On April 11, the White House published a fact sheet, outlining the Biden administration’s actions to lessen the burden of medical debt and increase consumer protection. The plan includes four focus areas:
- Holding Providers and Collectors Accountable: The Department of Health and Human Services (HHS) will evaluate how providers’ billing practices impact access and affordability of care and the accrual of medical debt. The Consumer Financial Protection Bureau (CFPB) will investigate credit reporting companies and debt collectors that violate patients’ and families’ rights and hold violators accountable.
- Eliminating Medical Debt as a Factor for Underwriting in Credit Programs: Americans with medical debt can apply for USDA rural housing service loans without fear that their medical debt could keep them from getting a mortgage. The Small Business Administration also has committed to ensuring credit access and a vested interest in accurate credit reporting and underwriting. The Federal Housing Finance Agency (FHFA) is reviewing the credit models that Fannie Mae and Freddie Mac use and looking at ways to ensure that measures of creditworthiness are accurate, reliable, and predictive.
- Support Veterans in Financial Hardship: The Veterans Administration (VA) will virtually cease reporting unfavorable debt, including medical debt, to consumer reporting agencies.
- Help Consumers Know Their Rights: The CFPB will produce consumer education tools aimed at helping consumers navigate the medical billing landscape, including more materials specifically designed to help patients access the financial assistance to which they are entitled.
For many watching legislative and regulatory developments in medical debt, this announcement may not have been a surprise. At the end of March, the U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing to examine the economic impact of the “growing burden of medical debt.” In prepared remarks, Committee Chairman Senator Sherrod Brown (D) pointed out the number of consumers — “an estimated 43 million Americans” — with billions of dollars of medical debt on their credit reports. “[A]nd this problem is growing. It can happen to anyone.”
The CFPB has been vocal about medical debt and consumers’ credit reports recently too. At the beginning of March, the CFPB published Medical Debt Burden in the United States, a report highlighting the medical billing system in the United States. The CFPB alleges that the U.S. health care system is supported by a billing, payments, collections, and credit reporting infrastructure where mistakes are common and where patients often have difficulty getting these errors corrected or resolved. In mid-March, the CFPB warned consumers of rising medical debt among older adults. And in April, the CFPB has already published several communications, directed both at consumers and industry:
- In opening remarks at the Consumer Advisory Board (CAB), CFPB Director Rohit Chopra focused on issues associated with the furnishing of allegedly unpaid medical bills on consumer credit reports — and specifically on the announcements from Equifax, Experian, and TransUnion in mid-March that they would be changing how medical bills would be reported on credit reports: “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? Important decisions about credit reporting should not be left up to three firms that arbitrarily decide how reporting will impact consumers’ access to credit.”
- In blog posts directed at consumers, the CFPB reminded consumers that nonprofit hospitals are required to offer financial assistance programs to help people cover the cost of medical care, and other medical providers might also offer similar assistance; the post also instructed consumers on how they can protect their credit and how to steer clear of pitfalls when they are billed for medical treatment.
And just last month, three major national credit reporting agencies announced significant changes to the way they would report medical debt on consumer credit reports, likely in response to the CFPB’s proposed plan of scrutiny for these actors in the consumer finance ecosystem. CFPB Deputy Director Zixta Martinez gave remarks at the Academic Research Council, questioning the effects those changes will have on communities of color, lower-income consumers, and the un- and under-insured. Zixta also expressed concerns about coercive debt reporting, and even asked the question: Is it appropriate to treat unpaid medical bills as a typical “debt”? And in even stronger language at a meeting of the CFPB’s Consumer Advisory Board, Chopra, explicitly referencing the move by the credit reporting agencies, 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? Important decisions about credit reporting should not be left up to three firms that arbitrarily decide how reporting will impact consumers’ access to credit.”
Which leaves those in the consumer finance space who deal directly with medical billing and debt collection clear on the deep ambivalence — if not outright antagonism — of federal regulators, but not necessarily clear on the action to take. And with several states introducing and passing legislation barring certain actions on consumer medical debt — California, New Mexico, Nevada, Idaho, New Jersey, Vermont, and Virginia just to name a few — it does not appear that easy clarity is on the horizon.
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