Consumer Comeback Blog

Senators Ask Consumer Financial Protection Bureau to Remove Medical Debt from Credit Reports

Recently a group of four Senators sent a letter to the Consumer Financial Protection Bureau (CFPB) encouraging the agency to consider regulatory action to remove fully-paid off medical debt from consumer credit reports. Senators Sherod Brown (D-Ohio), Jeff Merkley (D-Ore.), Chuck Schumer (D-N.Y.), and Robert Mendez (D-N.J.) wrote to CFPB director Richard Cordray to describe the complex nature of medical billing.

In their letter, the Senators stated that health providers frequently send bills to collections before patients have completed negotiations with their insurance company to determine what expenses they will have to pay out-of-pocket. Citing a study from credit scoring company FICO, the Senators state that any unpaid debt sent to a collection agency, regardless of the amount, deducts 100 points from a credit score for up to seven years.

The Senators write that by the time a patient is aware of what costs he or she will have to pay “the damage to the consumer’s credit score has already been done.” The credit score reductions make creditworthy consumers “artificially risky” and constrains the ability of many people to fully contribute to the economy, states the letter.

As part of the solution the Senators, along with Senators Dick Durbin (D-Ill.) and Tom Harkin (D-Iowa), co-sponsored the Senate version of the Medical Debt Responsibility Act which amends the Fair Credit Reporting Act to require the removal of fully-paid off medical debt from consumer credit reports within 45 days of the debt being settled.

The bill, which had won the backing of the American Medical Association, Mortgage Bankers Association, and the National Credit Reporting Association, passed the House of Representatives with a bipartisan majority of 336-82.