New Bill Would Provide Credit Report Relief to Medical Debtors

A bill introduced in the U.S. House of Representatives Friday would give patients behind on medical bills up to 120 days to work with debt collectors before the debt shows up on the consumer’s credit report.

Called the Accuracy in Reporting Medical Debt Act (H.R. 2211), the bipartisan bill was written and submitted by Rep. Gary Miller (R-Calif.) and is co-sponsored by Rep. Carolyn McCarthy (D-N.Y.).

H.R. 2211 would allow patients a 120-day grace period to deal with debt collectors that contact them seeking payment on delinquent medical debt. Specifically, a consumer would need to provide proof to the debt collector that they are contesting the debt, working with a medical provider or insurance company to resolve the account, or have applied for financial assistance.

If the consumer meets these requirements, the collection agency is barred from reporting the debt to the three major credit reporting firms – Equifax, Experian, and TransUnion – for 120 days.

Rep. Miller said in a statement, “Given the negative impact of the premature reporting of medical debt, we introduced this bipartisan legislation to help make certain that only real unpaid debt, not medical billing errors or bills pending with insurance companies or being disputed, are reported to credit bureaus.”

The impact of unpaid medical debt on consumer credit reports has gained national attention in the past few years as healthcare costs balloon. Miller’s bill address a similar concern as a Senate bill, the Medical Debt Responsibility Act of 2013 (S. 160) and its companion House bill (H.R. 1767).

But the Medical Debt Responsibility Act focuses on removing a medical debt from credit reports within 45 days of payment, rather than lingering for up to seven years. If Miller’s bill and the Medical Debt Responsibility Act are both passed, they would be complimentary; one would focus on credit reporting at the end of a medical debt’s life cycle and the other on the beginning.

Miller specifically crafted the Accuracy in Reporting Medical Debt Act to address medical debt collectors. Functionally, the bill amends the Fair Debt Collection Practices Act (FDCPA), the main federal law governing collection agency activity.

Under the FDCPA, consumers are allowed a 30 day validation period after a debt collector makes initial contact regarding a debt. The period allows consumers to respond to the collector and dispute the debt. This would not change under H.R. 2211. Collectors would send out validation notices as before, but if a consumer contacts the agency within 30 days with any of the three criteria laid out in the bill, the debt cannot show up on a credit report for at least 120 days.

However, if a consumer does not respond to the debt collector after 30 days, the debt may be reported. Only patients that respond to debt collectors will benefit from the bill.

Likewise, the bill does not prevent collection agencies from continuing their recovery efforts during the 120 days. They just can’t report the debt.

Miller stressed that the bill is intended to prevent billing errors and slow insurance cases from appearing on credit reports rather than hampering debt collection efforts on legitimate medical debt.

“This common sense proposal will help ensure that my constituents and Americans across the country are not unfairly denied access to credit or forced to fork over thousands of dollars in higher interest rates and fees when they wish to buy or refinance a home or purchase a new family car because of a medical billing error, a slow insurance company or simply because they are seeking financial assistance for the debt,” Miller said on his Web site.

The Accuracy in Reporting Medical Debt Act has been referred to the House Committee on Financial Services, of which Miller is Vice-Chairman and co-sponsor McCarthy is a member.