Banking and Finance Law Daily Wrap Up, TOP STORY—Senate Banking Chair supportive of removal of medical debt from credit reports, (Mar 21, 2022)

By Joe Cox, J.D.

The Senate Banking Chairman is supportive of new measures and looking forward to further action with the CFPB.

On March 18, Senator Sherrod Brown (D-Ohio), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, issued a statement in support of the recent move of the three major American credit reporting firms deciding to remove most medical debt from credit reports.

Brown praised the development, noting that “[M]illions of Americans will no longer have to worry about medical debt preventing them from getting a job, renting an apartment, buying a car, or getting a mortgage.” Brown further was encouraged that the recent development indicated “a CFPB that takes real action for consumers” and noted that he hoped to continue working with the Consumer Financial Protection Bureau to “address the growing burden of medical debt, protect working families, and hold bad actors accountable.”

Credit Reporting Shift. Brown’s comments followed the recent decision of Equifax, Experian, and TransUnion to remove approximately 70 percent of medical collection debt tradelines from consumer credit reports. That news was released in a joint statement from the CEOs of the three major credit reporting firms. “These changes are another step we’re taking together to help people across the United States focus on their financial and personal wellbeing,” said the three CEOs in their statement. The announcement indicated that as of July 1, 2022, paid medical collection debt will no longer be included on credit reports, and the time period before unpaid medical collection debt can appear on a consumer’s credit report will be extended from six months to one year. In 2023, all three credit reporting agencies will no longer include medical collection debt under $500 on their credit reports.

Criticism of the Changes. Not all are as enthusiastic as Sen. Brown about the changes. Patricia Kelmar, director of the Public Interest Research Groups’ Health Care Campaigns, indicated that the announced measures “are all welcome relief that can’t come soon enough.” However, she noted, “the credit bureaus should stop reporting debt arising from medically necessary procedures altogether. We need a fair credit system that doesn’t penalize people for life events they can’t control.”

Impetus for the Change. The credit union’s policy shift was itself prompted by recent reports from the CFPB about the ubiquity of medical debt for American families (see Banking and Finance Law Daily, March 2, 2022), as well as indications from CFPB director Rohit Chopra that the CFPB would be paying close scrutiny to medical bill collection actions.

The implementation of the recent “No Surprises Act” further enhanced the protection of consumers against medical providers and bill collectors (see Banking and Finance Law Daily, Jan. 14, 2022. That Act, which went into effect on January 1, protected insured individuals from surprise medical bills from non-network providers, and required medical facilities and providers to disclose additional protections against balance billing. While the CFPB did not enhance the legal protections granted, the Bureau has cautioned that medical debts collection acts could fall afoul of both the new law and the Fair Debt Collection Practice Act and/or Fair Credit Reporting Act.

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