Anyone who has had a credit application denied due to an unpaid (or past due) medical bill knows frustration. The fact is, medical debts – even seemingly insignificant amounts – can greatly affect a person’s credit score, making impossible to purchase a house, refinance a mortgage, or even buy a new car. Four Democratic Senators, however, want to put an end to the harmful impact of medical bill collections on patients’ credit reports, and they are asking the Consumer Financial Protection Bureau (CFPB) to take action.
Senators Jeff Merkley of Oregon, Chuck Schumer of New York, Robert Menendez of New Jersey, and Sherrod Brown of Ohio sent a letter to CFPB Director Richard Cordray last week detailing the impact a medical collection agency’s unfair collections and reporting policies can have on consumers and on the economy.
Many patients, for example, are not even aware of their debt until they have been sent to a medical collection agency. By this time, despite the fact that the patient was never given a chance to dispute or to correct the charges, the damage has already been done; and the damages, it seems, can be far-stretching. According to the Senators’ letter to Cordray, “the Fair Isaac Corporation estimates that any unpaid debt sent to medical bill collections, whether for $100 or $10,000 can shave up to 100 points off of a credit score,” and the black marks can remain on a patient’s credit report for up to seven years.
The Senators have asked that the CFPB consider modifying or adding regulations that would address such problems and protect consumers who, for example, might not get approved for a home loan due to a five-year-old medical bill that was since paid off. The uniqueness of the situation is that no one chooses to incur medical debt; therefore, patients should not be penalized the same as consumers with other kinds of debts.
“One potential approach,” states the letter, “is the Medical Debt Responsibility Act [which] would amend the Fair Credit Reporting Act to require consumer reporting agencies to remove medical debts from a consumer’s credit report within 45 days once they have been fully paid or settled.” Senators Merkley, Schumer, Menendez and Brown are co-sponsors of the Medical Debt Responsibility Act, which recently passed the House of Representatives with a bipartisan majority.