Cordray: Medical debt unfairly impacting consumer credit scores

A new federal study released this week asserts that consumers are unfairly penalized on credit scores because of medical debt (Source: “Medical debt affects consumers’ credit scores too much, Cordray say,” Columbus Dispatch, May 21, 2014).

The report, issued Tuesday by the Consumer Financial Protection Bureau (CFPB), concluded that credit-scoring models systematically underestimate the creditworthiness of consumers who owe medical debt in collections.

A review of 5 million credit reports found that scores appear to be overly penalized for medical debts versus other debts placed with bill collectors. Lower credit scores can make it difficult for consumers to get loans or force them to pay higher interest rates, said Richard Cordray, director of the agency and former Ohio attorney general.

All debts are treated the same by credit-scoring agencies, when there should be an adjustment for the complicated and confusing billing process accompanying health care, Cordray said. It is not unusual for medical bills to be turned over to collectors when consumers were not directly asked for payment and were not aware they owed money, he said.