Equifax, Experian and TransUnion have announced they will collectively remove nearly 70% of medical collection debt tradelines from credit reports.
UNPAID MEDICAL BILLS ACCOUNT FOR 58% OF DEBT IN COLLECTIONS: CFPB REPORT
Starting July 1, paid medical collection debt will no longer be included on consumer credit reports. In addition, the time period before unpaid medical collection debt would appear on a consumer’s report will be increased from 6 months to one year, offering consumers more time to address their debt with insurance and healthcare providers before it is reported.
In the first half of 2023, Equifax, Experian and TransUnion will also no longer include medical collection debt under at least $500.
|EXPN||n / A||n / A||n / A||n / A|
The three credit-reporting firms cover more than 1.6 billion credit accounts for over 200 million adults every month.
“Medical collections debt often arises from unforeseen medical circumstances. These changes are another step we’re taking together to help people across the United States focus on their financial and personal wellbeing,” Equifax CEO Mark Begor, Experian CEO Brian Cassin and TransUnion CEO Chris Cartwright said in a joint statement Friday. “As an industry, we remain committed to helping drive fair and affordable access to credit for all consumers.”
GET FOX BUSINESS ON THE GO BY CLICKING HERE
The Consumer Financial Protection Bureau estimates that there was at least $88 billion in medical debt sitting on 43 million credit reports as of June 2021.
“The total amount of medical debt in collections in the US is likely higher, since not all medical debts in collections are furnished to consumer reporting companies,” the CFPB noted in its “Medical Debt in the United States” report for February 2022.
The majority of medical debt collection tradelines on consumer credit reports are under $500, although many people with medical debt have multiple medical collections.
Past-due medical debt can lower a person’s credit score, potentially reducing their access to credit and making it harder to find a home or a job. The CFPB emphasizes that medical debt collections are less predictive of future payment problems than other debt collections are.
Black and Hispanic people, and young adults and low-income individuals of all races and ethnicities, are more likely to have higher rates of medical debt than the general population. Older adults and veterans are also heavily impacted by medical debt. Medical debt is more prevalent in the southeastern and southwestern United States.
CLICK HERE TO READ MORE ON FOX BUSINESS
The CFPB has committed to ensuring that the consumer credit reporting system is not used coercively against patients and their families to force them to pay questionable medical bills. A CFPB spokesperson told FOX Business that the agency “looks forward to closely reviewing the details of the credit reporting agencies’ plans.”
Equifax disclosed in its annual report for 2021 that CFPB is currently investigating whether the company has followed the Fair Credit Reporting Act’s requirements for the proper handling of consumer disputes. Sources told the Wall Street Journal, the first to report Friday’s announcement, that Experian and TransUnion are also under investigation for their handling of consumer disputes.
“As the CFPB is our primary regulator, we have continual engagement with them on a variety of issues,” a TransUnion spokesperson told FOX Business. Representatives for Experian did not immediately return FOX Business’ request for comment.
The latest move comes after Equifax, Experian and TransUnion reached a settlement in 2015 with the New York state attorney general to improve credit report accuracy, increase the fairness and efficacy of the procedures for resolving consumer disputes of credit report errors and protect consumers from unfair harm to their credit histories due to medical debt.
In recent years, credit-reporting firms have agreed to remove debts that did not arise from a contract or agreement to pay from credit reports, such as library fees or fines, parking tickets, speeding tickets, and court fees or fines. In 2017, they also agreed to implement changes to start removing civil judgment and tax lien data from credit reports.
President Biden called Friday’s move “a step in the right direction”, adding that his administration would “keep fighting for consumers – from increasing transparency to preventing surprise billing and more.”