CFPB’s Chopra outlines steps for combatting ‘coercive’ medical debt credit reporting

Three broad steps meant to combat “coercive” credit reporting to obtain payments on medical debt will be taken by the federal consumer financial protection agency, its director said Tuesday.

Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra said the three steps are: scrutinizing the “big three” credit reporting agencies to ensure their reports are not being used as tools to coerce or extort payments; whether it is appropriate to include medical debt in government agencies’ underwriting and role in credit reporting; and whether it is appropriate for unpaid medical billing data to be included on credit reports altogether.

His comments were made in conjunction with a release from the CFPB of a report on the medical debt burden in the country. That report estimates $88 billion in medical bills are currently noted on credit reports.

“In the United States, it is all too common for patients and their families to be caught in a doom loop between their provider and their insurance company,” Chopra said. “Even when a patient tries to battle to get an accurate bill or an insurance claim paid, medical debt collectors have a weapon that is hard to fight against: the credit report. I am concerned that the credit reporting system is being weaponized as a tool of coercion to get people to pay medical bills they may not even owe.”

Chopra claimed that coercive credit reporting forces patients and families to pay bills whose accuracy they doubt. Those who refuse to pay a bill whose accuracy they question, he asserted, can find their credit ruined and “their prospects for employment and housing dimmed.”

The CFPB director also said it’s hard to call medical debt a real debt. “Few people choose to take on medical debt, and typically, patients have no idea how much they will be charged for a service or a procedure,” he said. He noted that there is no upfront disclosure or interest rate to compare, but that individuals and families must confront a billing and collections system that can be best described as “error-plagued, confusing, and labyrinthine.”

Regarding the three steps he said the agency would be taking regarding medical debt credit reporting, he said:

  • Scrutiny of big three credit reporting agencies: The CFPB wants to ensure that the agencies are not being used “as a tool” to coerce or extort patients on medical bills – which they may not even owe. “If furnishers (of credit information), whether of medical debt or otherwise, are polluting the system with inaccurate information, we will expect the Big Three to cut off their access to the credit reporting system,” he said.
  • Work with other government agencies: “We are interested in what more government can do to make sure patients can exercise their rights to access financial assistance programs and payment plans, as well as obtain validation of debts allegedly owed,” he said. He cited a new rule the bureau is developing with the Veterans Affairs Department that requires all other methods of debt collection to be exhausted before a bill is reported to the credit reporting agencies, thus ensuring that the credit reporting system is not used as a tool of coercion.
  • Including unpaid medical billing data on credit reports: “We already know how a medical bill reported on credit reports is less predictive of future repayment than reporting on traditional credit obligations,” Chopra said. “We will make this determination while also taking steps to reduce harmful and inaccurate credit reporting.”

Prepared Remarks of Director Rohit Chopra on New CFPB Medical Debt Report