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Director Chopra’s Opening Remarks to the Consumer Advisory Board

Good afternoon. In modern consumer financial markets, financial institutions rely on more and more data every day. Today, I want to specifically focus on the issues associated with the furnishing of allegedly unpaid medical bills on consumer credit reports. I also want to share some of the CFPB’s early thinking on the recent announcement by Equifax, Experian, and TransUnion, regarding their reporting of medical bills.

We recently published a report called Medical Debt Burden in the U.S. This study built on work the CFPB has been doing since its inception, including a critical report we issued in 2014. The 2014 report found both that including medical bills on credit reports excessively penalized an individual’s credit score and that including medical bills on credit reports reduced the predictive value of an individual’s credit score. That is, including medical bills in credit reports hurt both individuals seeking credit and financial institutions trying to assess the risk that any given person would default on a loan.

Our most recent research reaffirmed that medical bills are less predictive. It also illuminated the magnitude of the problem: $88 billion of outstanding medical bills in collections that affect one in every five consumers.

Medical bills placed on credit reports can result in reduced access to credit, increased risk of bankruptcy, avoidance of medical care, and difficulty securing employment, even when the bill itself is inaccurate or erroneous.

Less than 21 days after we published our report, Equifax, Experian, and TransUnion issued a joint statement to announce they were changing how medical bills would be reported on credit reports.

Beginning in July of this year, paid medical bills will no longer be included on credit reports issued by those three companies. Unpaid bills will only be reported if they have remained unpaid for at least 12 months.

Additionally, they announced that next year, starting in July 2023, they will not include furnished medical bill collections information for amounts $500 or less.

Before I discuss the CFPB’s initial analysis of the announcement, there was one aspect that was particularly eyebrow-raising. The firms appeared to have made an agreement to decide how they wanted to report medical debt. This raised a key question: are these three firms acting as competitors or as a cartel?

Important decisions about credit reporting should not be left up to three firms that arbitrarily decide how reporting will impact consumers’ access to credit.

The CFPB is cautiously optimistic about certain aspects of the announcement. Most importantly, there will be more time for providers and insurance companies to process claims before any bills stain patient credit reports. On the other hand, the announcement does not fundamentally address the concern that the credit reporting system can be used as a tool to coerce patients into paying bills they may not even owe. Moreover, it’s not clear whether or not these changes are durable or enforceable.

You all serve as a critical sounding board for major policy issues that the CFPB is facing. I want to leave you all with a couple of questions to consider.

First, is it appropriate to treat unpaid medical bills as a typical “debt”? When it comes to medical bills, patients frequently have no idea what price they will pay. They usually don’t get to shop around, especially when facing emergencies. There isn’t a promissory note or disclosure, like there is with other loans.

Second, if medical bills are not much help when it comes to predicting repayment on future loan obligations, should they even be included in credit reports? We need to ensure credit reports are fair and provide an accurate accounting of a consumer’s credit obligations, but when it comes to medical billing, the system is rife with mistakes and errors.

Finally, how should we think about the inclusion of allegedly unpaid medical bills in credit reports as part of the broader question of how data is used in consumer finance markets? Technology has the power to improve lives, but unchecked surveillance can have many unintended consequences.

It is critical that our credit reporting system is not used as a weapon to coerce Americans into paying bills they may not even owe.

Thank you, all, for your work on the Consumer Advisory Board. I look forward to hearing more about your discussion today, which we will use to inform our work going forward.

Thank you.