WASHINGTON — The federal government inappropriately pressured major credit bureaus to remove most medical debt from consumer credit reports, a move that ultimately will curtail — not expand — the availability of loans, a top Republican argued Tuesday.
Speaking during a Senate Banking Committee hearing on medical debt, Sen. Pat Toomey, R-Pa., blamed the Consumer Financial Protection Bureau for a recent decision by the three major credit bureaus — Equifax, Experian and Transunion — to no longer include
“Pricing risk accurately is critical to the safety and soundness of financial institutions, and to consumers’ ability to access affordable credit,” Toomey said during opening remarks. “Lenders who cannot access information that they consider predictive of risk are likely to restrict their lending to the borrowers with the thickest credit files, seek out relevant proxies for the credit information they aren’t able to obtain, or increase the price of loans to all borrowers in order to capture the uncertainty and risk."
Toomey said that while he didn't object to the decision-making of private businesses in a vacuum, he was wary of the CFPB pressuring the credit bureaus into the policy change announced earlier this month. Just two days before the credit bureaus made their announcement, the agency released a research report on
“Now, if a credit reporting agency decides to exclude this information, I don’t think it’s the government’s role to meddle with such a decision,” Toomey said. But “what appears to have occurred here was that a political campaign, which included the CFPB, bullied lenders and credit rating agencies into removing this information.”
After the hearing, a CFPB spokesperson defended the agency's record on medical debt.
"The CFPB ensures that markets for consumer financial products are fair, transparent and competitive, and the bureau has been studying medical debt for nearly a decade," the spokesperson said in a statement. "Our new research highlighted that the prevalence of medical debt on Americans’ credit reports is a major pain point for tens of millions of households."
Agency officials are "closely reviewing the details of the credit reporting agencies’ plans to remove a significant proportion of medical billing data from credit reports and will continue to work to reduce the burden of medical debt for consumers," the statement said.
Democrats have broadly praised the credit bureaus’ decision. Senate Banking Chair Sherrod Brown, D-Ohio, and several other Democrats sent a letter addressed to Director Rohit Chopra on Tuesday morning urging the CFPB to do more, including the creation of an ombudsman position at the agency focused on medical debt.
“Incurring medical debt can result in a host of adverse long-term effects for consumers like garnished wages or property liens. The effects of medical debt can extend beyond financial issues, creating a negative impact on mental and physical health,” wrote Sens. Brown, Elizabeth Warren, D-Mass., Tina Smith D-Minn., Jack Reed, D-R.I., and Raphael Warnock, D-Ga.
The senators said that a medical debt ombudsman could “facilitate consumer complaint resolution and compliance with federal directives, like the recently implemented federal ban on surprise medical bills.”
During the hearing on Tuesday, the panel of lawmakers heard from witnesses who disputed Toomey’s claim that the removal of medical debt would impair lenders’ ability to assess certain risks for consumers. Democratic lawmakers and witnesses both argued that unlike other forms of debt, medical debt often reflects unexpected events rather than consumer decision-making.
“Since medical data is not a good indicator of credit risk, should medical debt even be part of a credit report?” asked Brown towards the end of the hearing, referring to the remaining 30% of medical debt that would remain on some consumers’ credit reports.
Berneta Haynes, a staff attorney at the National Consumer Law Center, responded that "ideally, we should end the practice of turning over any [medical] debt to debt collectors, considering how involuntary and unpredictable debt from medical emergencies tends to be.”
