Senate Democrats Pressure Credit Agencies to Ignore Medical Debt of Borrowers

Senate Democrats are urging major credit ratings agencies to disregard debt incurred by borrowers for medical expenses. This comes after a study by the Consumer Financial Protection Bureau revealed that medical debt is the most common type of debt in collections, with nearly half of all debt collection items on credit reports. Having medical debt on their credit reports can negatively affect borrowers’ credit scores and make it more difficult for them to obtain credit in the future.

Pressure on Credit Agencies

During a hearing on April 27, Sen. Sherrod Brown (D-Ohio), the chair of the Senate Committee on Banking, Housing, and Urban Affairs, stated that people shouldn’t have to spend time fixing errors made by companies they’ve never heard of. He called on credit agencies to stop putting medical debt on credit reports altogether. In response to pressure from Senate Democrats, credit agencies have announced some medical debt-related reforms, including the removal of all medical debts of $500 or below on reports. However, Democrats argue that this is not enough and are pushing for a total removal of medical debt from credit reports.

Consequences of Inaccurate Credit Reports

Inaccurate credit reports can have serious consequences for borrowers, including higher interest rates on loans, difficulty getting approved for credit, and even potential job loss. Removing medical debt from credit reports would give borrowers a fairer chance at obtaining credit and improving their financial standing, Brown and fellow Democrats argued.

Calls for Credit Reform

While not advocating specifically for the medical debt proposal, Sen. Tim Scott (R-S.C.) espoused the importance of credit reform. He said uniformity—that criteria be applied to all loans—is key to ensuring that credit reports are accurate and fair for all borrowers.