US Seeks to Ban Medical Debt From Credit Reports

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Facts

• The Biden admin. announced Thursday that the Consumer Financial Protection Bureau (CFPB) is considering barring consumer credit companies from including medical debt and collection information on individuals' credit reports.¹
• According to the CFPB, 20% of Americans have medical debt on their credit reports, which can affect their ability to obtain mortgages, loans, and credit cards. The agency also found that 58% of all third-party debt collection on consumer credit reports was for medical bills.²
• The CFPB also found that medical debt, which, according to a KFF Health News-NPR investigation, affects roughly 100M Americans, doesn't accurately predict a consumer's creditworthiness, unlike other forms of debt.³
• The CFPB cited the Fair Credit Reporting Act as the legal basis for the proposal, which, if enacted, could help the 80% of medical debt holders who have zero or negative net worth, according to a Brookings-based think tank. The study also found that 27% of Black families had medical debt as opposed to 16.8% of non-Black households.⁴
• The three largest credit agencies — Equifax, Experian, and TransUnion — last year stopped reporting medical debt of less than $500. However, that decision excluded millions of debt holders, prompting calls for more widespread protection, including banning hospitals from selling patient debt or denying care to those with past-due bills.³
• Though the $500 or less move left out 70% of medical debt holders, the companies also extended the grace period for applying debt to individuals' reports from six months to one year, giving patients time to address repayments with health insurers.¹

Sources: ¹CNN, ²CNBC, ³CBS and ⁴Reuters.

Narratives

• Narrative A, as provided by NPR Online News. Medical debt, something no one deserves and often appears due to unforeseen accidents, shouldn't hinder people's ability to access financial services. If we want people to make money to repay their debt, then we shouldn't ruin the credit report that helps them grow financially in other aspects of their lives. Over 100M people are burdened by this debt crisis, so the government must step in to help this significant portion of the population.
• Narrative B, as provided by Business insider. While significant amounts of medical debt are certainly hurting some Americans, the fact of the matter is that such debt doesn't affect credit scores nearly as much as it used to. As medical debt is something financial agencies still use to assess prospective clients' creditworthiness, patients should make sure they make smart choices when assuming debt, such as not putting it on credit cards and reaching out to non-profit credit report organizations.