On March 1, the Consumer Financial Protection Bureau (CFPB) released a report highlighting the effect of medical collections on consumer credit reports. The CFPB found that medical collections tradelines appeared on 43 million credit reports, and past-due medical debt is more prevalent among Black and Hispanic individuals. That same month, the three nationwide consumer reporting agencies announced plans to dramatically reduce medical debt credit reporting.

On July 27, the CFPB issued its analysis of the potential impact of those announced changes. While the analysis found that the majority of individual medical collections tradelines would be removed from credit reports, it also found nearly half of those consumers with medical collections will continue to have at least one medical tradeline on their credit reports, even after the changes go into full effect next year.

“Today’s report analyzes recent changes announced by the Big Three credit reporting conglomerates, and it is clear that more work must be done to address medical debt credit reporting problems” said CFPB Director Rohit Chopra.

Among other findings from the report, the CFPB found:

• Two-thirds of medical collections on credit reports will no longer be reported. Specifically, starting in 2023, medical collections tradelines less than $500 will no longer be reported on consumer credit reports.
• Announced changes will likely have varied geographic impact, meaning patients living in states in the North and the East have higher concentrations of medical debt with lower balances and will more likely benefit from the changes. Consumers residing in West Virginia will have a much greater share of medical collections removed compared to residents of any other state.
• Residents of lower income, majority Black or Hispanic census tracts are slightly less likely to benefit from the announced changes by having all their medical collections tradelines removed. The nationwide consumer reporting agencies also plan to cease reporting entirely on paid medical collections, whether paid by insurance or otherwise. However, the CFPB noted that removing paid collections is less likely to have a substantial effect, as very few medical collections tradelines are ever marked paid.

The report did not examine the impact of the nationwide credit reporting agencies’ extension of time between referral of the medical bill for collections and the reporting of the medical bill from six months to one year. That change should mean that many more medical billing disputes are resolved before credit reporting occurs.

The CFPB report also contained findings and observations in the following additional areas:

• Characteristics of consumers with reported medical collections;
• Persistence of medical collections on credit reports; and
• Medical collections likely to be removed in the next year.

The CFPB report concludes that these changes will likely reduce the number of medical collections being reported and implicitly reduce the amount of time that medical collections are reported. The CFPB is expected to conduct further research on how credit reporting of medical collections changes over the next year.

Troutman Pepper will continue to monitor important developments involving the CFPB and the consumer reporting industry and will provide further updates as they become available.