The three national Credit Reporting Agencies (CRA’s, aka credit bureaus, Equifax, Experian, Trans Union) announced they will not report medical debts for 180 days on a consumer’s credit report. They have initiated this new policy to allow insurances to be applied to balances. The CRA’s also said they will delete collection accounts for medical debts that have been paid by insurance. These changes come after significant scrutiny of the CRA’s by the Consumer Financial Protection Bureau (CFPB).
At Southern, we have had the policy to not report any account for 90 days after placement to allow a consumer to pay their bill, which is usually going to be much longer than 180 days from the date of service. It has also been our policy for many years to not report or delete accounts that are paid by insurances. It has been our view if the insurance company finally gets around to paying the bill that means it was not the consumer’s liability to begin with, and they shouldn’t have a collection trade line because of it. In both cases, it appears we have been ahead of the curve for many years!
However, being a data furnisher and reporting to the CRA’s is no small task, but it can be a beneficial way to encourage people to pay their bills. What does it take to be a data furnisher and report information onto a consumer’s credit report? More than most people realize, if you want to do it correctly! The Fair Credit Reporting Act (FCRA) is the federal law that governs most aspects of credit reporting for CRA’s, creditors, and data furnishers (DF, any entity that sends data to a CRA, like Southern). The Federal Trade Commission (FTC) was the enforcement department for the FCRA until 2010 when the Consumer Financial Protection Bureau (CFPB – tired of acronyms yet?) was created by the Dodd-Frank Act and took oversight, authority, enforcement and rule-making for the FCRA and all financial institutions related to the credit cycle in some form.
Since their inception, the CFPB has been very clear on their attitude and intent with consumer credit reporting; they want changes! And it’s hard to blame them, when study after study demonstrated over the years the CRA’s inability (complacency?) toward accurate credit data for a significant majority of consumers. The error rates of some studies exceeded 50%! Who hasn’t had something on their credit report that was incorrect, or know someone who has had to struggle getting their credit report corrected? With their zeal to assist consumers, the CFPB has put pressure on CRA’s to “get it right” or delete it. As such, the CRA’s continue to modify their policy on what and how they report items they receive.
As a DF, we send monthly update file to all three CRA’s with thousands of records. Each month, we get hundreds of “disputes” over a system created by the CRA’s we are required to use and pay for if we want to continue to report data. If we do not respond to a “dispute” within 30 days, the account will be removed. We are required to perform a “reasonable investigation” into the validity of the dispute, or it will be removed. That is the reason for many of the requests we send our clients for more documentation.