To prevent the weaponization of existing credit rating systems by debt collectors and insurance agents, the CFPB has taken stringent steps. CFPB has released a report on how various agents are misusing credit rating systems to coerce people. Amid COVID-19, there is a total outstanding of around $88 billion USD on medical bills, of which 43 million people see non-payment of medical bills in their credit reports.
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Why are credit report systems misused so rampantly?
As per industry trends, it is widely believed that credit reports provide the most accurate financial data about an individual’s financial health and their ability to fulfill obligations related to loan amount repayment. However, when it comes to paying up for medical bills, things become slightly difficult to report financial behaviors, especially when patients have to handle the loan management all by themselves. Despite availability of Payment Assistance Programs in the US, these are hardly making any impact on the ground, making them very hard to access at times. On top of it, numerous medical SOPs such as in-patient versus out-patient billing, out of network loan for medical billing, etc further add to the overall complexities in the way their non-payment are reported to credit rating systems in the US.
A majority of patients believe that healthcare companies overcharge for their procedures and services, and when it comes to footing the medical bills b using loan assistance programs, they are caught in a web of “error-plagued, confusing and labyrinthine” medical billing and collections systems..
To secure patients in such a scenario, CFPB Director Rohit Chopra released a statement on how insurance companies misuse credit rating systems to hound and abuse patients and their families, often forcing them into a vicious cycle of anxiety, fear and stress. Rohit sas, “In the United States, it is all too common for patients and their families to be caught in a doom loop between their provider and their insurance company. Even when a patient tries to battle to get an accurate bill or an insurance claim paid, medical debt collectors have a weapon that is hard to fight against: the credit report. I am concerned that the credit reporting system is being weaponized as a tool of coercion to get people to pay medical bills they may not even owe.”
“Coercive credit reporting forces patients and their families to pay bills whose accuracy they doubt. And, for those families who refuse to pay a bill whose accuracy they question, they can find their credit ruined and their prospects for employment and housing dimmed,” continued the CFPB Director.
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Steps to be taken by the CFPB to Safeguard US Credit Reporting Systems from Faulty Reporting by Insurance Companies
CFPB is taking a strong stance seeking a bigger accountability from the “Big Three” credit reporting agencies. Insurance companies can no longer use these platforms to instigate patients and extort money in the name of loan or medical bill repayments. The existing laws will be strictly administered to ensure SOPs are diligently followed by Equifax, Experian and TransUnion. The buck shall stop at their end when it comes to securing credit reporting systems against inaccurate financial health data related to debt and medical bills.
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Secondly, the “Big Three” would have to wield power to “cut off” data furnishers who wrongly report inaccurate information into credit reporting systems.
Thirdly, the CFPB will closely work with government agencies to include debt in their existing underwriting and credit reporting.
In this regard, Rohit added, “I am grateful to our Secretary of Veterans Affairs Denis McDonough for working with the CFPB on a new rule that will dramatically reduce the number of medical debts subject to credit reporting for veterans. The VA’s rule requires all other methods of debt collection to be exhausted before the bill is reported to the credit reporting agencies, thus ensuring that the credit reporting system is not used as a tool of coercion. This sets an important standard for other medical providers to meet. We intend to continue our work to ensure that government policies aren’t the source of these harms to families and patients. We are interested in what more government can do to make sure patients can exercise their rights to access financial assistance programs and payment plans, as well as obtain validation of debts allegedly owed.”
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The CFPB will partner with the Department of Health and Human Services. This will ensure no one is over-charged or extorted into paying illegal surcharges for medical care. This has been covered as part of the No Surprises Act. In all retrospect, business leaders, and healthcare community have to take humane steps to prevent inaccurate data entry and reporting into credit systems, even as patients continue to be exposed to aftermath of COVID-19 pandemic.
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