An Overview of Medical Debt Collection, Credit Reporting, and Related Policy Issues
link to page 1 
July 20, 2022
An Overview of Medical Debt Collection, Credit Reporting, and
Related Policy Issues
Medical debt collection practices raise many specific policy
CFPB became the first federal agency authorized to write
issues. Unlike most consumer debts, the need for medical
regulations to implement the FDCPA. In late 2020 and
care for an acute illness can often be unexpected and not
early 2021, the CFPB finalized two new regulations that
discretionary. For this reason, it can be difficult to shop and
clarify how debt collectors may communicate with
compare costs for medical care, and incurring debt to pay
consumers and the information debt collectors must
for it may not be indicative of a person’s future financial
disclose to consumers.
behavior. Health insurance programs and medical billing,
including co-pays and deductibles, can be complex and
Figure 1. Debt Collection Industry Revenue by Type
difficult for people to understand. According to a 2014
Consumer Financial Protection Bureau (CFPB) study,
consumers are unlikely to know how much various medical
services cost in advance, particularly those associated with
accidents and emergencies. Moreover, resolving billing
disputes with health insurance companies can take time.
Medical debt is a common debt in the United States. In
2017, a Census Bureau survey found that 19% of people
reported having medical bills they could not pay in full
during the year. A 2015 CFPB survey found that more than
half of consumers contacted by debt collectors about debt
Source: IBISWorld’s 2022 Industry Revenue Estimate.
reported that it was related to a medical debt. Uninsured
adults are more likely to have medical debt than adults with
Medical Debt and Credit Reporting
health insurance are. (Some research suggests that states
Credit reporting agencies (also called credit bureaus)
that expanded Medicaid may have fewer people with
collect and subsequently provide information to firms about
medical debts.) Nevertheless, adults with health insurance
consumer credit and payment behavior. Firms use this
still have medical debts. According to the CFPB, consumers
credit report information to screen for consumer risks. For
owed $88 billion in medical debt on consumer credit
example, lenders rely on credit reports and scores to
records as of June 2021. CFPB research suggests that Black
determine the likelihood that prospective borrowers will
and Hispanic people and those under age 65 may have
repay their loans. Debts in collection, including medical
higher rates of medical debts than other groups.
debts, can be reported to credit bureaus and appear on
consumers’ credit reports. However, debt collectors report
Debt Collection Market Background
to credit bureaus voluntarily, so not all medical debts are
When a consumer defaults on a medical debt, medical
reported. Entities that provide information to credit bureaus
providers often hire third parties to collect those debts. Debt
must comply with the Fair Credit Reporting Act (FCRA; 15
collectors help medical providers recoup their losses when
U.S.C. §1681), the main statute regulating credit reporting,
patients default. Consumers have no say over the debt
which imposes certain responsibilities on those who collect,
collectors that providers choose. For this reason, consumer
furnish, and use the information in consumers’ credit
protection laws and regulations may be particularly
reports, as well as consumer rights in relation to their
consequential. IBISWorld estimates that almost a third of
reports.
debt collection industry revenue will be from health care
debt in 2022 (see Figure 1).
Medical debts are the most commonly reported type of debt
collection on credit reports. According to the CFPB, in
The Fair Debt Collection Practices Act (FDCPA; 15 U.S.C.
2021, medical debts constituted 58% of debts reported in
§§1692-1692p) is the primary federal statute regulating the
collection. Medical debts reported to the credit bureaus tend
consumer debt collection market. It generally applies only
to be for relatively small amounts and may be more likely
to third-party debt collectors, not medical providers. The
to be reported than other types of debts. According to the
FDCPA prohibits debt collectors from engaging in certain
CFPB, most medical debts reported are under $500.
types of conduct (such as misrepresentation or harassment)
Reported medical debts can affect consumers’ credit reports
when seeking to collect debts from consumers and grants
and scores, reducing their future access to credit. Medical
consumers the right to dispute or stop some
debts on credit reports can also potentially impact decisions
communications about alleged debt. It also requires that a
related to insurance, rental housing, and job opportunities,
debt collector must send to a consumer a validation notice
among other things.
