Three of the nation’s largest credit reporting agencies are removing nearly 70% of medical debt from consumer credit reports, the companies said in a joint statement Friday.
Equifax, Experian and TransUnion will eliminate billions of dollars from the accounts of consumers faced with unexpected medical bills they couldn’t pay. The three companies said they made the move after months of research.
“Medical collection debts often result from unforeseen medical circumstances. These changes are another step we are taking together to help people across the United States focus on their financial and personal well-being,” the companies said. in a joint statement.
The announcement follows research from the Consumer Financial Protection Bureau showing that Americans had accumulated $88 billion in medical debt on consumer credit files as of June 2021. This is the most common debt collection credit account on credit files , said the CFPB.
Medical debt can be volatile and unpredictable, and can negatively affect many financially secure consumers. Black, Hispanic, young and low-income consumers are most likely to be affected by medical debt, the bureau said.
Medical debt problems have increased since the Covid-19 pandemic hospitalized millions of peopleand CFBP director Rohit Chopra was publicly critical medical debt collections by credit reporting agencies. On March 1, Chopra said the CFPD would “look closely” at the big three credit reporting agencies.
“We expect them to take seriously their role as major players in the credit reporting system, a system whose integrity and accuracy can determine the financial future of hundreds of millions of people. “, said Chopra.
Effective July 1, paid medical collection debts will no longer be included in consumer credit reports. Millions of Americans previously had lowered credit scores because debts paid after being sent to collections could show up on credit reports for up to seven years.
Further changes are expected. It will now take one month for unpaid medical collection debt to appear on a consumer’s report, instead of six months, the previous norm.
The three companies also said that beginning in the first half of 2023, medical collection debts under $500 will no longer be included in credit reports.
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