Wednesday, Rep. Cindy Axne (IA-03) asked Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra about upcoming changes to how medical debt will be considered in credit reports following a CFPB report indicating medical debt is less predictive of future repayment than reporting on traditional credit obligations. These changes should help Americans overcome financial challenges that are created by past medical debts and get loans or credit in the future.

That CFPB report found that roughly 20 percent of U.S. households report that they have medical debt, and medical collections tradelines appear on 43 million credit reports. Meanwhile, according to the report, the U.S. healthcare system is supported by a billing, payments and collections credit reporting infrastructure where mistakes are common and often difficult for patients to resolve.

Last month, shortly after that report, the three main nationwide credit bureaus, Equifax, TransUnion, and Experian collectively announced changes to credit reporting that will remove nearly 70% of medical collection debt from credit reports. The primary changes are:

• No longer including medical debt that was paid after it was sent to collections on credit reports (starting July 1st).
• Waiting at least a year before unpaid medical collection debt appears on a credit report (also starting July 1st).
• Only reporting medical debt of over $500. This will go into effect in 2023.

“Last month, the CFPB put out a report noting medical debt is less productive for credit reports, and you pointed out as well during that some of the harm that it could do. After that report, we saw three of the main credit bureaus take steps to reduce the importance of medical debt on people’s credit reports, which is good news,” Rep Axne said. “So can you explain the changes that were made, and if you believe they are really important to making a more positive change in people’s lives, and what is CPFB’s role in this area?

“You are right that there has been evidence to suggest that medical debt is not necessarily a very good predictor of credit performance on other loan obligations. We are actually working hard … given the challenges that we see throughout the system, and also with respect to health privacy, because one of the things we found is consumers are even reporting that collections issues are even raising what their actual medical procedure might have been,” CFPB Director Rohit Chopra replied. “We should determine whether it’s appropriate to include this information at all. We’re currently looking into that and we’ll happily report back on that question.”

Last week, Rep. Axne led 41 colleagues in a letter to the Department of Health and Human Services to rein in the use of “junk plans” which lack critical consumer protections, and can leave patients with hundreds of thousands of dollars of medical bills they weren’t expecting and are unable to pay.

Rep. Axne previously fought and voted for the bipartisan No Surprises Act, which protects Americans from most forms of surprise medical bills, which includes care provided in an emergency and transportation by air ambulances. The law went into effect January 1, 2022.

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