A bill that would require credit bureaus to delete reports of any delinquent medical debt not exceeding $2,500 within 45 days after it is resolved got a hearing last week, and the only witness to speak against it came from the credit bureaus that would have to implement it.
Stuart Pratt, president and CEO of the Consumer Data Industry Association, told the House Committee on Financial Institutions and Consumer Credit that his organization opposed House Bill 2086, the Medical Debt Responsibility Act. The integrity of the credit reporting system must be preserved, Pratt said. Deleting any debt would affect the predictive value of the system.
Furthermore, the bill is technically flawed, he said, because in numerous instances a credit bureau would not even know that a debt on a report is medical-related.
Another witness, Mary Spector, associate professor at Southern Methodist University Dedman School of Law, testified that there are precedents for withholding transaction information from credit reports as many states restrict the use of public information such as eviction filings and public utility bills.
According to some research reports, 50 percent of negative information on consumer credit reports is medical-related, she said, and of those, another study has suggested that 40-50 percent contain errors.
In many cases the consumer is caught between the healthcare provider and the insurance company, and is often times unaware that they even owed a medical bill until they apply for credit and it shows up on their report, by then much it is too late to do anything about it, she testified.
The bill was originally filed in 2011 , but did not make it through the Senate. Rodney Anderson, a Texas mortgage broker who claims to have been the person who proposed the bill, also testified at the hearing. Anderson became interested in the subject when some of his clients could not get mortgages or had to pay higher interest rates because of scars on their credit rating from medical bills, he said.
“The Medical Debt Responsibility Act would ensure that minor medical bills no longer play a major role in credit score calculations,” Anderson said. “Consumers with a zero balance would have the collection removed from their credit report in a timely basis instead of suffering the consequences of a bureaucratic mistake for seven years. If this straightforward legislation became law, millions of Americans would have the good credit standing necessary to qualify for mortgages, credit cards, and other types of loans.”
As Anderson and Pratt were on opposite sides of the bill, one of the members of the committee, Rep. David Scott (D-Georgia), asked why.
If by paying a delinquent bill consumers can sanitize their credit history, then some consumers simply will bring their balances current only just before they apply for credit, Pratt said.
Medical debt is unique, Anderson argued. Many consumers don’t find out about it until apply for credit. Anderson went on to say that a report by the U.S. Federal Reserve found that 85 percent of individual medical debts are under $500.
Rep. Donald Manzullo (R-Illinois) agreed that medical debt is unique in that it is credit no one seeks. He pointed to his own circumstances in which his wife was hospitalized for cancer.
Lenders want to know about lawful and accurate outstanding debts, Pratt said, regardless of how difficult those circumstances arose. He also pointed out that many medical procedures that would be covered under this law, such as cosmetic surgery, are incurred by choice.
The bill passed the House last year and is expected to go to vote again this year. The Senate version, S. 2149, has yet to have a hearing.
In addition to taking testimony on the Medical Debt Responsibility Act, the committee hearing also covered House Bill 6363, the “Credit Access and Inclusion Act,” which would permit utility companies and others to submit transaction information to credit bureaus.