Groups Want Medical Debts Deleted From Credit Reports

A group of more than 90 state and national consumer organizations have submitted a petition to the Consumer Financial Protection Bureau, asking it to issue a rule that would prohibit medical debts from appearing on consumers’ credit reports, if the debts resulted from medically necessary services.

Background: The CFPB has had medical debts in its crosshairs for a while now, looking to lessen the impact of that type of debt on consumers’ credit reports. The interest from the CFPB on the issue led the credit reporting agencies to announce they were going to make changes to how medical debts are reported, which would ultimately lead to 70% of medical debt tradelines being removed from consumers’ credit reports.

  • VantageScore, which is owned by the three major credit reporting agencies, subsequently announced it would not include medical debts in its scoring models. That announcement, the groups argue in their petition, proves that medical debts are “simply not necessary for credit scores to be predictive.”

The Collection Argument: In a footnote, the groups note that “the debt collection industry has also argued that placement medical debts on credit reports provides notice to patients that they have a bill or that their insurance company didn’t cover their care.” That argument doesn’t hold water, according to the petition, because “there are legal notice requirements for both medical billing and health insurance denials of coverage. Any problems with notices should be handled in other forums and not addressed through potentially harmful credit reporting.”

What The Groups Want: The groups are asking the CFPB to use its “clearly delineated” rulemaking authority under the FCRA and by removing provisions from Regulation V to prohibit the inclusion of medical debts in credit reports.

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