WASHINGTON — U.S. Senators grilled the executives of three major credit reporting bureaus Thursday on whether their practices are transparent and fair to consumers, with Democrats frequently pressing the CEOs to remove medical debt from the reports.  

Ohio Democratic Sen. Sherrod Brown, chair of the Senate Committee on Banking, Housing, and Urban Affairs, said all medical debt should be removed from credit reports. Equifax, TransUnion, and Experian announced on April 11 that all medical debt below $500 was removed from credit reports, but Brown said that move is not enough.

“Medical debt does not correlate with credit risk – it correlates with illness,” he said. “No one should have their financial future destroyed because of an emergency, or a sick family member. … If you have $1,000 in medical debt, you’re no less credit-worthy than someone with $500. It stems from the same problem – someone in your family or you got sick.”

Brown asked the CEOs to commit at that moment to removing all medical debt, but all dodged the request.

Credit reports can affect people’s ability to find new housing and can have errors that are in no way the fault of the consumer. Twenty-three percent of Americans have medical debt, according to a 2022 LendingTree survey.

Nearly 1 in 10 adults have significant medical debt, and 6% of adults — 16 million people in the U.S. — have debt above 1,000, according to Kaiser Family Foundation’s 2022 analysis. People in states that haven’t adopted Medicaid expansion, people in southern states, and Black people were more likely to live with this financial burden, KFF found. 

Consumer advocacy groups, progressive think tanks, and civil rights groups have been pushing the Consumer Financial Protection Bureau and IRS to address the medical debt issue through regulations. 

Sen. Elizabeth Warren, D-MA, asked Equifax CEO Mark Begor several times whether medical debt was less predictive of someone paying their bills than other kinds of debt before Begor responded that he didn’t have that information.

“You don’t have that information available? Are you kidding me? You are the head of one of the biggest credit reporting agencies in the country and you don’t know the relative predictability of one of the major forms of debt that you report on?” she asked.

Warren added, “The reason that medical debt is a poor predictor of credit worthiness is our medical system is a mess. Most hospitals charge you one price. They charge insurance companies another, so medical bills are often a moving target. Bills are routinely sent to the wrong party, often a patient can’t even figure out what it is in terms of supplies or services that they’re being billed for.”

She then turned to Begor to ask whether he would remove that information if the CFPB found that medical debt was so full of errors that it no longer belongs on reports. He said, “We’d certainly support that.”

TransUnion CEO Chris Cartwright said he would comply if directed to remove it by the CFPB.

“You’re going to wait until you’re ordered. That’s what you’re saying? You’re not going to do anything unless you’re ordered to do it?” she said, before moving on to Experian CEO Brian Cassin. 

“If the CFPB directs us, of course we would comply with that. If the CFPB concluded that it was so problematic and that the industry also agreed that it wasn’t an issue to remove that data from credit reports, we would do so too, but I think it is a complex issue, senator, and I think it needs to be looked at in the broad,” Cassin said.

Republicans call for financial literacy

Republicans on the committee advocated for other approaches to ease the burdens that credit reports have on Americans, such as financial education. Sen. Tim Scott, R-SC, said that he hoped the credit reporting bureaus were working on financial literacy and Sen. Katie Britt, R-AL, asked the three executives how to “help more Americans no longer be credit invisible.” Scott also accused the CFPB of “exploring new avenues of regulatory overreach,” providing its proposed rule on credit card late fees as an example.

Organizations that include the Debt Collective, Human Rights Watch, and Consumers for Affordable Health Care wrote letters to the U.S. Department of the Treasury, IRS, and Consumer Financial Protection Bureau on March 6 to call for more regulations and more enforcement of existing regulations to mitigate the harms of medical debt on people’s finances. 

The groups advocated for the IRS to ramp up enforcement of a regulation that requires hospitals to make a reasonable effort to find out whether a patient could receive assistance through the hospital before sending their information to a credit reporting bureau and selling their debt to another party. They also called for the CFPB to “prohibit reporting of all medical debt or all debt for medically necessary procedures.”

An April 2022 CFPB report that looks at consumer complaints found that people were being contacted for bills that were already paid and for debts they didn’t recognize. People also said that they didn’t have enough information to verify the debts attributed to them.

“The most common issue in debt collection is about attempts to collect a debt that the individual says is not owed. In medical debt collection complaints, this issue makes up nearly half of complaints and, importantly, complaint volume about this topic has been increasing,” the CFPB report stated.

In February, the agency said a decline in medical collections between 2018 and 2022 may be connected to the fact that the data has more inaccuracies or is more prone to being outdated, which can lead to more credit disputes.

Several federal agencies have taken steps to address problems affecting consumers and their credit reports. In February, the CFPB and the Federal Trade Commission, began to seek information from consumer reporting agencies, tenants, landlords, and others on how background screening affects tenants.

Last year, the Biden administration announced several actions specifically targeted to relieve and lessen the financial burden of medical debt, which included the the CFPB providing more consumer education on the subject and the Federal Housing Finance Agency evaluating whether Freddie Mac and Fannie Mae’s credit models are “accurate, reliable, and predictive.”