CFPB ‘Cautiously Optimistic’ About Medical Debt Credit Reporting Changes, But Chopra Questions Whether CRAs Went Far Enough

While expressing cautious optimism for “certain aspects” of the recent announcements from the three major credit reporting agencies regarding how they will handle medical debts, Rohit Chopra, the Director of the Consumer Financial Protection Bureau raised a number of issues and continued to ramp up the rhetoric with respect to credit reporting in his first public comments since the announcement was made last month.

During remarks to the CFPB’s Consumer Advisory Board, Chopra said announcement — which was jointly made by all three major credit reporting agencies, Equifax, Experian, and TransUnion — was “eyebrow-raising” because it begged the question: “are these three firms acting as competitors or as a cartel?”

Decisions about credit reporting “should not be left up to three firms that arbitrarily decide how reporting will impact consumers’ access to credit,” he said.

With respect to the particulars of the announcement — that medical debts under $500 would not be included in consumers’ credit reports, that paid medical debts would be removed, and that medical debts would not be allowed to be reported for one year from the date of first delinquency — Chopra praise that providers and insurance companies would have “more time” to process claims before debts “stain patient credit reports.” But Chopra then said that the moves announced by the credit reporting agencies failed to “fundamentally address the concern that the credit reporting system can be used as a tool to coerce patients into paying bills they may not even owe.”

Chopra posed three questions to the Consumer Advisory Board during his remarks:

  • is it appropriate to treat unpaid medical bills as a typical “debt”?
  • f medical bills are not much help when it comes to predicting repayment on future loan obligations, should they even be included in credit reports?
  • how should we think about the inclusion of allegedly unpaid medical bills in credit reports as part of the broader question of how data is used in consumer finance markets?

“It is critical that our credit reporting system is not used as a weapon to coerce Americans into paying bills they may not even owe,” he said.

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One comment

  1. Mr. Chopra is wrong about whether the use of unpaid medical debt is predictive, according to reports published by his own agency in April and December 2014. Notwithstanding that the data used for the report is now 10 years old and has not been updated, these reports do not claim that unpaid medical debt is not predictive of credit risk; only that in some instances it may be *less* predictive. However, these studies treat a single variable as dispositive and anyone with a rudimentary knowledge of multivariate statistical modeling knows that is not the case.

    Mr. Chopra wants to bully industry into doing his bidding by implicit or explicit threats of bringing the Federal government’s hellfire and brimstone down upon unfavored companies. He is the exemplar of what was feared when the Obama administration pushed through Dodd Frank; an unbridled, undisciplined autocrat who has the power to unilaterally and unreasonably coerce industry without any analysis or assessment of market and consumer impact. It should give courts a good reason to reassess whether the “deference doctrine” to Federal agencies is constitutional.

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