In a significant victory for US debtors and consumers, the federal Consumer Financial Protection Bureau (“CFPB”) has demanded that a vast majority of medical debt be removed from credit reports. See Wall Street Journal media report here. As reported, in response to this significant pressure from the CFPB, the country’s three major credit reporting agencies — Equifax, Experian, and TransUnion — have agreed to the following:
- They will remove PAID medical debt collection actions from credit score reports by July 2022
- Will provide a six-to-twelve month grace period before adding UNPAID medical debt to credit reports and
- Starting in 2023, will no longer include any medical debt — paid or unpaid — less than $500 on any credit report
According to the CFPB, and as reported, medical debt collection actions account for about 70% of the medical debt currently listed on consumer credit reports. Further, medical debt itself — about around $88 billion — is a significant proportion of debt that is reported. The move is prompted by CFPB’s cited studies showing that medical debt is “less predictive of future payment problems than other debt collections are…” This is because medical debt tends to result from unexpected and emergency health circumstances. The purpose of credit score reports is to provide a “prediction” for creditors of a consumer’s likelihood of prompt and full payment of extended credit. Since medical debt is NOT predictive of future debt payment, the CFPB believes that including medical debt is an unfair and abusive business practice. Moreover, as reported, medical debt and collection actions have a tendency to disproportionately impact communities of color and the disadvantaged. As such, the CFBP also believes hat including medical debt and collection actions can be discriminatory. For these and other reasons, the CFPB has promised intensive enforcement action if credit reporting agencies continue to use data that is not material or relevant to the predictive models of creditworthiness.
As noted, this is a significant victory for consumers and debtors crushed under mountains of debt. Consumer credit scores should see a significant boost as a result of the agreed actions by the three major credit reporting agencies.
What Should I Do?
Debtors need take no action at this time. The removal of medical debt data will be done automatically according to the reports.
However, starting in the summer of 2022, consumers should actively review their credit report to ensure that qualified medical debt and collection actions HAVE been removed from their credit reports. Further, if medical debt, collection actions and other erroneous information is contained on a credit report, debtors should consult with experienced California debtor’s rights attorneys. Credit reporting agencies can be held legally liable for money damages if credit reports contain false, immaterial and inaccurate information. Experienced debtor’s rights attorneys can help craft the proper demand correspondence that will clear inaccuracies from a credit report and/or begin litigation to vindicate a debtor’s legal rights.
Contact Our Experienced Debtor’s Rights Attorneys
For more information, contact the Consumer and Debtor Rights attorneys at Guardian Litigation Group. We have the tools and legal experience necessary to protect you and to recover money damages for you if you have been the victim of false, inaccurate or misleading credit reporting. Our mission is to provide unparalleled legal services and support to consumers and financially distressed individuals. We can be reached via our contact page or by phone at (949) 444-5474.