Medical Debt Collection – Know Your Rights | The Department of Financial Protection and Innovation (2024)

FAQs

What is the new rule for medical collections on credit reports? ›

Following the release of a CFPB report in March 2022 that found that Americans owed $88 billion in unpaid medical bills, the three largest credit reporting agencies announced that they would no longer include paid medical debts, unpaid medical debts less than a year old, and medical debt under $500 from credit ...

It is not a HIPAA violation to send to collections provided the minimum necessary Protected Health Information is disclosed and – if using an external collection agency – a Business Associate Agreement is in place with the collection agency.

Once medical bills enter collections, they are often reported to consumer credit reporting companies. Medical debt collections on a credit report can impact your ability to buy or rent a home, raise the price you pay for a car or insurance, and make it more difficult to find a job.

Since March 2022, the three nationwide credit reporting conglomerates – Equifax, Experian and TransUnion – voluntarily stopped reporting some, but not all, medical bills on an individual's credit report. However, the proposed rule would require them to stop reporting medical bills entirely.

Only unpaid medical collections with a starting balance of $500 or higher will show up on your reports, where they'll stay until they're paid or for seven years.

It takes seven years for medical debt to disappear from your credit report. And even then, the debt never actually goes away. If you've had a recent hospital stay or an unpleasant visit to your doctor, worrying about the credit bureaus is likely the last thing you want to do.

The Fair Credit Reporting Act (FCRA) and the Health Insurance Portability and Accountability Act (HIPAA) generally allow furnishers to report medical debts to consumer. Policies of individual consumer reporting agencies impose further restrictions on credit reporting this type of debt.

I am writing to negotiate the above medical bills because I am unable to pay the amount requested. Pursuing me for these bills will force me (and my family) into further financial hardship. This is where you explain your current financial situation and why you are unable to pay.

What happens if you never pay collections? ›

Ignoring these efforts could lead to further financial strain, potential wage garnishment, or the seizure of assets through a court judgment. Additionally, the debt may remain on your credit report for up to seven years, negatively impacting your credit score and future financial opportunities.

Yes, there are legal consequences for collection agencies that fail to notify debtors before reporting to credit bureaus. A federal law called the Fair Debt Collection Practices Act (FDCPA), requires collection agencies to send written notice to debtors within five days of their very first contact with the debtor.

You can take action if a debt collector contacts you about an unexpected out-of-network medical bill, or if you see a surprise medical charge listed as a negative item on your credit report. Reach out to the Consumer Financial Protection Bureau online or by calling 1-855-411-2372.

Consumers are well-protected when it comes to debt collection. One of the most rigorous rules in their favor is the 7-in-7 rule. This rule states that a creditor must not contact the person who owes them money more than seven times within a 7-day period.

Read more about the CFPB's work on medical debt. Read consumer complaints about medical bills and medical collections. Consumers can submit complaints about medical billing and collections issues, as well as about other financial products and services, by visiting the CFPB's website or by calling (855) 411-CFPB (2372).

On April 2, the California Senate Judicial Committee passed Senate Bill 1061. The bill seeks to prevent health care providers and contracted collection agencies from providing information about patients' medical debt to credit reporting agencies.

On November 30, 2021, the Debt Collection Rule became effective. The rule clarifies how debt collectors can communicate with you, including what information they're required to provide you.

Unpaid medical bills can torpedo your credit score.

In a statement, the CFPB said medical bills “have little to no predictive value when it comes to repaying other loans. “ In 2022, the three largest credit bureaus — TransUnion, Equifax and Experian — started removing paid medical debts from consumers' credit reports.

TransUnion, Equifax, Experian, and other major credit bureaus began eliminating paid medical debts from credit reports in 2022. As of 2023, medical debt less than $500 won't impact your credit score³. Lastly, debt collectors and credit bureaus can no longer provide or report inaccurate medical debt.