The biggest credit-reporting firms will strip tens of billions of dollars in medical debt from consumers’ credit reports, erasing a black mark that makes it harder for millions of Americans to borrow.

Equifax Inc., EFX 0.71% Experian EXPGY 1.72% PLC and TransUnion TRU -0.99% are making broad changes to how they report medical debt beginning this summer. The changes, which have been in the works for several months, will remove nearly 70% of medical debt in collections accounts from credit reports.

Beginning in July, the companies will remove medical debt that was paid after it was sent to collections. These debts can stick around on a consumer’s credit report for up to seven years, even if they are paid off. New unpaid medical debts won’t get added to credit reports for a full year after being sent to collections.

The firms are also planning to remove unpaid medical debts of less than $500 in the first half of next year. That threshold could rise, according to people familiar with the matter.



Medical debt is a huge burden for many Americans. Medical emergencies and unexpected diagnoses often result in giant bills that can easily overwhelm people who otherwise never miss a debt payment. The unpaid bills end up on credit reports, sometimes lowering consumers’ credit scores and hindering their ability to get affordable mortgages, car loans and other credit.

The Consumer Financial Protection Bureau estimates that some $88 billion in medical bills sits on 43 million credit reports. The three credit-reporting firms maintain reports on more than 200 million people in the U.S.

“This is an important step to support consumers in the wake of the Covid-19 pandemic,” the companies said in a joint statement. “These changes reflect our ongoing commitment to helping facilitate access to fair and affordable credit for all consumers.”

The firms are also trying to appease the Consumer Financial Protection Bureau, according to people familiar with the matter, which has made credit reporting a priority under director Rohit Chopra. The CFPB earlier in March said that it planned to hold credit-reporting firms accountable for not taking enough action against companies that report erroneous medical debts.
The agency has taken a hard line on the U.S. credit-reporting system, which plays a huge role in determining who gets credit and who doesn’t. Consumers have little control over what is added to their credit reports, which rely on information submitted by lenders, collections firms and others.

The CFPB is investigating how Equifax handles consumer disputes, the company said in a recent regulatory filing. Experian and TransUnion are also under investigation over their handling of disputes, according to people familiar with the matter.

“As the CFPB is our primary regulator, we have continual engagement with them on a variety of issues,” a TransUnion spokesman said. Experian didn’t respond to a request for comment on the investigation.

The CFPB has said its research indicates that medical debt is less predictive of a person’s ability to repay than other kinds of loans, an assessment some banks endorse. Still, “medical debt collections on an individual’s credit report can impact their ability to buy or rent a home, raise the price they pay for a car or for insurance, and make it more difficult to find a job,” the agency said.

The main customers of credit-reporting firms are lenders, which use the information on credit reports to assess the likelihood that loan applicants will pay back their debts.

The credit-reporting firms have been speaking with banks to get their take on removing medical debts, according to people familiar with the matter. Some banks have said they worry less about removing smaller unpaid medical bills and those that are in collections for a shorter period, the people said.

Banks worry that removing certain debts can make some loan applicants look less risky than they actually are, which could result in unexpected defaults and losses. Yet banks are in the business of lending money, and they don’t want to turn away customers if they don’t have to.

Banks today draw on a wealth of bespoke data, including information drawn from customers’ bank accounts, to make lending decisions. They are relying less on traditional metrics, such as credit scores derived primarily from the information on peoples’ credit reports.

Unpaid medical bills were addressed in settlements the three firms reached with state attorneys general dating back to 2015. The companies are now required to wait about six months before adding medical debt to consumers’ credit reports, and they must remove debts that were paid by insurance companies.

The credit-reporting firms have removed a swath of negative information from collections firms in recent years, including unpaid library fines, traffic tickets and gym memberships. In 2017, the companies decided to begin removing tax-lien and civil-judgment data.

LINK: https://www.wsj.com/articles/m...ing_now_article_pos3

So if I understand this correctly, this will make it possible for people that are already ass-over-teakettle in debt to borrow more money?