disclosing certain information about the debt. In 2010, the
https://crsreports.congress.gov
An Overview of Medical Debt Collection, Credit Reporting, and Related Policy Issues
Inconsistencies associated with medical billing can lead to
Medical Debt Policy Issues
inconsistencies in credit reporting. Medical debts are often
Should medical debts be on credit reports? Some believe
transferred to debt collectors after different periods of time,
it is unfair for medical debts to appear on credit reports
depending on the medical provider. In addition, debt
because these debts are often incurred for medically
collectors can decide whether to or when to report debts to
necessary reasons and are less likely to indicate whether
credit reporting agencies. Therefore, medical debts can
someone is financially responsible. Moreover, health
appear on people’s credit reports inconsistently. The
insurance disputes can take time to resolve. For these
inconsistency can harm consumers—for example, if a
reasons, some argue that the credit bureaus should be
health insurance dispute causes the consumer to be unaware
prohibited from including debts related to medically
of a medical debt in collection, or if the threat of reporting
necessary procedures in credit reports and from including
medical debts to the credit bureaus coerces some people to
medical debts that are less than a year old or paid. While
pay medical bills before resolving these disputes. Perhaps
the three nationwide credit bureaus may limit medical debt
for these reasons, CFPB research has found that medical
reporting voluntarily, some argue that these changes should
debts may be a less reliable predictor of future credit
be required by law and should apply to all credit bureaus.
performance than other debts are. While some newer credit
Others argue that older unpaid medical debts may
scoring models take this into account, older or in-house
demonstrate consumers’ credit risk and therefore should be
models are still used by industry and could impact
included in credit reports.
consumers with medical debt.
Are medical debt collections appropriately accurate?
Recent Policy and Market Developments According to the CFPB, approximately 15% of debt
In 2022, there have been significant policy and market
collection complaints received by the agency in 2021 were
developments relating to medical debt. In March 2022, the
related to medical debts. For about half of these complaints,
three nationwide credit bureaus—Experian, Equifax, and
the individuals say they do not owe the debts, because they
TransUnion—jointly announced that:
either were already paid, do not belong to them, or are
otherwise incorrect. Given the complexity of medical
Paid medical debts will no longer be included on credit
billing and health insurance programs, as well as CFPB
reports for consumers.
reports of broader validation issues in the debt collection
market, these complaints may indicate potential accuracy
Medical debts that are less than a year old will no longer concerns when collecting medical debt from consumers.
be included on credit reports for consumers in order to
These accuracy concerns can harm consumers if they need
give consumers time to work with insurance companies
to spend time disputing medical debts in collection or if
and medical providers to settle the debt.
their credit reports include inaccurate information.
Beginning in the first half of 2023, medical debts under
Veterans and servicemembers policy issues. Medical
$500 will no longer be included on credit reports for
debts could have unique harms for servicemembers, such as
consumers.
impacting security clearances and military readiness. P.L.
115-174, Section 302, provides veterans with credit
The credit bureaus believe that these actions will remove
reporting protections relating to medical debt, including
almost 70% of medical debts from consumer credit reports.
extending the waiting period for medical debts in credit
reports to one year and removing paid or settled medical
In January 2022, the No Surprises Act, part of the
debts. A 2022 CFPB report finds that servicemember
Consolidated Appropriations Act, 2021 (P.L. 116-260),
complaints to the agency continue to be driven by problems
went into effect to address surprise medical bills—for
with medical billing practices in consumer reporting and
example, out-of-network emergency bills. After this law
debt collection.
went into effect, the CFPB released a bulletin stating that if
debt collectors report or try to collect debts barred by the
CRS Resources
No Surprises Act, they may violate the FCRA or FDCPA.
CRS Report R46477, The Debt Collection Market and
Selected Policy Issues
In April 2022, the Biden Administration announced that (1)
the Department of Health and Human Services will do a
CRS Report R44125, Consumer Credit Reporting, Credit
study of more than 2,000 health care providers to evaluate
Bureaus, Credit Scoring, and Related Policy Issues
how billing practices impact the affordability of care and
accumulation of medical debt; (2) the Administration is
CRS Insight IN11590, CFPB Finalizes Two New Debt
directing all federal agencies not to consider medical debt
Collection Regulations
in underwriting their credit programs, such as for mortgages
and small business loans; (3) the Department of Veterans
CRS In Focus IF10031, Introduction to Financial Services:
Affairs will make their medical debt forgiveness process
The Consumer Financial Protection Bureau (CFPB)
easier and stop reporting medical debt to credit bureaus;
and (4) the CFPB will increase its education materials
CRS Report R45813, An Overview of Consumer Finance
around medical debt.
