Washington D.C. – Last week, the three biggest credit reporting agencies, Equifax, Experian, and TransUnion, announced changes to how they report medical debt which will amount to removing nearly 70% of medical debt in collections or tens of billions of dollars of medical debt from credit reports. Advocates at the Consumer Federation of America strongly supported these changes.
“This is a great step forward for America’s consumers, and we applaud the efforts of the Consumer Financial Protection Bureau in pushing credit reporting agencies to reevaluate their use of medical debt on consumer credit reports,” said Rachel Gittleman, Financial Services Outreach Manager at Consumer Federation of America. “However, many consumers will still have medical debts on their credit reports, which can negatively impact their ability to secure housing, loans, or even jobs. Black, Hispanic, and low-income consumers are more likely to have medical debt and more likely to be under- or uninsured. Consumers should not face lasting repercussions from getting sick.”
“Medical debt is frequently overwhelming and confusing, and consumers face an uphill battle trying to remove inaccurate information from their credit reports,” said Erin Witte, Director of Consumer Protection at Consumer Federation of America. “Particularly while the COVID-19 pandemic is ongoing and medical debt is surging, consumers will benefit from having these medical debts removed from their credit reports so that they can meaningfully participate in the economy.”
The credit bureaus announced that, beginning in July, they will remove medical debt which was paid after it was sent to collections. Prior to this change, these debts could stay on a consumer credit report for up to seven years. In addition, the bureaus will wait a year before adding new unpaid medical debts sent to collections and, starting next year, the bureaus will stop including medical debts of less than $500.
These changes were announced on the heels of a report issued by the Consumer Financial Protection Bureau which showed that consumers have $88 billion in medical debt on their credit reports. Although 1 in 3 consumers have past due medical bills, according to the National Consumer Law Center, the debt burden is disproportionately carried by Black and Hispanic people, young adults and low-income consumers. Medical debt has lasting repercussions for consumers— and is a leading cause of bankruptcy, with 62% of bankruptcies related to medical debt.
Contact: Rachel Gittleman, 609-571-5953
Contact: Erin Witte, 202-596-9807