People with unpaid medical bills are finding themselves in a
“haphazard system” of debt collection, in which some consumers don’t realize
they owe money or are still waiting for bills when their debt is sent to a
collections agency. The Consumer Financial Protection Bureau on Thursday issued a
study highlighting concerns about how consumers are treated when their
medical bills are sent to collections.
It comes as CFPB officials are working on a proposal for new
consumer protections for the debt-collection market. Those rules,
expected to be unveiled next year, are likely to target the kinds of practices
criticized by the CFPB.
The CFPB found that 43 million Americans have unpaid medical
debt on their credit reports, and that more than half of all debt on
credit reports is from medical expenses. Unlike an unpaid credit-card or
cellphone bill, consumers often have little to no knowledge of what they owe to
a hospital or another medical provider, CFPB officials say.
Consumers are often frustrated when they receive demands for
money that has already been paid. For example, an analysis of complaints to the
CFPB about debt-collection issues found that 20% of medical-debt-collection
complaints involved borrowers who said their debts had already been paid, compared
with 8.5% of complaints about other kinds of debts.
Mr. Cordray said a lack of consistency in the industry
creates confusion for consumers. Medical debts have no standard time frames for
reporting. Some doctors or hospitals send debt to collections 30 days after a
bill is unpaid, and others wait up to 180 days, Mr. Cordray said.
The CFPB found that the average unpaid medical debt is $579,
compared with several thousand dollars for credit cards or student loans.
Earlier this year, the CFPB put pressure on the
credit-reporting industry to deemphasize the impact of unpaid medical debt
on borrowers’ credit scores. In August, Fair Isaac Corp. said it
would give less weight to unpaid medical bills that are with a
collection agency in its FICO credit-score calculations. The CFPB has also put
pressure on lenders and debt collectors to do a better job of fixing
mistakes in consumers’ credit reports.
On Thursday, the CFPB said it would require major
credit-reporting firms such as Equifax, TransUnion and Experian to provide
the regulator with reports listing which companies and industries have the most
disputes with consumers.
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