Several months back, the three major credit reporting agencies announced drastic changes to how medical debt is reported. Following suit, the CFPB has pinned a laser on companies who take part in medical debt collection, promising strict oversight which is making it easier than ever to remove medical debt from your credit report.
Medical Debt Collection in the Cross Hairs
Rohit Chopra, the Director of the Consumer Financial Protection Bureau states that the CFPB “is working to stop unfair medical collection and coercive credit reporting practices that add to the strain on American families.”
The CFPB has targeted 88 million dollars in medical collection that does not conform to the the new rules, and have indicated this impacted nearly 1 in 5 Americans. Coercive credit reporting and debt collection tactics interfere with the relationship of a consumer with their doctors and medical practice, causing potential delay in treatment. The report went on to note that 58% of collection debt on consumer credit reports is tied to the medical system.
Response from the Credit Bureaus on Medical Debt Collection
The three credit bureaus announced each would take measures that would result in nearly 70% of medical collection debt tradelines being blocked or removed from consumer credit files. This is in direct response to the CFPB and their recent report. This will drastically improve credit scoring across the board and should help stabilize marketplaces. The mortgage lending industry pioneered this approach several years ago when changes were announced to FHA lending requirements, indicating medical collections, with some exceptions, will not be considered when approving a mortgage. The major caveat to this was credit scoring was still impacted. The total removal of this debt from showing on credit reports will improve scoring.
Know the Law and Dispute Accounts Showing After July 2022
If you are still showing medical debt after July 2022, make sure you understand the requirements for debt that can show and be prepared to write letters to dispute these accounts showing on your credit report. The requirements are fairly straight-forward:
- All paid medical collection accounts should be removed.
- Any medical collection account under $500, regardless of paid status, will be removed.
Keep your letter short and to the point, requesting the removal of the collection account. The credit bureaus are compelled to remove based on their announcement.
This article was last updated on June 3, 2022