Brilliant.

quote:

Originally posted by PHPaul:
So if I understand this correctly, this will make it possible for people that are already ass-over-teakettle in debt to borrow more money?

Brilliant.

Yep. Should work about as well as the policy did 15 years ago allowing people who couldn’t come up with a down payment to get a mortgage for a house they couldn’t afford. Our government’s version of “Here, hold my beer.”

The medical billing system is totally out of control. Go to the ER, spend 2 hours mostly waiting, no XR or any procedure, come out owning $13,000. There is a problem with the system, and greed is the culprit.

Taking med billing away from credit score is fair and reasonable. No need to ruin someone's life because the med system is so flawed.

Regardless of the life circumstances that caused debt it is still debt until it is paid off or forgiven. No one ever promised me life would be fair...

It should remain on if it's owed. Thats the WHOLE PURPOSE of credit monitoring and reporting so that potential lenders are not blind sided by unreported debt. You think thats fair?

How would you like it if your business loaned someone money on the basis of a false ability of them to pay it back due to debt they carry that was hidden from you. How would you like to receive pennies on the dollar back of your hard earned money from them in bankruptcy court.

Borrowing money under false pretenses...
Why would that not be considered fraud?

quote:

Originally posted by c1steve:
The medical billing system is totally out of control. Go to the ER, spend 2 hours mostly waiting, no XR or any procedure, come out owning $13,000. There is a problem with the system, and greed is the culprit.

Taking med billing away from credit score is fair and reasonable. No need to ruin someone's life because the med system is so flawed.

Lots of theories for why healthcare (and higher education) are so expensive. There's a little bit of truth in each of them I suppose. But the most significant factor is undeniably due to the main "input" to this product being oodles and oodles of highly educated workers.

Automation has yet to impact the input costs of the healthcare business. Tackle that, the cost of huge regulatory burdens, and liability insurance, and the Federal entitlement programs (Medicare and especially Medicaid) that pay less for services than the services cost (money losers)... oh, and now add to that those that can freely skate on their bill without so much as a ding to their credit, ... then the price will come down.

I'm not optimistic either.

When my wife got cancer, the medical bills put us into bankruptcy. Took us years to recover, but we did, and paid every last one of them off.

quote:

Originally posted by cparktd:
Regardless of the life circumstances that caused debt it is still debt until it is paid off or forgiven. No one ever promised me life would be fair...

It should remain on if it's owed. Thats the WHOLE PURPOSE of credit monitoring and reporting so that potential lenders are not blind sided by unreported debt. You think thats fair?

How would you like it if your business loaned someone money on the basis of a false ability of them to pay it back due to debt they carry that was hidden from you. How would you like to receive pennies on the dollar back of your hard earned money from them in bankruptcy court.

Borrowing money under false pretenses...
Why would that not be considered fraud?

Let's say the petro companies got together and decided to raise their prices 10x. Their costs were the same. Now it cost $1,000 to fill your tank. How would you feel? This is healthcare today.

I work in healthcare, and greed has turned western medicine into money machine. Patient wellness has little to do with how things are run and set up. It has NOTHING to do with cost of education, absolutely nothing.

Years ago my wife went to the hospital for a minor procedure. Within less then two weeks later we were sent to collections for the bill (which we had the money to pay - as soon as we knew how much).
We had NOT even received the bill yet!
I immediately went to the hospital billing department. The manager called the collection service (in another state) and corrected the situation right then and there while I was in her office.

PC

My biggest issue with medical billing is the EOB and the final bill.

I had an approved procedure, and the EOB showed me owing $400. I receive a bill for $595. I say, no, it should be $400. Call the insurance company, they say no, it's $400. Call the Med group to pay the $400, they say they require the full $595 that is owed.

Go back and forth, find that the issue is a particular method the doctor prefers to use that doesn't code with the insurance company. So without my knowledge I was on the hook for charges beyond insurance due to the Dr's preference.

Yeah, I let that one go to collections and paid the collections company 50% to make it go away.

