The Department of Veterans Affairs has published a final rule detailing how delinquent debts owed to the VA are reported to credit reporting agencies. The new rule, which establishes a minimum threshold for what will be reported, goes into effect on March 4.
About 5,000 delinquent accounts are reported to credit bureaus each month, according to the VA. In many cases, veterans complain about the loss of security clearance or an inability to obtain credit or get a mortgage. In amending the rule, the VA is acknowledging that certain debts, such as medical debts, “are fundamentally different than consumer debt.”
Under the new rule, debts will be reported to a credit bureau if they have been deemed to be uncollectible, meaning the VA has exhausted available collection efforts, if the debt is not owed by someone who has been determined to be catastrophically disabled or whose income entitles the individual to free healthcare and benefits, and if the debt owed is over $25.
“Reporting debt to consumer reporting agencies impacts credit worthiness and negative reports may cause financial distress for Veterans,” said VA Secretary Denis McDonough, in a statement. “Late remittance or nonpayment can lead to debt collection. However, overpayment of benefits funds is often debt accrued through no fault of the Veteran.
Consumer advocates praised the announcement.
“Medical debt is not a good predictor of creditworthiness, and none of us should worry that an unexpected medical bill could damage our credit history,” said Jenifer Bosco, staff attorney at the National Consumer Law Center, in a statement. “The Department of Veterans Affairs has sent a strong message that the credit reporting of medical debt is harmful, and it is time to end this harm to veterans with VA medical debt.”