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Senators Ask CFPB to Investigate Medical Debt Reporting

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Four U.S. Senators recently sent Consumer Financial Protection Bureau director Richard Cordray a letter asking his agency to look into how medical debt is reported to the various credit bureaus.

The Democratic lawmakers — Charles Schumer of New York, Jeff Merkley of Oregon, Sherrod Brown of Ohio and Robert Menendez of New Jersey — wrote Cordray about medical debt reporting because they say it is far more complicated and damaging than other types of credit, such as mortgages or credit cards, according to a release from Menendez’s office. In particular, many consumers take on massive amounts of medical debt, sometimes hundreds of thousands of dollars’ worth, without planning for it, which itself is difficult to deal with.

Exacerbating the matter, though, is the insurance process, which may make consumers wait months to learn exactly what they owe, the report said. By the time that happens, many healthcare providers may send a consumer’s balance off to a collections agency, which presents its own problems. Not the least of these is that even if the debt in question is cleared or settled immediately, the fact that it went to collections at all can remain on their credit reports for as long as seven years, and take as much as 100 points off their credit rating during that time.

Further, the Senators are also co-sponsoring a bill known as the Medical Debt Responsibility Act, the report said. This piece of legislation is designed to amend the Fair Credit Reporting Act, and would require that credit bureaus wipe medical debt from consumers’ reports within 45 days of it being settled or paid off. It has already passed the U.S. House of Representatives with an overwhelming majority and also has the backing of both the American Medical Association and the National Credit Reporting Association.

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The CFPB has been expanding its purview significantly in the last several months under Cordray’s direction. The former Ohio attorney general took office in January and has taken the agency from largely only regulating credit cards to covering far more of the lending industry and businesses associated with it. This includes mortgages, mortgage servicing, student lending, military loans and other types of financing that can affect consumers significantly in their everyday lives.

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