Going through the medical battles now, 8 days in the hospital, their initial bill was $67,000.00. Insurance has that down to about half and still does not include the doctors, radiology, or anything related. Medical is one hell of a racket that we have no control over or up front pricing.

I worked in the mortgage biz, both A paper and subprime. I could look at a credit report and tell if someone was a deadbeat, no matter their income. Plenty of people making $200k in the mid-90s were overextended and bad credit risks. Some credit reports simply go to character. Medical debt rarely goes to character. Consumer debt and payment history do.

My folks are pretty well off and with 800+ FICOs. But a recent three month stay in the hospital and rehab for my mom has them facing six figure bills. My suspicion is that my mom's treatment was planned around Medicare and their supplement plan's reimbursement limits and that she'd be released the day the facilities couldn't bilk them anymore. My folks will be fighting this stuff out for months or years and, whatever ding shows on their credit reports for it would not remotely reflect their ability or willingness to repay debts.

Five sutures cost us about 2k at our regional ER, for which we are responsible for around $400. Had I known this ahead of time I would have spent $3 on a tube of superglue and dealt with it myself.

quote:

Originally posted by cparktd:
Borrowing money under false pretenses...
Why would that not be considered fraud?

In what other industry to you have to walk in, hand them the ability to decide what you owe, without your prior consent? Do you buy anything else in this society without a prior knowledge of the cost, or the approximate cost? In fact, often the person providing the care has no idea about the costs associated with the procedure they are proscribing. If you go into the hospital, and you don't having somebody right there as your advocate, the system can easily turn a responsible person into a debtor.

I think medical debt isn't a good indicator of a person's financial responsibility, because they aren't able to make rational decisions about the expenditures beforehand. Therefore, I think it's fitting to partially exclude them from your FICO score.

In my opinion, for a hospital stay expense, someone either you or your spouse will have to take on the job as an A/P or A/R clerk to hound dog and reconcile every bill received from every Vendor (Doctor, Hospital, Radiology, labs, etc etc) until all the bills have come in and been accounted for and paid properly. That could take 6 month to 1 year to reconcile depending... It's almost a part time job for a big hospital expense.

quote:

Originally posted by c1steve:
The medical billing system is totally out of control.

There's no denying this. The prices being charged are obscene.

Kinda like- a man is sentenced 500 years in prison, and he's eligible for parole in 6 years. Hospitals charge 160,000 dollars for a hospital stay so they can end up with 18,000 dollars.

This shit is just plain broken, and it's lead us to this.

Once several years ago I had a procedure to shock my heart back into rhythm. As I was getting ready to change into my clothes to go home, while I was still somewhat sedated, someone from billing came in and said they would give me a break on my bill. It was $10,000 and they would reduce it to $5000. All I had to do was sign the paper. I refused. When I turned it in to my insurance company they paid all but $1000 dollars. That's what I owed the hospital. The sneaky bastards tried to take advantage of me while I was still mildly sedated.

I went to the ER once, at the hospital that was in my plan, well, wouldn't you know it....one of the ER doctors was not in my plan. Guess what? I received a big bill because I didn't have the foresight to make sure all the doctors were in my plan.

This is an interesting thread. There is something wrong with healthcare costs/billing in this country. Rick Lee makes an interesting comment above.
I am not very eloquent, but you go in with no idea what things will cost. Neither do the docs ordering treatment. Maybe this will prompt some change in the "system." IDK - but it shouldn't be this way (healthcare billing/expenses)

Another BIG issue is that you don’t get to see how much it will cost nor get to decide what you want.

So a doc recommends a high cost test that “might” help? You are not given the cost nor the right to decide, BOOM $12000 onto you bill.

quote:

Originally posted by cparktd:
It should remain on if it's owed. Thats the WHOLE PURPOSE of credit monitoring and reporting so that potential lenders are not blind sided by unreported debt. You think thats fair?

Most are blowing right by this. It's not the Evil Medical Collective that's getting screwed under the new practice, it's everyone else who relies on credit reporting to judge people's actual creditworthiness.