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Prepared Remarks of CFPB Director Rohit Chopra on Medical Debt at a Press Call Hosted by Vice President Kamala Harris

Thank you, Vice President Harris.

Today, the Consumer Financial Protection Bureau is launching a rulemaking to block medical debt collectors from weaponizing the credit reporting system to coerce patients into paying bills they may not even owe. We are also kicking off a rulemaking process to prohibit lenders from using certain medical billing information in their underwriting decisions.

When Americans end up in the hospital, there’s often little or no choice of provider, it’s extremely difficult to know prices in advance, and the full cost of treatment may only become clear weeks or months after the fact. Families are often barraged with a stream of confusing and error-ridden bills from facilities and providers. Too many of us have ended up in a doom loop of disputes between insurance companies and healthcare providers.

Too often, these bills, even ones where the patient doesn’t owe anything further, end up being reported on the patient’s credit report. Millions of people have spent millions of hours disputing these errors, often while recovering from serious illness. Others first learn of an erroneous medical bill in collections when they apply for a mortgage or car loan, and are forced to choose between a protracted fight to fix the inaccuracy, or just paying it so they can move on with their lives. And of course “just paying” an inaccurate bill just isn’t an option for many.

CFPB research found that 58 percent of all third-party debt collection tradelines were for medical debt, making medical debt the most common debt collection tradeline on credit records in 2021. Let me say that again: more than half of third-party collections on people’s credit reports were from medical debt, more than credit cards, student loans, utilities, and every other type.

There are broad concerns about the accuracy of this data. First of all, billing errors are widespread, whether that’s patients being charged for care they didn’t receive, for care that should have been covered by insurance, or even for care provided to someone else entirely. Making matters worse, most debt collectors collecting on unpaid medical bills have no way of comparing the bills they are collecting on with the healthcare providers’ billing records, so they cannot verify the underlying accuracy of a bill. And when unpaid balances are altered by an insurance adjustment or financial assistance, that may not be reflected in the debt collector’s data.

Those problems may be part of why research has found medical billing history has limited predictive value in underwriting. Those that use and report medical bills have largely conceded their questionable worth. Last March, the big three credit reporting conglomerates, Equifax, TransUnion, and Experian, announced that they would stop reporting some, but not all, medical bills on an individual’s credit report. Large credit scoring companies are moving to models that completely or partially exclude medical bills, though many creditors still rely on older models that haven’t made that shift. VantageScore, an entity owned by the conglomerates, has stopped using medical debt in its scores entirely. Newer FICO score models also give less weight to medical debt reporting.

This raises an obvious question. If credit bureaus are pulling off much of this information already because it isn’t a good predictor of risk, why should creditors see your medical bills at all? And if creditors don’t need to see your medical billing history , why are we continuing to allow debt collectors to use credit reports to pressure people into paying questionable bills at all?

And as the Vice President noted, all of this can have disastrous consequences for an individual. Because credit reports are used in so many important decisions in our lives, falsely reported medical bills can make it harder to get a loan, rent an apartment or get hired for a job, and can even drive up the cost of insurance. And the implications extend far beyond the financial. Many of those with outstanding medical bills will avoid future medical care, and research shows that people with medical debt suffer higher rates of depression and anxiety.

Last April, Vice President Harris launched an all-of-government effort to address the burden of medical debt, and to increase consumer protections around billing and collections. At the time, the Consumer Financial Protection Bureau issued a bulletin to prevent unlawful medical debt collection and reporting in light of the No Surprises Act. The CFPB has taken many steps to ensure that patients are not being unfairly treated, particularly when it comes to coercive credit reporting and collection tactics.

Together, the two parts of the proposals we are outlining today would ensure that credit decisions are based on someone’s ability to repay a debt, not their ability to file disputes and navigate red tape. This will provide peace of mind to millions of Americans who won’t be forced to battle errors and junk data on their credit report when they get sick.

Our planned rulemaking would not stop creditors from getting the legitimate information they need to make credit decisions – for instance, when it is necessary to process a medical forbearance. If anything, it would increase the validity of the data creditors are accessing, and stop them from using information that says more about someone’s unexpected medical emergencies than their risk of late payments.

American families should not have their financial lives permanently marred by medical bills. Today’s announcement is a small step toward easing that burden and delivering peace of mind. Thank you.