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August 10, 2022

CFPB Publishes Report on Impact of Medical Debt Reporting Changes

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Key Takeaways

  • About half of consumers with medical collections appearing on their credit reports will continue to see them there even after the changes fully go into effect.
  • The removal of collections under $500 likely will result in a majority of individual medical collections tradelines being removed from credit reports.
  • Consumers who have medical collections that are likely to be removed are disproportionately more likely to live in states in the north and east of the country.

The CFPB recently published a report analyzing how certain actions announced earlier this year by the three largest national consumer reporting agencies—Equifax, Experian, and TransUnion—will affect people who have allegedly unpaid medical debt on their credit reports  The new report is the CFPB's third report issued this year on medical debt.

As previously reported, Equifax, Experian, and TransUnion announced that, starting July 1, 2022, the time before unpaid medical collections can appear on a consumer's report would increase from 180 days to one year, and paid medical collections would no longer appear on consumer reports at all.  Additionally, beginning in 2023, they will no longer report medical debt when the amount owed is less than $500.

Some key findings from the CFPB's report:

  • About half of consumers with medical collections appearing on their credit reports will continue to see them there even after the changes fully go into effect.
  • The removal of collections under $500 likely will result in a majority of individual medical collections tradelines being removed from credit reports.  However, in terms of dollar amounts, the majority of reported medical collection balances will likely remain.
  • The removal of paid collections is less likely to have a substantial effect as very few medical collection tradelines are ever marked paid.
  • Consumers who have medical collections that are likely to be removed are disproportionately more likely to live in states in the north and east of the country.  However, consumers residing in West Virginia likely will have a much greater share of medical collections removed compared to residents of any other state.
  • Although consumers with medical collections are significantly more likely to reside in neighborhoods that are majority Black or Hispanic and have lower median income, consumers who are likely to have all their medical collections removed due to this change are slightly more likely to live in neighborhoods that are majority white and higher income.

In March 2022, the CFPB issued a report titled " Medical Debt Burden in the United States" that took aim at medical debt collections.  In April 2022, the CFPB issued a report titled "Medical billing and collection issues described in consumer complaints" that analyzed debt collection and credit or consumer reporting complaints submitted to the CFPB in 2021 that involved medical debt.  When it issued the March 2022 report, the CFPB indicated that it intended to "[d]etermine whether policies should be implemented to eliminate unpaid medical billing data on credit reports altogether."  The agency reaffirmed its intention to "[d]etermin[e] whether unpaid medical billing data should be included in credit reports" when it issued the April 2022 report.  And in remarks made in April 2022, CFPB Deputy Director Zixta Martinez called the change announced by TranUnion, Equifax, and Experian "a first step, but it is not enough." 

The CFPB concludes the new report with the statement that it "shows that a substantial share of medical collections currently reported on consumer credit reports likely qualify to be removed" under the change announced by the national credit reporting companies.  While the CFPB's previous comments strongly suggested that the agency was headed in the direction of taking steps to block or limit the reporting of medical debt, perhaps the findings in the new report will cause the CFPB to question whether such action is needed.

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