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The Realities and Future of Medical Collections Debt and Credit Reporting: A Policy Update for Consumers

Posted by J. Edward Richards | Apr 29, 2022

As Covid-19 spread across our nation over the past years, it is no wonder that medical debt collection has stepped back into the policy limelight. The Consumer Financial Protection Bureau (“CFPB”) recently reported that $88 billion in medical debt exists on consumer credit records. This figure is likely to be higher though as not all collections accounts are reported to each credit reporting agency. As of last year, medical collection debt tradelines were the most common collection tradeline (58%).[i]

Reported accounts frequently means lower credit scores for consumers. Lower credit scores mean limited access to credit, making it harder for struggling Americans to find a job or get approved for a lower interest rate car loan or mortgage. This is particularly concerning as medical debts have not been found to be predictive of future payment troubles. Newer credit models factor this in, but older models may still govern some reports. [ii]

Changes Are Coming

Ailing credit scores affected by medical collection debt will be getting a boost in the coming months. According to Forbes[iii] and the New York Times,[iv] approximately 70% of medical collection debt will soon be removed from credit reports.  Three major changes will accomplish this:

1)            As of July 1, 2022, the three consumer credit reporting agencies of Equifax, Experian, and TransUnion will no longer report medical collection debt that has been paid (even if the tradeline has been present for several years). Presently, such accounts would stay on a report for seven years.

2)            The grace period for unpaid medical debts appearing on credit reports will increase from six months to a year. This will allow consumers more time to double-check their bills, dispute insurance issues, and negotiate payment plans to stay out of default before taking the credit hit.

3)            In the first half of 2023, the three agencies will not include medical collection debt under $500.

It is important to note that these changes do not apply to loans or credit cards. Once a medical bill is put on a credit card, it becomes credit card debt that is subject to different reporting standards.[v] Also, a medical collection debt may still be legally collectible even if not reported to the credit bureaus.

What If a Tradeline Stays On My Credit Report?

While these changes will positively impact consumers, we know that sometimes there are bumps along the road to change. Should you find a medical collection debt tradeline (or any tradeline) on your credit report that should not be there after you have disputed the account, you may be entitled to damages under the Fair Credit Reporting Act (“FCRA”)[vi]. The FCRA is a federal law that ensures the accuracy, fairness, and privacy of consumer information. If you are in need of an experienced debt defense attorney, no matter where in Florida you live, Miami, Orlando, Tampa, Jacksonville, or any other place in the sunshine state, contact the Holland Law Group today for a free consultation. Your credit score may thank you for it.

[i] https://www.nytimes.com/2022/03/04/business/credit-report-medical-debt-ban.html

[ii] https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf

[iii] https://www.forbes.com/advisor/personal-finance/medical-debt-removed-from-consumer-credit-reports/

[iv] https://www.nytimes.com/2022/03/04/business/credit-report-medical-debt-ban.html

[v] https://money.usnews.com/credit-cards/articles/most-medical-debt-may-soon-vanish-from-credit-reports

[vi][vi] 15 U.S.C. §§ 1681-1681x

About the Author

J. Edward Richards

Edward Richards is from Pensacola, FL. He received his J.D. from Mercer University, as well as a certificate fromthe school's prestigious Advanced Legal Writing Program. He returned to Florida as a prosecutor in Bradenton beforemoving to auto insurance litigation. Edward's focus in the high-volum...

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