The Medical Debt Relief Act, designed to remove settled and paid medical debts from consumer credit reports, was introduced in the Senate and House late last week. 

If ultimately passed, the legislation would create permanent 180-day waiting period rules before medical debts are documented with credit bureaus. The timeframe would allow insurance payments to be applied. The credit bureaus also would remove previously reported medical collections that have been or are being paid by insurance from consumers’ credit reports.

"This legislation would prevent medical debt from continuing to damage consumers’ credit scores after it has been paid off or settled, ensuring that otherwise creditworthy consumers are able to find affordable credit,” according to a news release from the office of Sen. Jeff Merkley, D-Oregon.

Medical bills often come after a discrepancy between a doctor and an insurance company, meaning the patient may not even find out they owe something until after they receive a collection agency's notice. By then, the bill already has damaged their credit history and led to a credit score drop.

The newly introduced legislation would permanently establish the National Consumer Assistance Plan created last year as a result of a settlement between credit bureaus Equifax, Experian and TransUnion and several state attorneys general.

An estimated 20% of consumers with credit reports had one or more medical collection item on their record, according to the Consumer Financial Protection Bureau. An estimated 43 million consumers have overdue medical debt recorded on their credit reports and 15 million have credit reports listing only medical debt, according to the CFPB’s 2014 data. Medical bills are usually unpredictable, piling up after a sudden diagnosis or debilitating injury, making it difficult or impossible to save or prepare, the CFPB noted.  In 2014, Fair Isaac Corporation (FICO) started using a scoring model that changes the way medical debt is weighted and no longer factors in overdue payments that have since been made.  


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