Thanks to Attorney General Eric Schneiderman of New York state, consumers across America have attained a reprieve.
New York sued the 3 major credit bureaus, Equifax, Experian, and Trans-Union on behalf of consumers because of complaints that there are too often errors on our credit reports, and those errors can be difficult to challenge.
As part of the settlement, the rating bureaus agreed not to include medical bills in formulas calculating our credit ratings for 6 months. This is a big deal because :
Medical debt accounts for more than half of the collection items on credit reports, according to a report by the Consumer Financial Protection Bureau. Among people facing collection for only medical debt, about half have otherwise clean credit reports with no sign of past debt collection problems. [NPR]
A famous study from 2005 was groundbreaking in this realm. The researchers interviewed close to 1,000 people declaring personal bankruptcy at various courts around the U.S., and found that about half of declarations were attributable to medical debt.
Giving consumers leeway to work down their debts before lowering their credit scores seems like a humane and sensible policy. Fewer people with bankruptcies are better for all of us, macroeconomically.
This post by John H. Schumann, MD, FACP, originally appeared at GlassHospital. Dr. Schumann is Interim President of the University of Oklahoma-Tulsa. His blog, GlassHospital, seeks to bring transparency to medical practice and to improve the patient experience.