In addition to the health crisis created by a worldwide pandemic, many U.S. residents also experienced borderline catastrophic financial problems that resulted in a significant decline in credit scores. Debt caused by medical bills increased significantly for many who found themselves leaving hospitals with significant balances that wreaked havoc on their respective credit scores.
Months of industry research led to a significant shift. The Kaiser Family Foundation found that two-thirds of medical debts result from acute medical needs that occur one time or short-term. COVID-19 fits into that category.
All three national credit reporting agencies announced that applicants pursuing motor vehicle financing, yet have unexpected medical debt, may find the path to financing a car or truck easier.
The relief provided by Equifax, Experian, and TransUnion will remove 70 percent of medical collection debt from consumer credit reports. The agencies will also provide much-needed time for consumers to work out payment plans with insurance and healthcare providers.
- Instead of six months, debtors will have twelve months before their debts are reported to credit files and any subsequent collection efforts.
- Medical debt in collections under $500 will no longer appear on credit reports by the first half of 2023.
Collectively, their goal is to emphasize personal and financial well-being and recovery while emerging from the COVID-19 crisis. The move goes into effect on July 1st.
While relief is on the way, collection agencies could double down in their aggressive pursuits of past-due debts or continue their practices following policy changes. Consumers are still entitled to protection, particularly when collectors employ “strategies” that violate established and ever-changing regulations.