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Will Congress change credit reporting rules for medical debt? P. 2

In the last post, this blog started a discussion of congressional efforts to modify the credit reporting rules in regard to paid off medical debts.

As far as credit reporting, medical debts are generally handled much differently than other types of debt. Health providers do not report to the agencies when a patient carries a balance and pays the debt on time. Consumers are not able to obtain good credit from paying medical bills on time, but when the debt is sent to a bill collector--the debt may be listed on a credit report, having an adverse impact on a credit score.

Lawmakers continue to haggle over changes to the Fair Credit Reporting Act in relation to medical debt. Senator Sherrod Brown is a co-sponsor of the Medical Debt Responsibility Act, which would erase paid medical debts from credit reports. Brown says that people cannot plan for medical expenses and consumers "should not be punished because they or a loved one got sick," according to the Dispatch.

Congressman Steve Stivers says that unforeseen sickness should not destroy a family's finances. Stivers says, "Once minor medical payments are paid off, it shouldn't be held against someone long-term."

Opponents of changing the credit reporting rules surrounding medical debts suggest that the measure would tend to "water down the value of a credit score." The president of consumer education with SmartCredit.com says that the change "would cause legitimate debts to expire before the seven years, and that's bad because people who are defaulting on debt are higher credit risks and that misrepresents their credit risk to lenders," according to the Dispatch.

The bill reportedly would apply to medical debts that reach credit reports, but are then paid off. In many cases, consumers hounded by medical debts may not be able to pay off the debt. For those financially distressed by overwhelming medical bills, filing for bankruptcy may be an option to find meaningful debt relief.

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