A new CFPB report titled “Medical Debt Burden in the United States,” takes aim at medical debt collections, with the CFPB indicating that it intends to “[d]etermine whether policies should be implemented to eliminate unpaid medical billing data on credit reports altogether.”

The CFPB found that as of 2021, medical debt was the most common debt collection tradeline on credit reports, constituting 58% of all third-party tradelines.  Other key findings include:

• Medical debt collections are less predictive of future consumer credit performance than nonmedical collections.
• Newer versions of some credit score models consider medical debt differently from other debts and consider paid medical debts differently from unpaid medical debt.  FICO research indicates that the credit scores of individuals who only had medical collections improved up to 25 percent on average when switching from older models to newer models that weigh medical debt less heavily.
• Black and Hispanic people, and young and low-income individuals of all races and ethnicities, are more likely to have medical debt than the national average.  As a result these populations may be more heavily impacted by outdated credit models that overestimate the predictiveness of medical debt.

In the report, the CFPB also discusses recently-enacted state laws governing medical debt collection as well as the impact of its final debt collection rule on medical debt, particularly the final rule’s prohibition on “debt parking.”

Without any apparent basis, the CFPB states in the report’s conclusion that “[m]any patients and their families are coerced into paying invalid, unsubstantiated, or inaccurate medical bills by the threat or actuality of credit reporting of those medical accounts.”  Director Chopra’s remarks on the report include the similar statement that “[c]oercive credit reporting forces patients and their families to pay bills whose accuracy they doubt.”  Indeed, Director Cordray calls into question the legal status of medical debt with the statement that “[i]n many ways, it’s hard to call medical debt a real debt.”

In addition to determining whether it is appropriate for medical debt to even be included on credit reports, the CFPB plans to take the following steps in light of the report:

• Closely scrutinize whether credit reporting companies have reasonable procedures to assure maximum possible accuracy of medical debt information and take action against furnishers who report inaccurate information;
• Work with other government agencies to determine whether it is appropriate to include medical debt in their own underwriting and role in credit reporting, noting the recent announcement by the Department of Veterans Affairs that it was adopting new standards for when it will report information on outstanding medical bills to consumer reporting companies (which the CFPB called “a clear and important precedent for the health care industry”); and
• Investigate how to facilitate patients’ access to financial assistance programs offered by medical providers, including at the point of collection and credit reporting.

Medical debt collection was also the subject of a January 2022 CFPB compliance bulletin which dealt with medical debt collection and consumer reporting requirements in connection with the No Surprises Act.

The CFPB’s current focus on medical debt collection represents the reemergence of an area of concern previously flagged by the CFPB under former Director Cordray.  In addition to the practices of third-party collectors and debt buyers, the CFPB under former Director Cordray made the collection practices of hospitals and other medical providers a subject of scrutiny.  At that time, we observed that the CFPB has very limited authority to address debt collection by medical providers.  Nevertheless, it is possible Director Chopra will seek to take the CFPB in a similar direction.

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