Equifax (EFX), Experian (EXPGF) and TransUnion (TRU) will take billions of dollars off the bills of consumers facing unexpected medical bills they couldn’t pay. Three firms said they made the move after months of research.
“Medical bill arrears are often due to unforeseen medical circumstances. These changes are another step we are taking together to help people in the United States focus on their financial and personal well-being,” the companies said in a joint statement.
The announcement follows a study by the Consumer Financial Protection Bureau showing that as of June 2021, Americans have accumulated $88 billion in medical debt from consumer loans. According to the CFPB, this is the most common credit account for debt collection in credit histories.
Medical debt can be volatile and unpredictable and can negatively affect affect many financially wealthy consumers. The bureau said blacks, Hispanics, young people and low-income consumers are most likely to be hit by health care debt.
Concerns about medical bill arrears intensified after millions of people were hospitalized due to the Covid-19 pandemic and CFBP director Rohit Chopra publicly criticized the collection of medical debts by credit reporting agencies. On March 1, Chopra said the CFPD would be “taking a hard look” at the Big Three credit reporting agencies.
“We expect them to take seriously their role as key contributors to the credit reporting system — a system whose integrity and accuracy can determine the financial future of hundreds of millions of people,” Chopra said.
As of July 1, paid medical bills will no longer be included in consumer credit reports. Previously, the credit ratings of millions of Americans were downgraded because debts paid off after being sent for collection could appear on credit reports for up to seven years.
More changes are expected. It will now take one month before a consumer’s report shows an outstanding medical bill collection debt, rather than six months as in the previous standard.
The three companies also said that starting in the first half of 2023, medical bills under $500 will no longer be included on credit reports.