Medical bills have become a major source of financial trouble for millions of Americans, up to largest source of personal debt in the US. Now, the top three credit reporting agencies plan to remove most medical debt from consumers’ credit reports starting this summer.
Equifax, Experian and TransUnion on Friday speak that they are making some changes to the way they treat medical debt on credit reports, which are records of consumers’ borrowing and paying. Lenders use credit reports to determine if a consumer is a good bet on a loan, i.e. poor credit score can make it difficult to get a mortgage, car loan, or other product. Credit reports can also affect people’s ability to rent apartments and even get jobs.
The announcement comes as federal regulators and consumer advocates are increasingly scrutinizing the issue of medical debt, with the Consumer Financial Protection Bureau earlier this month. criticize The nation’s medical payment system for consumers failed. The agency says medical debt-related errors are common on credit reports, and consumers often find it difficult to resolve issues.
According to the CFPB, about 1 in 5 households in the US has healthcare-related debt.
The top three credit reporting agencies say they are making some changes to the way medical debt is handled. These include:
- Paid medical debt will be removed from consumer credit reports
- The amount of time before unpaid medical debts in collections will appear on the credit report will increase from 6 months to 1 year
- Credit bureaus will remove medical claims of less than $500 from credit reports
Mark W. Begor, CEO of Equifax, said: “Medical collection debts often arise from unforeseen medical circumstances. Brian Cassin, Experian CEO; and Chris Cartwright, CEO of TransUnion, in a joint statement.
The changes will allow “people across the US to focus on their finances and personal wellbeing,” they added.
Government on the case
Ted Rossman, a senior industry analyst at Bankrate, said in an email that removing paid medical bills from people’s credit reports would boost their credit scores. “The fact that new unpaid medical revenues will go unreported for at least a year is also a consumer-friendly change that will give patients more time to sort these bills with their insurers – this is often time consuming and frustrating,” he added.
The CFPB, established after the 2008 financial crisis, oversees credit bureaus. The March 1 report on medical debt warned that it plans to “hold credit reporting agencies accountable” for inaccurate medical debt on consumer reports. The agency also said it plans to determine whether unpaid medical billing data should be included on credit reports.
Americans complain about the three major credit reporting agencies more than on any other topic, according to Complaint analysis by CFPB. The agency said more than six out of 10 complaints the CFPB received in 2021 involved Equifax, Experian or TransUnion.
Congress last year sought to address the issue of runway health bills by passed the “No Surprises Act,” protects people with health insurance from being charged for getting urgent medical care outside of the insurance company’s network. Patients are still responsible for any deductibles and copayments they would normally pay under their plan, but they may only be billed at the plan’s in-network rate.
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