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CFPB Releases Study on Credit Reporting and Medical Debts

Peter L. Cockrell
Greenberg Traurig, LLP - McLean Office

Brett M. Kitt
Greenberg Traurig, LLP - Washington Office

Gil Rudolph
Greenberg Traurig, LLP - McLean Office

J. Scott Sheehan
Greenberg Traurig, LLP - Houston Office

June 10, 2014

Previously published on June 4, 2014

On May 20th, the CFPB released a study on medical debt finding that “consumers’ credit scores may be overly penalized for medical debt that goes into collections and shows up on their credit report.”1 The data set for the study consisted of five million credit records from September 2011 to September 2013. The study analyzed the models used to score these records and found that the models may underestimate consumers’ creditworthiness when consumers’ medical debts go into collections. In addition, according to the study, these credit scoring models may not properly recognize consumers for repaying such medical debts.

Specifically, the study found that “consumers with medical debt generally paid back their loans or bills on par with consumers with scores about ten points higher.” In addition, the study found that “consumers who subsequently paid medical debt that had gone into collections were more likely to pay back their debts, on par with consumers with scores 16 to 22 points higher.” Based on the findings of the study, the CFPB observed that credit scoring models could be more accurate if they accounted differently for medical and non-medical debt in collections.

This study is the latest in a series of steps that the CFPB has taken over the past few years to begin to understand and prepare to regulate the consumer reporting industry. The CFPB conducted two prior studies of the consumer credit reporting industry in 2012: an analysis of the differences between consumer- and creditor-purchased credit scores and a review of how the nation’s largest credit reporting bureaus manage consumer data.2 Also in 2012, the CFPB began accepting consumer complaints about credit reporting and it issued a rule that provides for its supervision of certain larger participants in the consumer reporting market.

1 See the study at http://www.consumerfinance.gov/f/201405&under;cfpb&under;report&under;data-point&under;medical-debt-credit-scores.pdf.

2 See the reports at http://files.consumerfinance.gov/f/201209&under;Analysis&under;Differences&under;Consumer&under;Credit.pdf and http://files.consumerfinance.gov/f/201212&under;cfpb&under;credit-reporting-white-paper.pdf. 


The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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