and Policy Issues
Cheryl R. Cooper, Analyst in Financial Economics
IF12169
https://crsreports.congress.gov
An Overview of Medical Debt Collection, Credit Reporting, and Related Policy Issues
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF12169 · VERSION 1 · NEW
July 20, 2022
An Overview of Medical Debt Collection, Credit Reporting, and
Related Policy Issues
Medical debt collection practices raise many specific policy
CFPB became the first federal agency authorized to write
issues. Unlike most consumer debts, the need for medical
regulations to implement the FDCPA. In late 2020 and
care for an acute illness can often be unexpected and not
early 2021, the CFPB finalized two new regulations that
discretionary. For this reason, it can be difficult to shop and
clarify how debt collectors may communicate with
compare costs for medical care, and incurring debt to pay
consumers and the information debt collectors must
for it may not be indicative of a person’s future financial
disclose to consumers.
behavior. Health insurance programs and medical billing,
including co-pays and deductibles, can be complex and
Figure 1. Debt Collection Industry Revenue by Type
difficult for people to understand. According to a 2014
Consumer Financial Protection Bureau (CFPB) study,
consumers are unlikely to know how much various medical
services cost in advance, particularly those associated with
accidents and emergencies. Moreover, resolving billing
disputes with health insurance companies can take time.
Medical debt is a common debt in the United States. In
2017, a Census Bureau survey found that 19% of people
reported having medical bills they could not pay in full
during the year. A 2015 CFPB survey found that more than
half of consumers contacted by debt collectors about debt
Source: IBISWorld’s 2022 Industry Revenue Estimate.
reported that it was related to a medical debt. Uninsured
adults are more likely to have medical debt than adults with
Medical Debt and Credit Reporting
health insurance are. (Some research suggests that states
Credit reporting agencies (also called credit bureaus)
that expanded Medicaid may have fewer people with
collect and subsequently provide information to firms about
medical debts.) Nevertheless, adults with health insurance
consumer credit and payment behavior. Firms use this
still have medical debts. According to the CFPB, consumers
credit report information to screen for consumer risks. For
owed $88 billion in medical debt on consumer credit
example, lenders rely on credit reports and scores to
records as of June 2021. CFPB research suggests that Black
determine the likelihood that prospective borrowers will
and Hispanic people and those under age 65 may have
repay their loans. Debts in collection, including medical
higher rates of medical debts than other groups.
debts, can be reported to credit bureaus and appear on
consumers’ credit reports. However, debt collectors report
Debt Collection Market Background
to credit bureaus voluntarily, so not all medical debts are
When a consumer defaults on a medical debt, medical
reported. Entities that provide information to credit bureaus
providers often hire third parties to collect those debts. Debt
must comply with the Fair Credit Reporting Act (FCRA; 15
collectors help medical providers recoup their losses when
U.S.C. §1681), the main statute regulating credit reporting,
patients default. Consumers have no say over the debt
which imposes certain responsibilities on those who collect,
collectors that providers choose. For this reason, consumer
furnish, and use the information in consumers’ credit
protection laws and regulations may be particularly
reports, as well as consumer rights in relation to their
consequential. IBISWorld estimates that almost a third of
reports.
debt collection industry revenue will be from health care
debt in 2022 (see Figure 1).
Medical debts are the most commonly reported type of debt
collection on credit reports. According to the CFPB, in
The Fair Debt Collection Practices Act (FDCPA; 15 U.S.C.
2021, medical debts constituted 58% of debts reported in
§§1692-1692p) is the primary federal statute regulating the
collection. Medical debts reported to the credit bureaus tend
consumer debt collection market. It generally applies only
to be for relatively small amounts and may be more likely
to third-party debt collectors, not medical providers. The
to be reported than other types of debts. According to the
FDCPA prohibits debt collectors from engaging in certain
CFPB, most medical debts reported are under $500.
types of conduct (such as misrepresentation or harassment)
Reported medical debts can affect consumers’ credit reports
when seeking to collect debts from consumers and grants
and scores, reducing their future access to credit. Medical
consumers the right to dispute or stop some
debts on credit reports can also potentially impact decisions
communications about alleged debt. It also requires that a
related to insurance, rental housing, and job opportunities,
debt collector must send to a consumer a validation notice
among other things.
