Consumer Financial Protection Bureau Director Richard Cordray today will call on credit reporting agencies to take a more active role in policing the companies that furnish data on consumers, including a mandate to report consumer disputes made against specific companies. The new requirements stem from a CFPB study on debt collection tradelines in credit reporting.

In a speech in Oklahoma City Thursday, Cordray will announce that large national credit reporting bureaus will now be required to track which creditors, debt collectors, debt buyers, and other companies are providing information for publication on consumer credit reports that see the highest level of disputes from those consumers. The credit reporting agencies will then provide an “accuracy report” to federal regulators.

The CFPB will also be tracking which industries draw the most disputes and which companies receive the highest number of disputes relative to their peers within industries.

The federal financial watchdog released a sample accuracy report that it suggested credit reporting agencies could use to comply with the new requirement.

The Bureau did not say how it will use the information it collects from the credit bureaus, but it did say that it “expects the credit reporting agency to investigate, identify if there is a problem, and take appropriate action” against companies with a high number of disputes. In his speech, Cordray said that appropriate action “may include declining to accept information from the troubled furnisher.”

In conjunction with the new requirement announcement, the CFPB released a study on the impact debt collection has on consumer credit reports. The focus was primarily medical debt, but the new requirements for national credit reporters – specifically, TransUnion, Equifax, and Experian — will be neutral on the type of debt being reported.

Still, the CFPB’s report showed that 52 percent of all debt on credit reports is from medical expenses. So a lot of the information in the report, and in Cordray’s speech, was focused on medical debt.

“It’s hard for consumers to navigate the medical debt maze and come out with a clean credit report on the other side,” said CFPB Director Richard Cordray. “The CFPB is taking action to improve credit report accuracy. Getting medical care should not make your credit report sick.”

The CFPB’s research revealed that nearly 20 percent of all Americans have a medical debt on their credit report, with seven percent having only a medical debt collection tradeline and no other negative marks.

The impact medical debt has on consumers’ credit reports is a huge concern for the CFPB, especially since the transaction that creates the debt is often far different from typical credit behavior. The report is also a continuation of the work the CFPB has been doing in the area.

In May, the CFPB published a report that focused on the consequences of medical debt in collections on consumers’ credit scores. In both the report and in official statements made surrounding its release, the CFPB did not make recommendations for policy changes. At the time, the report was seen as the first step in the process of proposing a rule about medical debt reporting and collection.

The CFPB stopped short of making rule proposals today, but the new requirement on national credit reporting agencies is not the only step the Bureau is considering.

The report lauds efforts by credit scoring outfits, specifically FICO, to re-weight paid collection accounts and medical debt. The CFPB also mentioned the joint effort by ACA International and the Healthcare Financial Management Association (HFMA) to develop standards for medical debt collection and credit reporting.

Outside of the medical ARM sector, the report contained some additional interesting information. The CFPB’s research revealed that more than two-thirds (67.5 percent) of all collection tradelines on consumer credit reports are reporting on accounts that did not originate with a traditional credit agreement. In addition to healthcare providers, utility companies and telecom companies – and their debt collection agencies – are responsible for the bulk of collection tradelines.

The Bureau also discussed “passive collection,” or parking collection tradelines on consumer credit reports in an attempt to get inbound service from debtors. But the CFPB did note that in many cases, a collection agency’s credit reporting behavior is dictated by its creditor client, including healthcare providers.

Finally, the CFPB announced the publication of a new consumer advisory, “7 Ways to Keep Medical Debt in Check.”


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