Four Democratic senators recently submitted a letter to Consumer Financial Protection Bureau (CFPB) Director Richard Cordray requesting that the agency consider regulations restricting the use of medical debts in credit scoring.
In their letter, Senators Jeff Merkley (D-OR), Chuck Schumer (D-NY), Robert Menendez (D-NJ) and Sherrod Brown (D-OH) emphasized that medical debts are different from other consumer debts and are not as useful in predicting whether individuals are creditworthy. The senators explain in their letter that the factors that distinguish medical debt include: “the unplanned nature of the purchases, the opaqueness of the costs, the complex billing procedures, [and] the exceptionally high error rate in reporting.” The senators also noted that, because of the intermediation of insurance companies, providers frequently send bills to collections prior to notifying patients of the amount for which they are responsible. Referring such bills to collections frequently results in reporting to credit agencies, which may cause long-lasting damage to an individual’s credit score.
The four senators are also co-sponsors of the Medical Debt Responsibility Act (S.2149), which would require consumer reporting agencies to erase medical debts from an individual’s credit report within 45 days once the debt has been paid in full or settled. The senators’ letter requested CFPB to evaluate other methods of regulating the collection and reporting of medical debt.
The full text of the letter is available on Senator Menendez’s website here.