Several U.S. senators are asking the Consumer Financial Protection Bureau to start addressing medical debt collections and the impact on consumer credit.
In a letter to CFPB Director Richard Cordray Thursday, Senators Jeff Merkley (D-OR), Robert Menendez (D-NJ) and Sherrod Brown (D-OH), asked the CFPB to detail the costs imposed on consumers and the economy by unfair medical collections and reporting.
"The medical debt collection process is riddled with informational and administrative problems, inflicting serious damage on the credit reports of millions of creditworthy consumers. Unlike most other debt, medical debt is often incurred unexpectedly, and given the complexity of the insurance process, health providers frequently send bills to collections before patients even know that they are personally responsible for paying," the letter states.
The senators are co-sponsors of the Medical Debt Responsibility Act, which would require credit ratings agencies to remove medical debts from consumers’ credit reports no later than 45 days after they have been settled or paid in full.
The letter continues: "Because of these factors, medical debts are less accurate predictors of a consumer’s creditworthiness than other debts, making their presence on the credit report unfair to consumers and unhelpful to lenders. But even if a patient pays off a debt immediately after being notified, once it has gone to collections, that black mark remains on his or her credit score, which can result in a deduction of up to 100 points for as long as seven years."
“The issue of consumer debt is usually discussed in relation to a consumer’s ability to pay,” according to the letter. “But for medical debt, the problem is one of information. Consumers frequently do not even know there is a debt that they are personally responsible for paying before it goes to collections. Often, by the time they find out, the medical office has already reported the bill to collections. In this case, even if the consumer is still in discussions with the insurance company, the damage to the consumer’s credit score has already been done.”
Medical collections has been in the news in recent months after Minnesota Attorney General Lori Swanson accused a Chicago-based medical revenue company of attempting to collect from patients awaiting treatment, among other charges.
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