Firms’ reduction in medical debt reporting will leave nearly half of consumers with such debt still affected, CFPB says

Consumer credit reporting companies’ changes to medical debt collection reporting, announced in March, will remove some but not all medical debt collections and will leave nearly half of consumers still seeing such collections on their credit reports – even after the reporting changes take full effect next year, the federal consumer financial protection agency said Wednesday.

The Consumer Financial Protection Bureau (CFPB) also said that the medical collection tradelines that will remain on credit reports after the changes will likely represent a majority of the dollar amount of all medical collections currently reported.

In its announcement, the CFPB said past research by the bureau and others suggests that medical collections are less predictive of future repayment risk than other collections or payment history on loans.

In March, Equifax, Experian, and TransUnion announced steps beginning this July 1 that they said would remove nearly 70% of medical collection debt tradelines from consumer credit reports. As of this July 1, paid medical collection debt would no longer be included on consumer credit reports; and the time period before unpaid medical collection debt would appear on a consumer’s report will grow from six months to one year, giving consumers more time to resolve related issues.

The firms also said in March that in the first half of 2023, medical collections with balances below a threshold of “at least” $500 will no longer appear on consumer credit reports. In a later announcement July 1, the firms said they would, in the first half of 2023, remove medical collection debt with an initial reported balance of less than $500 from consumers’ credit reports.

The CFPB on Wednesday acknowledged the removal of most individual medical collections tradelines from credit reports but said that “in terms of dollar amount, a large majority of reported medical collections likely will still remain.”

The CFPB report, part of a series on consumer credit trends, includes the following key findings:

  • The removal of collections under $500 as a result of the Medical Collections Reporting Change may have a large effect on the number of medical collections reported, as the majority of medical collections are under that threshold. Moreover, currently on average these collections remain on consumers’ credit reports longer than higher balance collections. However, these collections represent a minority of medical collections balances in dollar terms.
  • Removing paid collections is less likely to have a substantial effect, as very few medical collection tradelines are ever marked paid.
  • In total, the bureau finds that about half of all consumers who currently have medical collection tradelines on their credit reports will likely still have medical collections reported once the Medical Collections Reporting Change goes into effect.
  • Removal of medical collections will likely be geographically concentrated. Consumers who have medical collections that are likely to be removed are disproportionately more likely to live in states in the north and east of the country. Consumers residing in West Virginia, in particular, stand to have a much greater share of medical collections removed compared to residents of any other state.
  • Although consumers with medical collections are significantly more likely to reside in neighborhoods that are majority Black or Hispanic and have lower median income, consumers likely to have all their medical collections removed by the Medical Collections Reporting Change are slightly more likely to live in neighborhoods that are majority white and higher income, compared to all consumers who have medical collections currently.

CFPB Publishes Analysis of Potential Impacts of Medical Debt Credit Reporting Changes

Consumer credit trends report: Paid and Low-Balance Medical Collections on Consumer Credit Reports