Don't block the CFPB's plan to provide some relief from medical debt

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When the Consumer Financial Protection Bureau proposed a new policy this fall to bar all medical debt from appearing on credit reports and impacting credit scores, I, along with other advocates who had long pushed for this rule, expected pushback from the debt collectors and loan providers whose profits are accrued by adding interest to people's misfortune.

And those actors have not failed to live up to that expectation. 

Recently, American Banker ran an article and an opinion piece outlining some of the arguments against the proposal. In his opinion piece, John Heltman acknowledges the core problems with medical debt — that it is unplanned and of little predictive value of credit worthiness — but the idea he proposes of raising the threshold on the level of debt that will or will not appear and mandating that credit agencies follow suit is ineffective at worst and insufficient at best. 

U.S. health care spending grew 2.7% in 2021, reaching $4.3 trillion or $12,914 per person. As a share of the nation's gross domestic product, health spending accounted for 18.3%. And while the rule is an important step toward protecting people in this country, it will likely eat into the sky-high profits that debt collectors, loan providers and other stakeholders make off of the growing medical debt crisis in this country.

Medical debt is a uniquely American problem. And the underlying issue behind medical debt is simple: Health care is inadequate and far too expensive. The health care system has been designed and overseen by corporate interests that put profits over people. This is unfair, widespread and deepens inequity across our country. 

As a result, we are a nation that profits off of people's illness, rather than investing in solutions that will make us well. "If we really want to move towards a wellness care system, we have to talk about avoiding the sicknesses, the chronic illnesses, that drive our system to be very inefficient," said Health and Human Services Secretary Xavier Becerra. Yet, instead of offering solutions that will help us move toward a wellness care system, like investing in preventive care, housing and food security, the industry has instead doubled-down on misinformation to advance arguments that seek to only muddle and delay any positive action. 

An alarming four in ten adults have some kind of medical debt in this country, and the burden is disproportionately carried by adults without insurance, women, Black and Latino adults, parents, immigrants and those with lower incomes. Nearly 27% of Black households and just under 19% of Latino families carry medical debt.

The effect of medical debt is far-reaching and has resulted in the denial of necessary care by providers or delayed and forgone care by individuals, damaged or ruined credit upending families' financial stability, drained savings and bankruptcy, stress, anxiety and altered life trajectories.

Despite this, in order to keep the status quo and their sky-high profits, many corners of the financial industry are coming out in full force against this critical action by the CFPB.

Remember, no one chooses to get sick. Raising the threshold or allowing creditors to view the debt is still punishing people who have been dealing with serious, unexpected illnesses and medical hardships — the people who are most negatively impacted by the system currently in place. Additionally, medical debt is often hidden. It's hidden in accounts sold by hospitals to creditors, family loans, predatory medical credits peddled in doctors' and dentists' offices and plundered savings accounts and home equity loans.

Regulation and compliance

Collectors fume over CFPB plan to ban medical debt from credit reports

Financial firms claim a proposal by the Consumer Financial Protection Bureau would restrict lending, raise borrowing costs and result in more denials of credit to consumers.

By Kate Berry

November 28

The delay, delay, delay tactic we're currently seeing by some actors within the financial services community has not gone unnoticed by those of us working with people whose lives and livelihoods have been impacted by medical debt. It's why our partners at the National Consumer Law Center have convened a formal response on behalf of 60 community, state and national organizations pushing for the CFPB to not get waylaid in advancing this important rule. 

The inequity in our health care system does not exist in a vacuum. And while medical debt is not a problem created by the financial services industry, the industry has a critical role to play in addressing it. This is evident in medical debt impacting people's ability to get housing, transportation or, in some instances, even a job. 

And though we are focused on the CFPB in this piece for the important role it can play in addressing the medical debt crisis in America, other federal agencies, including the Internal Revenue Service and Treasury, have a responsibility too. We are at an inflection point, with data and analysis making clear the deep connections between egregious billing and collections processes, inadequate financial assistance and predatory medical credit cards that feed a medical debt crisis affecting 100 million people in this country. 

And we need to be clear, this is not an abstract debate. We're talking about real people who are losing their lives and their livelihoods because of predatory and profit-driven practices. People like Misty. 

Earlier this year, Misty flew from Colorado to Washington, D.C., to join us and others in urging policymakers to take action on medical debt. As representatives from the Biden administration and Congress listened, Misty shared the impact that medical debt and a destroyed credit score had on her economic and personal safety.

At age 23, Misty underwent life-saving heart surgery, leaving her with $200,000 in medical bills. Because medical debt had destroyed her credit score, Misty could not get housing, a car or a credit card on her own, forcing her to stay in an abusive relationship for 20 years. Misty even studied hard and got her license to be an insurance provider but could not get a job because prospective employers checked her credit as part of the hiring process. While Misty was eventually able to break free and stand on her own, medical debt has meant that she is left trying to catch up on 20 years of her life.

Misty is not an isolated incident. She represents millions of people with similar stories. And if the industry has its way and the CFPB rule is delayed or defeated, Misty and the millions like her will continue to be unprotected and preyed upon. 

And that is simply unacceptable.