Consumer Finance Agency Estimates $88 Billion in Medical Bills on Credit Reports

The CFPB released a report highlighting inaccurate credit reporting practices

The Consumer Financial Protection Bureau (CFPB) released a report on Tuesday revealing some of the major failings of the U.S. medical billing system, including inaccuracies in the reporting of medical bills to the major credit bureaus.

The report highlights that the coronavirus pandemic has exacerbated some of these systemic issues, leaving many consumers with little recourse.

Key Takeaways

  • The CFPB has released a report about the state of medical billing and how mistakes in the credit reporting system are used against consumers.
  • The report highlights how recent changes by credit scoring models to make medical debt less impactful have gone largely ignored by lenders who use credit scores to make lending decisions.
  • Past-due medical debt and the related reporting issues have disproportionately impacted Black and Hispanic communities.

Key Findings of the CFPB Report

The CFPB's report on medical billing has highlighted some serious problems, not only in the reporting process but also in the collection of medical bills. Here are some key findings of the report:

  • Tens of millions of households are impacted: The federal agency found that 43 million credit reports contain medical collections tradelines. In the second quarter of 2021, 58% of the bills in collections are medical bills, based on credit report data.
  • Medical debt impacts borrowing options: Medical billing data is less likely to help creditors predict the likelihood of a loan applicant paying their traditional debts on time. But while new credit scoring models put less emphasis on medical bills, lenders are still using older models that don't reflect this update, hurting consumers.
  • Medical debt impacts certain communities disproportionately: Black and Hispanic communities are more likely to have medical debt, with 28% and 22% of individuals in those communities with past-due medical bills, respectively. In comparison, 17% of white individuals and 10% of Asian individuals have late medical bills.
  • Inaccuracies in reporting make matters worse: The U.S. healthcare system's billing, collections and payment processes can be complex. Medical bills generally don't show up on your credit report until they're 180 days late, and by then, the charges can become confusing and even inaccurate. Patients often find it difficult to obtain a resolution.

The report also found that many of these issues were made worse by the coronavirus pandemic, as consumers incurred substantial costs related to COVID-19.

"Coercive credit reporting to obtain payments on medical debt can also deter families from seeking needed medical care," said CFPB director Rohit Chopra in a statement on Tuesday. "Coercive credit reporting interferes with the relationship between patients and their doctors and can lead to worse medical outcomes."

Steps the CFPB Plans to Take

Upon releasing the report, the CFPB has announced steps it plans to take to protect consumers from questionable medical bills and coercive collection practices related to them:

  • Hold credit bureaus accountable to make sure medical bills are reported accurately, including taking action against data furnishers that regularly report inaccurate information.
  • Work with the U.S. Department of Health and Human Services to remind debt collectors of consumer rights and their responsibility to collect and report only those debts that are legitimate.
  • Conduct additional research to determine if medical bills should be included on consumer credit reports at all.

Read the full report, Medical Debt Burden in the United States, to learn more.

Article Sources
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  1. Consumer Financial Protection Bureau. "CFPB Estimates $88 Billion in Medical Bills on Credit Reports."

  2. Experian. "How Does Medical Debt Affect Your Credit Score?"