Many consumers don’t know they owe money for medical procedures until they get a call from a collection agency or they discover it on their credit report, a federal consumer watchdog says.
The Consumer Financial Protection Bureau on Thursday released a report spotlighting concerns about how medical debts are collected and reported.
About 43 million Americans have overdue medical debt on their credit reports, the bureau said. Unlike, say, unpaid phone or utility bills, medical debt can result from an event that is unpredictable and costly, with consumers often temporarily responsible for the whole bill until their insurance companies can work it out.
“Consumers can also become responsible for the medical debt because of billing issues between medical providers and insurers,” the bureau said. “If a medical bill goes unpaid after a certain period of time, the medical provider may hand over the account to a third-party debt collector.”
Most of the collection notices on consumers’ credit reports are furnished to the credit-reporting agencies by third-party debt collectors, the bureau said.
Such black marks on a credit report can hurt consumers’ credit scores, which can influence whether they can get loans and at what interest rates. A collection notice generally can stay on a report for up to seven years.
Complaints from consumers who are subject to medical collections are more likely to be about amounts owed or about whether the bill was paid as compared with complaints about other types of collections. The bureau’s analysis found consumers with medical debt were more than twice as likely to argue that the debt was paid — 20 percent for medical collections compared with 8 percent for all other types of collection complaints.
“The medical billing process can be confusing for consumers,” according to the bureau, which said 52 percent of overdue debt on credit reports is from medical expenses. Also, one in five credit reports contain medical debt in collections, the bureau said.
Unpaid medical debts average $579, the bureau said.
The bureau said it’s concerned that “the complex processes by which medical bills are incurred, collected by a wide range of debt collectors and reported to credit reporting agencies can create challenges for consumers.”
“A top priority” includes holding “all players in the credit reporting market accountable for ensuring the accuracy of data in credit reports,” the bureau said. “This applies to the furnishers of the information, to the credit bureaus, and to the creditors that often both furnish information and use credit reports.”
On Thursday, the bureau said it would require major credit-reporting companies to provide regular accuracy reports that would include which information furnishers and which industries have the most disputes with consumers.
The bureau “expects the credit reporting agency to investigate, identify if there is a problem and take appropriate action.”
“As part of its oversight responsibility,” the bureau “periodically asks the nationwide credit-reporting agencies to provide information regarding data maintained by the” agencies, said a spokesman for Consumer Data Industry Association, a trade group. “The information they are asking about concerns data received from lenders and others that report to the credit-reporting agencies.”
The association said it views the request as “being a normal course of business in dealing with the regulator.”