects the “Big Three” agencies to cut off those furnishers' access to the credit reporting system.
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