Home > Managing Debt > Why Medical Collections Need an Overhaul

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A good credit history takes years to build, and can be instantly destroyed when even a modest medical co-payment bill is sent to collection. Currently, American consumers have no effective redress if a medical bill is sent to collection and reported to the credit bureaus. Even if the bill sent to collection is promptly paid, or is in dispute, it can drag down a credit score. The Fair Isaac Corporation, which produces the FICO score, has said that medical collections may lower a score by “100 points or more” for someone with a spotless credit history.

Recognizing the financial problems caused by medical bills that appear on credit reports, U.S. Senators Jeff Merkley of Oregon, Charles Schumer of New York, Robert Menendez of New Jersey and Sherrod Brown of Ohio called on the Consumer Financial Protection Bureau (CFPB) to investigate medical collections.

At a recent hearing of the House Committee on Small Business, CFPB Director Richard Cordray made it clear that he would do so. Director Cordray was asked by Rep. Nydia Velazquez of New York whether the CFPB’s recent announcement that it would regulate credit bureaus would also include addressing medical debt on credit reports. His response revealed his intimate understanding of medical collection problems.

Cordray described delays in medical billing, insurance disputes, confusion regarding co-payment amounts, and acknowledged that it is a “hard issue” whether disputed insurance claims should be considered debt. He responded that the CFPB was “going to be overseeing and supervising the larger participants in the credit reporting industry.” Noting that the credit reporting companies keep consumer files on millions of Americans, Cordray went on to say, “We will be overseeing all of their approach to this, including medical debt.”

Quite possibly, the scrutiny of Congress and the CFPB will result in a review by the Consumer Data Industry Association of its policies and practices for reporting medical debt.

The Senators who have called on the CFPB to investigate medical debt have also introduced legislation to address this problem. They are sponsors of The Medical Debt Responsibility Act, a proposal that would amend the Fair Credit Reporting Act and require consumer reporting agencies to remove medical accounts from credit reports within 45 days of being fully paid or settled. To repeat, only medical accounts with a zero balance due would be removed from credit reports. Similar legislation has been filed in the U.S. House with strong bi-partisan support.

This legislative proposal would help millions of Americans who are now shut out of the affordable credit market due to medical collections that inaccurately portray them as risky consumers. It has the potential to save American consumers millions in dollars due to overpriced loans; money that could stimulate the economy by being spent on consumer goods. This multi-pronged approach — legislation and CFPB oversight of industry practices — may finally crack open the black box that the Consumer Data Industry Association does not want Americans looking into. Hopefully, Congress will act to pass the Medical Debt Responsibility Act AND the CFPB will further investigate the unfair practice of penalizing American who had the misfortune of having a medical bill sent to collection. Such scrutiny of the medical debt collection problem could not come at a better time.

Image: rosmary, via Flickr

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  • Marina

    It is about time somebody looks into the lousy and abusive medical billing practice. Why medical billers can’t bill patients in a timely manner; bill patients without even checking patient’s current info regarding secondary insurance; billing patients few days after the patient informs them he wants some copies of his medical records for another doctor to look at when the biller never sent a bill for several months or even a year. Overhaul is needed.

  • http://credit.com maria c. chambers

    The medical collection make you feel like they have total control over your livelyhood. And even when you paid off things on your credit they tell you things like we won’t can’t take this off your credit. I feel like the doctor are in arrangement with these collection agencies.

  • Brian Graef

    I had a devasting heart condition diagnosed in May 2011. I had a clean bill of health and had regular physicals. I even had a EKG on my heart a few years before this incident and was told that I had a good heart. Since the incident happened in May, I had to have open heart surgery for a heart condition that is hereditary. I lost my job due to the condition. The hosp did not have a contract with the ins company, eventhough it was one of my providers on my insurance. They nailed me with unusual and uncustomary charges and then told me to pay the bill off. I was paying what I could with the little income I was getting and they still turned over to a collection agency. I didnt even know that it would affect my credit until the bank called me and informed me. What a joke. I thought credit was about applying for a loan and making payments on time, isnt that what credit is about. You have no way of knowing or planning for hosp bills. So WHY SHOULD THIS BE ON OUR CREDIT, WE DIDNT APPLY FOR THIS AMOUNT!!!! I had a good credit score, and now it is tanked. WELCOME TO THE AMERICAN DREAM (I MEAN JOKE)!!!!!!

    • Gerri Detweiler

      Brian – I wish we didn’t hear so many stories like yours! You may want to share your experience with the Consumer Financial Protection Bureau and let your legislators know how you feel about the Medical Debt Responsibility Act.

  • Janel

    I spent $800 per month 2 ONLY ins my son & my self w/Cobra Serve for 5 yrs.I couldn’t afford 2 add my hubby,& 2 other kids 2 my ins that wouldv’e been $2,ooo per month.(R entire income)My son & I both had medical issues.My son had surgery for a birth defect of his hand (he waswn’t able 2 use it 2 write with/dress himself)United Health Care said as did Ombus Cobra Serve said it would be covered;then both Cobra & United Health said it was cosmetic & refused 2 pay the bill (left me $18 grand in debt).I had a surgery breast reduction (the surgeon didn’t complete due 2 my heart & lungs stoping during the surgery).That bill was $22,000 & once again both ins refused 2 pay my bill saying it was cosmetic.6 yrs later I’m still trying 2 figure out what collection agenies 2 pay;my credits ruined!Also,the hospitals outsource all their many different doctors 2 P.O.Box address 2 mail payments 2 so U can get a sigature on arrival 2 prove I pd them.Plus tryn 2 keep tract of who got pd twice/not at all.The hospitals NEED 2 stop outsourcing & except the Payments OF ALL THEIR DOCTORS THAT WORK 4 THEM!I tried 2 pay my debts,& got my credit ruined,& flusher $75 grand down the toliet 4 USELESS MEDICAL (WASTEFUL)INsurance!I’d rather die than EVER buy medical ins again.At that time I had $40 grand in savings,but both Oakwood,& St Joephs Childrens hospitals refused cash,they said due 2 lawsuit liabilty risks,if u don’t have insurance,u & ur son don’t get ur surgery’s.My hubby was then servery injured from an unisured driver,then we had 2 live off the $40 grand for 3 yrs til he got on SSD.We were then left broke,& w/ wasted 5 yrs 0f $800 per month($75 grand we could have had in savings)And tapped out of r $40 grand we did have in the bank.Then,after living on r savings,being broke,we were left paying an additional $40 grand out in medical bills over 6 yrs now!Then my Dad passed away,& I had 2 pay his final expenses over the past 2 yrs,& SSD’s beeen tryn 2 cut my hubby,who’s got perment nerve,& orthopedic injures,& has learning disabilities in reading.We fought 2 get his benefits back,got em back,but then they canceled the medicare he was paying 4 every month.I wish the hospitals & Dr’s would sue the ins companies & NOT US!Medial INS is a Useless Waste of $!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  • jeff julian

    we need a over haul on this and medical should not be part of your credit history…at all……….

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