New CFPB Report and Blog Post Look at Third-Party Debt Collections Tradeline Reporting and Medical Debt Furnishing

The CFPB issued a new report, “Market Snapshot: An Update on Third-Party Debt Collections Tradelines Reporting,” that looks at trends in credit reporting of debt in collections from 2018 to 2022.  It also published a new blog post, “Debt collectors re-evaluate medical debt furnishing in light of data integrity issues,” that looks at factors that create challenges for medical collections reporting.

Report   

The report’s key findings include:

• The total number of collections tradelines on credit reports declined by 33% in 2022, from 261 million tradelines in 2018 to 175 million tradelines.  The share of consumers with a collection tradeline on their credit report decreased by 20% in the same timeframe.  The decline in collections tradelines was driven by fewer reports by contingency-fee-based (non-buyer) debt collectors.  Contingency-fee-based debt collectors reported 38% fewer collections tradelines from Q1 2018 to Q1 2022, while the number of collections reported by the debt buyers increased by 9% over the same period.  The number of unique contingency-fee-based debt collectors also declined by 18% (from 815 to 672).  Medical bills account for 68.9% of furnished collections by contingency-fee-based debt collectors.

• While the diverging trend between contingency-fee-based collectors and debt buyers could indicate an increasing market share for debt buyers in the overall debt collection market, it could also indicate diverging furnishing practices by debt buyers and non-buyer debt collectors, with non-buyer debt collectors becoming less likely to furnish information to consumer reporting agencies while debt buyers maintained or increased their furnishing rates.
  
  
• In conversations with the CFPB, debt buyers and non-buyer debt collectors indicated that some collectors have stopped furnishing due to concerns about data integrity and their ability to comply with the Fair Credit Reporting Act, particularly handling disputes.  
  
  
• Despite the decline in collections reporting, medical collections tradelines continue to constitute a majority (57%) of all collections on consumer credit reports.  Upcoming changes to medical collections reporting announced by the nationwide consumer reporting agencies will remove small dollar (less than $500) and paid medical collection tradelines from consumer credit reports.  While these changes will reduce the total number of medical collections tradelines, an estimated half of all consumers with medical collections tradelines will still have them on their credit reports, with larger collection amounts (representing a majority of the outstanding dollar amount of medical collections) remaining on credit reports.

Blog post  

The blog post discusses the following key issues relating to medical debt reporting:

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• Debt collectors typically lack timely access to healthcare providers’ billing and payment information.  As a result, debt collectors may be unable to verify whether the medical bills they are collecting on are consistent with healthcare providers’ records or whether the underlying bill is accurate.  A complicating factor is that unpaid balances on medical bills often change as a result of insurance adjustments or financial assistance.
  
  
• These structural barriers to accurate billing, collections, and reporting of medical bills contribute to the higher rates at which medical bills are disputed and make it harder and more expensive for debt collectors to accurately furnish medical tradelines, thereby exposing them to greater litigation and compliance risks.  Concerns about potential Fair Debt Collection Practices Act and Fair Credit Reporting Act liability resulting from a lack of data integrity in medical billing “may well have played a role in the significant reduction in the furnishing of medical bills to consumer reporting agencies in recent years.”

In 2022, the CFPB issued three reports on medical debt.  In the new blog post, the CFPB states that it is continuing to closely examine medical billings and collections practice. It also notes that “the Federal Housing Finance Authority, other federal agencies , and the White House, as well as the largest nationwide credit reporting companies and VantageScore all took recent actions to reduce the role of medical debt in determining credit access” but states that “[t]hese changes are important steps, but they won’t solve the structural data integrity issues affecting remaining medical debt tradelines.”  Previous CFPB comments strongly suggested that the agency was headed in the direction of taking steps to block or limit the reporting of medical debt.  While that suggestion is not made again in the new blog post, it seems clear that the CFPB is not satisfied that enough has been done to address “the consumer harms presented by furnishing medical debt information and considering medical debt when determining someone’s credit risk.”