It may not be student loan cancellations, but it’s good news for other debt-laden consumers looking for relief from tarnished credit reports.
Some of the largest credit reporting agencies are going to be removing “tens of billions of dollars” in medical debt from consumers’ credit reports, according to a new report from the Wall Street Journal.
The change is expected to take place this summer, with Equifax, Experian and TransUnion all participating. About 70% of all medical debt is expected to be removed from credit reports, even debts in collections, as a result of the change.
The agencies said: “This is an important step to support consumers in the wake of the Covid-19 pandemic. These changes reflect our ongoing commitment to helping facilitate access to fair and affordable credit for all consumers.”
In addition to new, unpaid debts not making their way onto credit reports for a full year after being sent to collections, debts that were previously in collection and have been paid will also be removed from credit reports. Normally, they could stay on reports for up to 7 years, the report says.
The Consumer Financial Protection Bureau has helped catalyze the change, saying in March that it was going to “hold credit-reporting firms accountable for not taking enough action against companies that report erroneous medical debts.”
A TransUnion spokesperson told the WSJ: “As the CFPB is our primary regulator, we have continual engagement with them on a variety of issues.”
Unpaid medical debts of less than $500 will also be removed from credit reports.
The CFPB says that, currently, $88 billion in medical bills is spread across 43 million credit reports.