disclosing certain information about the debt. In 2010, the
https://crsreports.congress.gov
An Overview of Medical Debt Collection, Credit Reporting, and Related Policy Issues
Inconsistencies associated with medical billing can lead to
Medical Debt Policy Issues
inconsistencies in credit reporting. Medical debts are often
Should medical debts be on credit reports? Some believe
transferred to debt collectors after different periods of time,
it is unfair for medical debts to appear on credit reports
depending on the medical provider. In addition, debt
because these debts are often incurred for medically
collectors can decide whether to or when to report debts to
necessary reasons and are less likely to indicate whether
credit reporting agencies. Therefore, medical debts can
someone is financially responsible. Moreover, health
appear on people’s credit reports inconsistently. The
insurance disputes can take time to resolve. For these
inconsistency can harm consumers—for example, if a
reasons, some argue that the credit bureaus should be
health insurance dispute causes the consumer to be unaware
prohibited from including debts related to medically
of a medical debt in collection, or if the threat of reporting
necessary procedures in credit reports and from including
medical debts to the credit bureaus coerces some people to
medical debts that are less than a year old or paid. While
pay medical bills before resolving these disputes. Perhaps
the three nationwide credit bureaus may limit medical debt
for these reasons, CFPB research has found that medical
reporting voluntarily, some argue that these changes should
debts may be a less reliable predictor of future credit
be required by law and should apply to all credit bureaus.
performance than other debts are. While some newer credit
Others argue that older unpaid medical debts may
scoring models take this into account, older or in-house
demonstrate consumers’ credit risk and therefore should be
models are still used by industry and could impact
included in credit reports.
consumers with medical debt.
Are medical debt collections appropriately accurate?
Recent Policy and Market Developments According to the CFPB, approximately 15% of debt
In 2022, there have been significant policy and market
collection complaints received by the agency in 2021 were
developments relating to medical debt. In March 2022, the
related to medical debts. For about half of these complaints,
three nationwide credit bureaus—Experian, Equifax, and
the individuals say they do not owe the debts, because they
TransUnion—jointly announced that:
either were already paid, do not belong to them, or are
otherwise incorrect. Given the complexity of medical
Paid medical debts will no longer be included on credit
billing and health insurance programs, as well as CFPB
reports for consumers.
reports of broader validation issues in the debt collection
market, these complaints may indicate potential accuracy
Medical debts that are less than a year old will no longer concerns when collecting medical debt from consumers.
be included on credit reports for consumers in order to
These accuracy concerns can harm consumers if they need
give consumers time to work with insurance companies
to spend time disputing medical debts in collection or if
and medical providers to settle the debt.
their credit reports include inaccurate information.
Beginning in the first half of 2023, medical debts under
Veterans and servicemembers policy issues. Medical
$500 will no longer be included on credit reports for
debts could have unique harms for servicemembers, such as
consumers.
impacting security clearances and military readiness. P.L.
115-174, Section 302, provides veterans with credit
The credit bureaus believe that these actions will remove
reporting protections relating to medical debt, including
almost 70% of medical debts from consumer credit reports.
extending the waiting period for medical debts in credit
reports to one year and removing paid or settled medical
In January 2022, the No Surprises Act, part of the
debts. A 2022 CFPB report finds that servicemember
Consolidated Appropriations Act, 2021 (P.L. 116-260),
complaints to the agency continue to be driven by problems
went into effect to address surprise medical bills—for
with medical billing practices in consumer reporting and
example, out-of-network emergency bills. After this law
debt collection.
went into effect, the CFPB released a bulletin stating that if
debt collectors report or try to collect debts barred by the
CRS Resources
No Surprises Act, they may violate the FCRA or FDCPA.
CRS Report R46477, The Debt Collection Market and
Selected Policy Issues
In April 2022, the Biden Administration announced that (1)
the Department of Health and Human Services will do a
CRS Report R44125, Consumer Credit Reporting, Credit
study of more than 2,000 health care providers to evaluate
Bureaus, Credit Scoring, and Related Policy Issues
how billing practices impact the affordability of care and
accumulation of medical debt; (2) the Administration is
CRS Insight IN11590, CFPB Finalizes Two New Debt
directing all federal agencies not to consider medical debt
Collection Regulations
in underwriting their credit programs, such as for mortgages
and small business loans; (3) the Department of Veterans
CRS In Focus IF10031, Introduction to Financial Services:
Affairs will make their medical debt forgiveness process
The Consumer Financial Protection Bureau (CFPB)
easier and stop reporting medical debt to credit bureaus;
and (4) the CFPB will increase its education materials
CRS Report R45813, An Overview of Consumer Finance
around medical debt.
and Policy Issues
Cheryl R. Cooper, Analyst in Financial Economics
IF12169
https://crsreports.congress.gov
An Overview of Medical Debt Collection, Credit Reporting, and Related Policy Issues
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF12169 · VERSION 1 · NEW