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Medical Debt Collection – System Run Amok Screwing-Up Credit

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Medical debt accounts for more than half of all collection items that appear on consumer credit reports. Recognizing medical debt is both often mistaken and not a good indicator of future creditworthiness, leading credit score companies have begun to remove it from credit scores, but it still appears in credit reports. 

The U.S. PIRG Education Fund, released the ninth in a series of reports that review complaints to the Consumer Financial Protection Bureau (CFPB).  The latest report, Medical Debt Malpractice, found nearly two-thirds (63%) of 17,701 complaints about medical debt collection reviewed in the report assert either that the debt was never owed in the first place, it was already paid or discharged in bankruptcy, or it was not verified as the consumer’s debt.

Many complaints document inappropriate and aggressive tactics including frequent or repeated calls, calls harassing friends and family, threats of legal action, or the use of abusive language.

Although impacts on credit reports are not categorized by the CFPB, they appear to be a significant source of complaints: 1,810 complaint narratives, or 35 percent of all medical complaint narratives submitted, contain the text “credit report.”

PIRG says medical debt collectors often employ aggressive tactics and attempt to collect debt from the wrong customers – putting consumers’ credit records at risk. Medical debt accounts for more than half of all collection items that appear on consumer credit reports. Recognizing medical debt is both often mistaken and not a good indicator of future creditworthiness, leading credit score companies have begun to remove it from credit scores, but it still appears in credit reports.

PIRG notes the CFPB has returned $11.8 billion to 29 million consumers harmed by financial practices.

The group noted powerful special-interests continue to spend many billions — $2 billion on lobbying and campaign donations in 2015-2016 alone, according to the PIRG-backed Americans for Financial Reform, to weaken the CFPB and all of the Wall Street reforms enacted in 2010.

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