The three major credit reporting agencies will make major changes to how they report medical debt, beginning this summer, The Wall Street Journal reports.
The changes will remove nearly 70% of medical debt from consumer credit reports, according to a statement released by the companies.
Experian, Equifax and TransUnion have been working on the changes for months, according to The Wall Street Journal. The credit reporting agencies have been under pressure from the Consumer Financial Protection Bureau to address the issues surrounding medical debt.
Beginning July 1, medical debt that has been paid after it was sent to collections will be removed from credit reports. Previously, that debt, even once paid off, could remain on a consumer’s credit report for up to seven years.
Unpaid medical debts occurring after the new rules take effect this summer will not be added to credit reports until a year has passed since the debts have been sent to collections.
Another change next year involves unpaid medical debts of $500 or less, which the CFPB has found is the most common category. The credit reporting agencies will remove such debts from credit reports, though the dollar amount could change, officials told The Wall Street Journal.
A report by the CFPB released March 1 outlined areas of concern about the amount of medical debt appearing on consumer credit reports and how COVID-19 could cause an increase in medical debt. The CFPB found that $88 billion in medical debt was on consumer credit reports as of June 2021. The bureau also found that in 2021, 58% of all third-party debt collection was for medical debt, making it the most common form of debt for consumers.
The credit reporting companies’ CEOs released a joint statement about the changes:
“Medical collection debt often arises from unforeseen medical circumstances. These changes are another step we’re taking together to help people across the United States focus on their financial and personal wellbeing,” said Mark W. Begor, CEO Equifax; Brian Cassin, CEO Experian; and Chris Cartwright, CEO TransUnion. “As an industry we remain committed to helping drive fair and affordable access to credit for all consumers.”
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