Some medical debt will continue to haunt consumers despite the changes

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Medical debt has a big target on its back.

In addition to the March announcement by the Big Three credit reporting companies that they will limit when such debt will show up on credit reports, the White House on Monday outlined measures intended to further prevent past medical bills haunt consumers.

Still, not everyone will see the relief.

“What has been done so far represents huge developments and will help consumers,” said Chi Chi Wu, an attorney at the National Consumer Law Center. “We think more could be done.”

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Medical debt in the United States has reached about $88 billion, according to the Consumer Financial Protection Bureau. Additionally, 58% of bills that are in collection and appear on credit reports are medical-related and approximately 43 million credit reports show such collections.

This can lower your credit score, making it harder to get loans or other credit, or get good interest rates if you’re approved.

Although some credit scores don’t treat medical debt as harshly as others, lenders tend to use one that treats all collection debts the same if they appear on your credit report. Also, employers or landlords can use your credit score or report to make decisions.

At the same time, research has shown that medical debt is less predictive of a person’s ability to meet payments than other types of collection accounts.

The Biden administration’s announcement includes a plan for low-income veterans to eliminate their medical debt, as well as a push for all federal agencies that issue loans to stop considering that debt when determining creditworthiness. of a consumer.

Meanwhile, the big three credit bureaus – Equifax, Experian and TransUnion – said in mid-March that starting July 1, they would stop including medical debts that have been collected on credit reports after their reimbursement. Under current practice, it can stay on your file for seven years.

Additionally, consumers will have one year, instead of six months, before unpaid medical debt will appear on credit reports once it is escalated to a collection agency. And in the first half of 2023, the credit bureaus will stop including anything under $500.

While credit agencies say these measures will remove about 70% of medical debt from credit reports, the remaining share is concerning, Wu said.

“That 30% is definitely a big deal,” Wu said. or underinsured and something catastrophic happens.”

About 11 million Americans have medical debt over $2,000 and 3 million owe more than $10,000, according to the White House.

The CFPB also has medical debt in its sights. In addition to its plans to target credit reporting practices that violate consumer rights, the watchdog agency is also examining whether medical billing data should be included in credit reports.

Additionally, there are various bills in Congress that address the issue. One proposal is to prohibit the inclusion of “medically necessary” debts. Broadly speaking, this would mean that unpaid bills for elective procedures or services — i.e. cosmetic surgery — would still show up on credit reports if they were over $500.


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