On December 11, the Consumer Financial Protection Bureau released a report and accompanying press release regarding the intersection of medical debt and credit reporting.  This report reveals the staggering impact medical debt has on the credit reports of millions of Americans.

The CFPB views medical debt as unique among debts because of the unpredictability by which it can be incurred, the speed at which it can mount, and the complex payment relationships among patients, medical professionals, and insurance companies.  According to the CFPB, medical bills are frequently turned over to third party collection agencies before the patient is ever aware that he or she has an unpaid debt.  In turn, these collection efforts negatively affect patients’ credit reports.

The CFPB’s report includes a number of eye-opening figures pertaining to medical debt and credit reporting.  The CFPB found that half of all overdue debt on credit reports is medical debt.  Medical debt appears on roughly 20% of all credit reports – the credit reports of 43 million Americans.  For approximately 15 million consumers, medical debt is the only debt on his or her credit report.  Overall, the average unpaid medical debt is $579.

According to the CFPB, medical debt creates unique challenges for consumers.  For example, the CPFB believes that the complexity of the medical billing process often leaves consumers confused as to what they actually owe and to whom they owe it.  In addition, the speed at which some medical providers report outstanding medical debt to debt collectors increases the danger of failing to pay a medical bill.  This danger to consumers is compounded by the practice of “parking,” whereby a debt collector reports the debt to a credit reporting agency before attempting to collect the debt from the consumer.

Because of the CFPB’s increased interest in medical debt reporting, it has announced new requirements for consumer reporting agencies pertaining to medical debt.  We discussed these new requirements on the blog here.