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The nation’s three leading credit report companies have simultaneously announced plans to rewrite their corporate policies on reporting medical debt.
What Happened: According to a Wall Street Journal report, Equifax Inc. (NYSE:EFX), Experian PLC (OTC:EXPGY) and TransUnion (NYSE:TRU) will remove medical debt from their reports that was paid after it was sent to collections and will not add new unpaid medical debts for a full year after being sent to collection agencies. The changes will go into effect in July.
The firms are also planning to remove unpaid medical debts of less than $500 during the first half of 2023, according to an unnamed source cited in the Journal’s report.
Currently, medical debts can remain on a consumer’s credit report for up to seven years, even if the debts had been fully repaid. With these changes, approximately 70% of medical debt in collections accounts will now be removed from credit reports.
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Why It's Important: Medical debt has been an extraordinary financial burden for many Americans, and it was one of the driving forces that fueled the creation and passage of the Affordable Care Act in 2010. This situation wasn't abated by the passage of that landmark legislation, however, and many consumers with sterling credit histories find their credit scores tarnished by high levels of medical debt created by emergencies and prolonged illnesses.
According to the Consumer Financial Protection Bureau (CFPB), approximately $88 billion in medical debt is placed on 43 million credit reports.
The Journal, citing “people familiar with the matter,” reported the three companies were responding to the increased focus by CFPB Director Rohit Chopra, who has prioritized credit reporting, particularly in how the three companies respond to companies that incorrectly report medical debts.
“This is an important step to support consumers in the wake of the Covid-19 pandemic,” the companies said in a joint statement. “These changes reflect our ongoing commitment to helping facilitate access to fair and affordable credit for all consumers.”
