On March 1, the Consumer Financial Protection Bureau (CFPB) published a report highlighting the effect of medical collections on consumer credit reports. The CFPB found that commercial medical collection lines appeared on 43 million credit reports, and that overdue medical debt is more prevalent among blacks and Hispanics. In the same month, the three national consumer intelligence agencies announcement plans to dramatically reduce medical debt credit reports.
On July 27, the CFPB Published its analysis of the potential impact of the announced changes. While the analysis revealed that the majority of individual medical collections business lines would be removed from credit reports, it also revealed that nearly half of consumers with medical collections will continue to have at least one medical business line in their credit reports, even after the amendments take effect. full effect next year.
“Today’s report analyzes recent changes announced by the Big Three credit reporting conglomerates, and it is clear that more work needs to be done to address medical debt credit reporting issues,” said said CFPB director Rohit Chopra.
Among other findings of the report, the CFPB found:
- Two-thirds of medical recoveries on credit reports will no longer be reported. Specifically, beginning in 2023, commercial medical collection lines under $500 will no longer be reported on consumer credit reports.
- The announced changes will likely have a varied geographic impact, meaning patients living in northern and eastern states have higher concentrations of medical debt with lower balances and are more likely to benefit from the changes. Consumers residing in West Virginia will see a much larger share of medical collections removed than residents of any other state.
- Residents of low-income, predominantly black or Hispanic census tracts are slightly less likely to benefit from the announced changes by having all of their business lines removed from medical collections. National consumer reporting agencies also plan to stop fully reporting paid medical collections, whether paid for by insurance or otherwise. However, the CFPB noted that removing paid recoveries is less likely to have a substantial effect, as very few medical recoveries business lines are ever marked as paid.
The report did not examine the impact of credit bureaus nationwide extending the time between medical bill referral for collections and medical bill filing from six months to a year. This change should mean that many more medical billing disputes are resolved before the credit report occurs.
The CFPB report also contained findings and observations in the following additional areas:
- Characteristics of consumers with declared medical collections;
- Persistence of medical collections on credit reports; and
- Medical collections likely to be discontinued next year.
The CFPB report concludes that these changes will likely reduce the number of reported medical pickups and implicitly reduce the time that medical pickups are reported. The CFPB should conduct further research on how medical collections credit reports are changing over the next year.
Troutman Pepper will continue to monitor important developments involving the CFPB and the consumer reporting industry and will provide further updates as they become available.