Credit Reporting Firms Announce Removal of Most Medical Debt from Credit Reports
The largest credit reporting firms, Experian, Equifax, and TransUnion, recently announced they would erase billions of dollars of medical debt from consumers’ credit reports, which currently make it more difficult for many Americans to borrow. Starting this summer, the companies will remove medical debt that was paid after it was sent to collections.
In a joint statement, the CEOs of Equifax, Experian, and TransUnion said, “Medical collections debt often arises from unforeseen medical circumstances. These changes are another step we’re taking together to help people across the United States focus on their financial and personal wellbeing.”
“As an industry we remain committed to helping drive fair and affordable access to credit for all consumers,” they continued.
The changes have been in the works for several months and will eliminate nearly 70 percent of medical debt in collections accounts from credit reports; new unpaid debts will not be added to credit reports for an entire year after being sent to collections. The firms also plan to remove unpaid debts of less than $500 in the first half of 2023.
The Kaiser Family Foundation noted that two-thirds of medical debts are from a one-time or short-term expense coming from a minor medical need. The Consumer Financial Protection Bureau (CFPB) estimated that nearly $88 billion in medical bills is spread across 43 million credit reports, and is focused on holding credit-reporting firms accountable under Director Rohit Chopra.
Senator Sherrod Brown (D-Ohio), Chair of the Senate Committee on Banking, Housing, and Urban Affairs, issued a statement in support of the changes, saying that “millions 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. No family should have their financial future ruined because they or a family member got sick”
Banking Committee Ranking Member Senator Pat Toomey (R-Pa.), however, blasted the move as an example of government “suppress[ing] the reporting of accurate credit information.”
“Lenders who cannot access information that they consider predictive of risk are likely to restrict their lending to the borrowers with the thickest credit files, seek out relevant proxies for the credit information they aren’t able to obtain, or increase the price of loans to all borrowers in order to capture the uncertainty and risk,” Toomey said in a statement.
“This hurts all consumers, including low-income families and those without a long credit history,” Toomey continued.