CFPB’s Chopra urges group to consider medical debt on credit reports – and credit reporting firms as ‘cartel’

It is critical that the credit reporting system is not used as a weapon to coerce Americans into paying medical and other bills they may not even owe, the leader of the federal consumer financial protection agency said Wednesday, referring to medical debt being included on credit reports.

Further, Consumer Financial Protection Bureau (CFBB) Director Rohit Chopra said, a recent announcement by the three national credit reporting agencies about medical debt reporting raises an issue: are the agencies acting as competitors or as a cartel?

Speaking to a meeting of the bureau’s Consumer Advisory Board (CAB), Chopra noted that the agency early last month unveiled a report titled Medical Debt Burden in the U.S. which – building on a previous bureau report published in 2014 – found that including medical bills in credit reports hurt both individuals seeking credit and financial institutions trying to assess the risk that any given person would default on a loan. The 2022 research, he said, reaffirmed that medical bills are less predictive, and reported $88 billion of outstanding medical bills in collections that affect one in every five consumers.

He asserted that the report showed that medical bills placed on credit reports can result in reduced access to credit, increased risk of bankruptcy, avoidance of medical care, and difficulty securing employment, even when the bill itself is inaccurate or erroneous.

The credit reporting agencies responded he said, but in an eyebrow-raising way.

“Less than 21 days after we published our report, Equifax, Experian, and TransUnion issued a joint statement to announce they were changing how medical bills would be reported on credit reports,” Chopra said. “The firms appeared to have made an agreement to decide how they wanted to report medical debt. This raised a key question: are these three firms acting as competitors or as a cartel?”

He told the group that important decisions about credit reporting should not be left up to three firms that “arbitrarily decide how reporting will impact consumers’ access to credit.”

He said the agency is “cautiously optimistic” about certain firms’ announcement. However, he said, the announcement does not “fundamentally address the concern that the credit reporting system can be used as a tool to coerce patients into paying bills they may not even owe. Moreover, it’s not clear whether or not these changes are durable or enforceable,” he said.

He asked the group to consider three questions:

  • Is it appropriate to treat unpaid medical bills as a typical “debt”?
  • If medical bills are not much help when it comes to predicting repayment on future loan obligations, should they even be included in credit reports?
  • Should the groups think about the inclusion of allegedly unpaid medical bills in credit reports as part of the broader question of how data is used in consumer finance markets

Director Chopra’s Opening Remarks to the Consumer Advisory Board