STATEMENT: U.S. PIRG applauds industry move to erase medical debt from credit reports

Advocates say patients shouldn’t be penalized by a bad credit score.

U.S. PIRG

WASHINGTON —  According to a joint PRNewswire release from Equifax, Experian and TransUnion, the three major credit bureaus are changing how they will treat the reporting of medical debt. The release states that the new actions will result in nearly 70% of medical debt in collections being removed from credit reports. Paid medical debt will be erased from consumer reports and any new medical debt won’t be included in credit reports until a year (rather than the current six months) after the debt is given over to collection agencies. Beginning in 2023, owed medical debt of less than $500 will not be included in credit reports.

The announcement comes just weeks after the Consumer Financial Protection Bureau (CFPB) released a report that expounded on the widespread problem of medical debt for American families. According to the CFPB report, about 20 percent of American households say they have medical debt. As of the second quarter of 2021, 58% of bills in collections and on credit reports were medical bills. These black marks can remain on credit reports for seven years, making it less likely for affected individuals to get loans, buy a home, or in some cases, to even get a job. Debt in general has an added negative impact on individuals’ long-term health. 

In response to the announcement, Patricia Kelmar, U.S. PIRG’s Health Care Campaigns director, made the following statement:

“We have known for years that medical debt doesn’t predict credit defaults, nor does it accurately predict a person’s desire and willingness to pay off loans. After feeling the heat from the CFPB and its new director, Rohit Chopra, the credit bureaus appear to have finally seen the light and are course-correcting. 

“Delaying medical debt reporting by a year, wiping paid medical debt from credit reports, and ending the inclusion of medical debt under $500 are all welcome relief that can’t come soon enough. 

“Working through the system takes time. Giving people a year, rather than 180 days, to work out any problems with their billing statements, is a good start. Confusing bills, errors in coding, and unsubstantiated claim denials are just some of the reasons people fighting medical bills suddenly find themselves dealing with collections agencies. 

“While these are welcome changes, the credit bureaus should stop reporting debt arising from medically necessary procedures altogether. We need a fair credit system that doesn’t penalize people for life events they can’t control like getting sick.”