By Charlene Crowell
Anyone who has been to an emergency room, out-patient clinic or undergone a series of medical tests knows how it feels to receive confusing bills from providers you never knew were treating you. The effects of so many bills and their high costs can almost make a person sick a second time – just from learning how much their medical care costs.
Each year, 43 million Americans have unpaid medical debt that adversely affects their credit, says the Consumer Financial Protection Bureau (CFPB). Nationwide, one out of every five credit reports show overdue medical debt and accounted for 52 percent of all debt appearing on credit reports. Over the past year, the number of debt collection complaints CFPB received surpassed those of both mortgages and credit cards.
Beyond confusing bills, CFPB learned through investigating these complaints that two frequently-cited concerns were the lack of standard practices and deliberate failure to notify consumers that detrimental entries were added to the personal credit reports.
The varying amount of time that medical providers allot before turning accounts over to collections agencies can be as short as 30 days after billing to as long as 180 days. In other cases, some debt collectors bypass directly informing consumers of an alleged delinquency and instead file derogatory comments with credit bureaus.
The CFPB also found that almost one in four consumers filing medical debt complaints claimed that the debts were not their own. These consumers were more than twice as likely to allege that the “debt was paid” compared to other types of debt collection concerns. A second widely claimed position of complainants was that the collector was seeking the wrong amount.
These two types of complaints – the wrong amount owed and the debt being owed by someone else – together illustrate how the lack of uniform standards in medical collection negatively impacts consumers.
These and other related reasons prompted CFPB to convene a public hearing on medical debt on December 11. Held at Oklahoma City University’s Kerr-McGee Auditorium, CFPB Director Richard Cordray opened the session saying, “It’s hard for consumers to navigate the medical debt maze and come out with a clean credit report on the other side. Getting medical care should not make your credit report sick.”
Lisa Stifler, a policy counsel with the Center for Responsible Lending, testified at the hearing, citing even more concerns.
“Debts are often sold with limited and inaccurate or incomplete information about the consumers and the debts,” said Stifler. “This, along with the collection tactics used, results in people being harassed and wrongly pursued for debts they do not owe, have already paid, or are too old to be the subject of a lawsuit.
“Debt buyers are also increasingly operating as lawsuit factories clogging the courts to collect on the debts they purchase, often resulting in garnished wages and other financial harms,” continued Stifler. She also noted how the sale of credit card debt has dropped in recent years with debt buyers now looking to other forms of debt to purchase, including medical debt.
To effectively remedy the growing medical debt issue, CFPB announced a series of steps it will take to ensure accuracy of data in credit reports. Both creditors and credit bureaus will be required to regularly provide CFPB with accuracy reports. Some of the key metrics will include:
• The volume of information and total number of disputes on the top industries reported;
• Identification of the creditors furnishing the largest number of consumer disputes; and
• A record of the efforts taken by reporting agencies to investigate problems and relevant actions
For consumers, CFPB released tips on how to deal with medical debt both before and after it reaches credit reports.
Expanding on a quote by William Osler, considered by many as a father of modern medicine: “Soap and water and common sense are the best disinfectants,” Director Cordray said, ”We can and we will make it a point to apply more common sense to improve life for consumers.”
Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.firstname.lastname@example.org.