This week, a U.S. Senate panel grilled the CEOs of the three major credit reporting bureaus on whether their practices are transparent and fair to consumers, even as Democrats urged them to remove medical debt.
Sherrod Brown, D-Ohio, chair of the Senate Committee on Banking, Housing, and Urban Affairs, said all medical debt should be deleted from credit records. On April 11, Equifax, TransUnion, and Experian removed any medical debt under $500 off credit reports, but Brown said it wasn’t enough.
Brown stated on Thursday that medical debt is linked to disease, not credit risk. “No emergency or sick family member should ruin your financial future. Medical debt doesn’t affect creditworthiness. Your family or you became sick.”
Brown requested that the CEOs immediately eliminate all medical debt, but they declined.
Credit reports might contain inaccuracies that aren’t the consumer’s fault and hinder housing searches. LendingTree found 23% of Americans have medical debt in 2022. According to Kaiser Family Foundation’s 2022 analysis, 6% of adults, or 16 million Americans, have medical debt above $1,000. KFF found that southerners, Black persons, and Medicaid-exempt states were more likely to carry this financial burden.
Consumer advocacy, progressive think tanks, and civil rights groups have urged the Consumer Financial Protection Bureau and IRS to regulate medical debt.
Sen. Elizabeth Warren, D-Mass., repeatedly asked Equifax CEO Mark Begor if medical debt was less predictive of bill payment than other debts. Begor said he didn’t know.
Is that information unavailable? Are you kidding? “You are the head of one of the nation’s largest credit reporting agencies and you don’t know the relative predictability of one of the major forms of debt you report on?” she questioned.
“Our medical system is a mess,” Warren said. Most hospitals charge one price. Medical bills change because they charge insurance companies. Bills are often issued to the wrong party, so patients don’t know what they’re being charged for.
She then asked Begor if he would delete medical debt from reports if the CFPB deemed it to be so full of inaccuracies. “We’d support that,” he replied.
If the CFPB ordered it removed, TransUnion CEO Chris Cartwright would comply.
“You’ll wait until ordered. You mean that? “You’ll do nothing unless ordered?” She then addressed Experian CEO Brian Cassin.
We would follow CFPB orders. “I think it is a complex issue, senator, and I think it needs to be looked at in the broad,” Cassin added.
Republicans urge financial literacy
Republicans on the committee argued for financial education to reduce credit report requirements.
Sen. Tim Scott, R-S.C., hoped the credit reporting bureaus were working on financial literacy, while Sen. Katie Britt, R-Ala., asked the three executives how to “help more Americans no longer be credit invisible.” Scott accused the CFPB of “exploring new avenues of regulatory overreach” with its proposed credit card late fee rule.
On March 6, the Debt Collective, Human Rights Watch, and Consumers for Affordable Health Care wrote to the U.S. Department of the Treasury, IRS, and Consumer Financial Protection Bureau to request more regulations and enforcement to reduce medical debt’s financial impact.
The groups urged the IRS to enforce a regulation that requires hospitals to make a reasonable effort to determine if a patient can receive assistance before sending their information to a credit reporting bureau and selling their debt. They asked the CFPB to “prohibit reporting of all medical debt or all debt for medically necessary procedures.”
In an April 2022 CFPB report on consumer complaints, customers were approached for payments they had already paid and debts they didn’t recognize. People also claimed they lacked the information to verify their debts.
The most typical debt collection concern is trying to collect a debt the individual denies. The CFPB reported that nearly half of medical debt collection complaints are about this issue, and complaint volume has been rising.
In February, the agency stated a reduction in medical collections between 2018 and 2022 may be due to data flaws or obsolescence, which can increase credit disputes.
Federal agencies have addressed consumer credit report issues. The CFPB and FTC began asking consumer reporting agencies, tenants, landlords, and others about tenant background screening in February.
Last year, the Biden administration announced several measures to reduce medical debt, including the CFPB educating consumers and the Federal Housing Finance Agency assessing Freddie Mac and Fannie Mae’s credit models’ accuracy, reliability, and predictability.
