Consumer Bureau chief calls out "doom loop" that keeps patients in debt
A report released this week by the Consumer Financial Protection Bureau (CFPB) indicates that Americans have $88 billion in medical debt appearing on credit reports.
The report reveals that the U.S. healthcare system is supported by a billing, payments, collections, and credit reporting infrastructure where mistakes are common, and where patients often have difficulty getting these errors corrected or resolved.
A "Doom Loop"
In a statement about the report, the CFPB's director called out a "doom loop" that traps consumers in medical debt:
“When it comes to medical bills, Americans are often caught in a doom loop between their medical provider and insurance company,” said CFPB Director Rohit Chopra. “Our credit reporting system is too often used as a tool to coerce and extort patients into paying medical bills they may not even owe.”
When those bills end up in collections, the repercussions can be far-ranging. Medical bills placed on credit reports can result in reduced access to credit, increased risk of bankruptcy, avoidance of medical care, and difficulty securing employment, even when the bill itself is inaccurate or erroneous.
The report notes:
Roughly 20% of U.S. households report that they have medical debt. The CFPB found that medical collections tradelines appear on 43 million credit reports. As of the second quarter of 2021, 58% of bills that are in collections and on people’s credit records are medical bills.
The CFPB indicated it plans to take action and is already working with partner agencies to protect consumers. Specifically:
The CFPB is working with the U.S. Department of Health and Human Services to ensure that patients are not coerced into paying bills more than the amounts due. In January, the CFPB issued a compliance bulletin that reminded debt collectors, credit reporting companies, and others that it is illegal to collect or report as owing a debt that is not legally due and owing, including where the billed amount violates the No Surprises Act.