Banking and Finance Law Daily Wrap Up, FAIR CREDIT REPORTING—Medical debt disproportionately impacts Alaska Native communities, (Aug 27, 2024)

By George M. Gullo, J.D.

People in Native Alaskan communities are more likely to have medical debt in collections on their credit records compared to the national average.

A Consumer Financial Protection Bureau blog post draws attention to the disproportionate impact of medical debt on Alaska Natives. Since 2011, the CFPB has received thousands of complaints from Alaskans who experienced problems with their credit reports, mortgages, credit cards, and similar products. Like Americans all across the country, Alaskans have faced difficulties as a result of medical debt on their credit reports or with collections.

Harm to consumers. Debt collectors may leverage information about a consumer’s medical debt to pressure the consumer to pay medical bills that may not be owed, even though complexities in medical billing contribute to the inaccuracies and errors contained in credit reports. However, CFPB research has shown that medical bills on a person’s credit report are relatively weak predictors of whether the consumer will repay a loan and may act as a penalty by making underwriting decisions less accurate.

Native Alaskans. Complaint data and reports from health care providers and key stakeholders indicate that consumer finance issues have negatively impacted the lives of Alaskans. This information points to problems with billing practices, coverage, and medical debt credit reporting in Native communities.

Disproportionate impact. People in Native communities are significantly more likely to have medical debt in collections on their credit records compared to the national average. The amount of medical debt in collections that remains on credit reports is also higher in Native communities and nearly 25 percent of credit records for people in Native communities contain only medical debts in collections.

Rule proposed. To address this problem, in June 2024, the CFPB issued a proposed rule seeking public comments on an amendment to Regulation V, which implements the Fair Credit Reporting Act concerning medical information. The rule proposes to remove a regulatory exception in Regulation V from the limitation in the FCRA on creditors obtaining or using information on medical debts for credit eligibility determinations.

Rule’s impact. The proposed rule aims to remove medical bills from most credit reports, increase privacy protections, help to increase credit scores and loan approvals, and prevent debt collectors from using the credit reporting system to coerce people to pay. The rule also provides that a consumer reporting agency generally may not furnish a consumer report containing information on medical debt to a creditor that the creditor is prohibited from using.

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