‘Groundbreaking’ settlement results in medical debt credit reporting exception

Special rules that allow for delayed credit reporting for medical debt emerged out of a “groundbreaking consumer protection settlement” between the New York State Attorney General’s Office and the three top credit reporting agencies. The settlement, which was announced by Attorney General Eric T. Schneiderman, provides for improved credit report accuracy and increased fairness and efficacy of the procedures for resolving disputes of credit report errors, as well as a 180-day waiting period with regard to medical debt reporting.

The agreement

The settlement agreement involved the three top credit reporting agencies in the country—Experian Information Solutions, Inc. (Experian), Equifax Information Solutions, LLC (Equifax), and TransUnion, LLC (TransUnion)—and put into place the following practices: (1) improvement of the dispute resolution process; (2) adoption of a waiting period for reporting medical debt; (3) an increase in visibility for AnnualCreditReport.com; (4) prohibition on reporting debt from entities, such as “payday loan” organizations, that have failed to comply with relevant New York lending laws; (5) development of a National Credit Reporting Working Group, which will develop best practices for the furnishing of information to the agencies; (6) the addition of the right to a second free annual credit report; and (7) the execution of a media campaign about consumers’ rights.

Medical debt reporting

Specifically, in regard to reporting medical debt on consumers’ credit reports, the agreement outlined a mandatory 180-day waiting period before discovered information on medical debt could be included in a report by the agencies. According to the New York Attorney General’s Office, “over half of all collection items on credit reports are medical debts,” which often result from insurance coverage delays or disputes. As such, “medical debt may not accurately reflect consumers’ creditworthiness.” The waiting period was created in order to account for these delays or disputes. The agreement also dictates that medical debt that was later paid by an insurer must be removed from the individuals’ report.

Medical debt, examined

Schneiderman’s announcement referred to a Federal Trade Commission (FTC) poll that indicated that 26 percent of individuals surveyed reported a potentially material error in their credit reports. With respect to medical debt in particular, a report released by the Consumer Financial Protection Bureau found that medical debt was not indicative of other bad financial behavior in the future and is most likely the result of consumer confusion (see Medical debt: a bad predictor of future bad financial behavior, Health Law Daily, January 9, 2015). Further, another report indicated that up to 70 percent of Americans have difficulty paying their medical bills (see Most Americans financially strain to pay medical bills, Health Law Daily, January 12, 2015).