Legislation Would Give Consumers 120 Days To Resolve Medical Debts Before Dinging Credit Reports

Consider the following: 1-in-10 insurance claims are processed incorrectly; debt collectors are using account information that may be incomplete, inaccurate and out-of-date; once reported to a credit bureau, medical debt — whether real or erroneous — can do severe damage to your credit score. Perhaps it couldn’t hurt to give consumers a chance to challenge or resolve medical debts before collectors report them to the credit bureaus?

That’s the thinking behind the Accuracy in Reporting Medical Debt Act, introduced last week by Congressman Gary Miller of California and Carolyn McCarthy of New York.

The bill, which would amend the Fair Debt Collection Practices Act, would give consumers 120 days to resolve medical debt with collectors before that debt is reported to Equifax, Experian or Transunion. It would require debt collectors to delay reporting the debt to the bureaus if the supposed consumer can show that she is continuing to work with an insurance company; was unaware that the debt existed or disputes owing the debt; or has applied for financial assistance.

Debt collectors would initially give alleged debtors 30 days to respond. If there is no response within 30 days, the collector could report the debt to the credit bureaus. Those 30 days are included in the 120 day timeline, so there is no incentive for the consumer to wait to respond.

The law does not prevent the collectors from continuing to attempt to get your money during the waiting period; they just can’t tell the credit bureaus about it.

The goal, say the bill’s backers, isn’t just to give consumers enough time to deal with that debt before it scars their credit report for up to seven years — even after it’s been paid — but to improve the accuracy of credit reports in general.

“Every year, families in my district, and across the country, are hit with confusing and costly medical bills,” said Miller in a statement. “The personal and financial toll of dealing with a medical emergency or serious illness is difficult enough. Unfortunately, for many patients and their families, our nation’s complex and broken healthcare system inflicts additional pain by damaging their ability to access credit.”

The Accuracy in Reporting Medical Debt Act is not intended to be an option to the proposed Medical Debt Relief Act, introduced earlier this year by Senator Jeff Merkely of Oregon (and by Rep. Maxine Waters of California in the House). That bill would require that any paid medical debt be removed from a credit report 45 days after it was paid.

Instead, the two pieces of legislation would, if passed, work together. The Accuracy in Reporting bill giving consumers time on the front end to proactively resolve matters before they impact credit reports, and the Medical Debt Relief Act acting on the back end to limit the long-term damage of paid medical debt that has already been reported to the bureaus.