FOR IMMEDIATE RELEASE
Sept. 30, 2024
CONTACT
Carter Dougherty
carter@ourfinancialsecurity.org
New Effort to Curb Erroneous Medical Debt Collections Protects Families
Biden administration efforts to address challenges created by medical debt, highlighted at a White House meeting today, will curb its harmful impacts, including distorted credit reports and abusive collection practices. The impacts are a widespread problem for millions of people, but disproportionately harm communities of color.
A recent proposal by the Consumer Protection Financial Bureau to eliminate medical debt on credit reports and new CFPB medical debt guidance clarifies that debt collectors are violating federal law when they collect inaccurate and invalid medical debts. Debt collectors, including third-party medical billing companies, violate the law when they double-dip to collect payment for services already covered by insurance, harass people to pay fake or exaggerated charges, and misrepresent the right to contest bills.
“Medical debt erodes savings, causes families to cut back on essential expenses like groceries and health care, and negatively impacts the credit scores that are gatekeepers for participating in the U.S. economy,” said Christine Chen Zinner, senior policy counsel for the Americans for Financial Reform Education Fund. “Continued agency efforts to lower medical debt and reduce its many negative impacts, including today’s guidance to curb abusive and aggressive debt collection practices, will better protect all families and provide much needed relief for Black and Latine families, who are far more likely to suffer from abusive medical debt collection practices.”
Earlier today, the White House convened people affected by medical debt and experts and advocates in the field to highlight the Biden administration’s efforts in this area. Fifteen million people in the United States have medical debt collections on their credit reports and nearly 140 million people have faced medical financial hardship due to out-of-pocket health care bills.
Debt collections, lawsuits, judgments, and wage garnishments are also 60 percent more common in communities of color than in white communities. Black and Latine families face these higher medical debt levels because of the ongoing legacy of structural racism that contributes to occupational segregation into lower-paying jobs with less healthcare coverage and retirement benefits, lower household wealth because of redlining, and higher healthcare needs because of more physically strenuous jobs and less access to affordable, quality health care providers.
Eliminating medical debts from credit reports would raise credit scores by an average of 20 points and lead to the approval of approximately 22,000 additional mortgages every year. The impact of medical debt can impair families’ ability to build household wealth and navigate emergency financial hardships.
“The administration’s efforts to cut down medical debt burdens will help families save, grow wealth, and create a stronger and more just economy,” said Amanda Jackson, consumer campaign director for AFREF. “These steps are critical to helping prevent negative outcomes of medical debt from perpetuating racial inequities in future financial determinations.”
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