Good morning. Today, the CFPB released a report on medical billing and collection practices in our country. Medical bills are the most common debt in collections reported on our credit reports. Our own review suggests that roughly 43 million people had medical bills on their credit report, in June 2021, with the total outstanding amount around $88 billion.
In theory, credit reports are supposed to be an accurate repository of data about whether you have met your obligations on loans you have taken out. This theory is far from reality. To make things worse, credit reports include items like unpaid medical bills, where patients frequently do not know what services will be performed and what they will be charged.
For many patients, it can feel like full-time detective work to understand procedure codes, whether something was in-network vs. out-of-network, or inpatient vs. outpatient. Many procedures include separate bills from providers and facilities. Payment assistance programs, required by law as a condition of the nonprofit status of many hospitals, are sometimes not well advertised, and they can be hard to access. Complex and confounding medical billing practices make it impossible for patients and their families, already struggling with the stress and anxiety of the need for medical care, to ascertain the accuracy of the bills.
In the United States, it is all too common for patients and their families to be caught in a doom loop between their provider and their insurance company. Even when a patient tries to battle to get an accurate bill or an insurance claim paid, medical debt collectors have a weapon that is hard to fight against: the credit report. I am concerned that the credit reporting system is being weaponized as a tool of coercion to get people to pay medical bills they may not even owe.
Coercive credit reporting forces patients and their families to pay bills whose accuracy they doubt. And, for those families who refuse to pay a bill whose accuracy they question, they can find their credit ruined and their prospects for employment and housing dimmed.
In many ways, it’s hard to call medical debt a real debt. Few people choose to take on medical debt, and typically, patients have no idea how much they will be charged for a service or a procedure. There’s no upfront disclosure or interest rate to compare. Individuals and families must confront a billing and collections system that can be best described as error-plagued, confusing, and labyrinthine.
The scope of these problems is extraordinary: our report published today estimates that 58% of the debt that is in collections and on people’s credit records stems from medical bills.
Having a medical debt collection mark on a credit record can make it harder to get credit, rent or buy a home, or find a job. Families are pushed into bankruptcy by medical debts that they cannot pay.
Coercive credit reporting to obtain payments on medical debt can also deter families from seeking needed medical care. Coercive credit reporting interferes with the relationship between patients and their doctors and can lead to worse medical outcomes.
The CFPB will be taking several steps in light of the report:
First, we will be closely scrutinizing the Big Three credit reporting agencies to ensure that they are not being used as a tool to coerce and extort patients on medical bills they may not even owe. The law requires Equifax, Experian, and TransUnion to follow reasonable procedures to assure maximum possible accuracy of the information they collect and disseminate about each of us. They are responsible for guarding against contamination of the credit reporting system with unsubstantiated and inaccurate reports of debt allegedly owed. We expect them to take seriously their role as major actors in the credit reporting system—a system whose integrity and accuracy can determine the financial futures of hundreds of millions of people. If furnishers, whether of medical debt or otherwise, are polluting the system with inaccurate information, we will expect the Big Three to cut off their access to the credit reporting system.
Second, the CFPB will work with other government agencies to determine whether it is appropriate to include medical debt in their own underwriting and role in credit reporting. I am grateful to our Secretary of Veterans Affairs Denis McDonough for working with the CFPB on a new rule that will dramatically reduce the number of medical debts subject to credit reporting for veterans. The VA’s rule requires all other methods of debt collection to be exhausted before the bill is reported to the credit reporting agencies, thus ensuring that the credit reporting system is not used as a tool of coercion. This sets an important standard for other medical providers to meet. We intend to continue our work to ensure that government policies aren’t the source of these harms to families and patients. We are interested in what more government can do to make sure patients can exercise their rights to access financial assistance programs and payment plans, as well as obtain validation of debts allegedly owed.
Finally, we will be assessing whether it is appropriate for unpaid medical billing data to be included on credit reports altogether. We already know how a medical bill reported on credit reports is less predictive of future repayment than reporting on traditional credit obligations. We will make this determination while also taking steps to reduce harmful and inaccurate credit reporting.
For example, we will partner with the Department of Health and Human Services to ensure patients are not charged and do not pay illegal surcharges for medical care, as we did with our recent action on the No Surprises Act in January. We will also investigate how best to facilitate patients’ access to financial assistance programs offered by medical providers. Our long-term determination on whether it is appropriate for credit reporting agencies to include so-called medical debt on consumer credit reports will also be informed by additional research on medical billing, collections, and reporting.
On a broader scale, the contamination of the system by coercive credit reporting makes it harder for lenders to fairly and responsibly price credit, based on actual default risk.
Earlier this year, we issued a bulletin on medical debt and explained that debt collectors should only collect and report debt that is in fact legally due and owed. This is a basic precept of the law, and we will continue to ensure that families are not harmed for bills not due.
I also look forward to discussions with the business community, including hospitals, labs, outpatient facilities, payors, and practitioners to identify ways we can reduce the stress of medical debt and coercive credit reporting. Many in the health care community have already taken steps to avoid this behavior and to work constructively with patients before launching an assault on their credit report.
The pandemic has exposed how quickly our country and our lives can change. As we look to recover, it will be critical that we ensure that patients seeking care do not find their financial lives ruined. I expect that we will report further on any additional efforts to combat coercive credit reporting this summer.