Consumers to See Relief from Medical Debt on Credit Reports

Credit bureau policy will mean 2/3 of medical debt in collections will no longer be reported

The Consumer Financial Protection Bureau (CFPB) issued a report and analysis today on a new policy by the three major credit bureaus to stop reporting a portion of medical debt in collections on consumer credit reports. This policy has far-reaching implications for consumer credit scores.

The policy will be implemented by the bureaus in 2023, meaning consumers will see the benefits in just a few montsh. The CFPB says the change could limit what it calls "coercive credit reporting."

“The credit reporting system should not be used to coerce people into paying medical bills that they do not owe,” said CFPB Director Rohit Chopra. “Today’s report analyzes recent changes announced by the Big Three credit reporting conglomerates, and it is clear that more work must be done to address medical debt credit reporting problems.”

The biggest change is the elimination of small medical debt from credit reports. Specifically:

• Two-thirds of medical collections on credit reports will no longer be reported. Starting in 2023, medical collections tradelines less than $500 will no longer be reported on consumer credit reports. Medical bills under $500 are significantly more likely to remain on a credit report for longer than medical bills over $500. For patients and families who have only relatively small outstanding medical bills, the $500 threshold could mean a large reduction in coercive credit reporting.

The changes announced by Experian, Equifax, and TransUnion followed a CFPB report published earlier this year that highlighted how medical bills are a burden on one in every five consumers who are forced into an opaque system to resolve billing and credit reporting issues.

While the elimination of small medical debt from credit reporting has clear benefits, the CFPB analysis notes that a majority of all total outstanding medical debt in collections will remain on credit reports. That is, many individuals and families with medical debt have relatively large outstanding balances.

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