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Group suggests changes for medical debt

Medical debt is one of the most frustrating and confusing types of debt. There are notices from hospitals and doctors, from insurance companies and from collection agencies. This debt is piling up after a crisis -- one that may not even be fully resolved. Unlike many other types of debt, medical debt is something that people can't plan for and are not at fault for needing.

As a result, many consumer advocates are arguing that medical debt should not be used to ruin a person's credit score -- making it harder for consumers to get credit for other expenses in the future. Last month, FICO announced that it would reduce the impact that medical debt had on consumer's credit scores.

However, the National Consumer Law Center has now issued a report asking for more action to be taken. They are arguing that the Consumer Financial Protection Bureau regulate medical debt collection agencies' actions. They say many of these collection agencies are aggressively focused on collecting medical debt. In fact, one study showed that collection agencies try to collect medical debt at a higher rate than any other type of debt -- including credit cards.

Furthermore, the report argues that the CFPB should prohibit medical debt from affecting credit scores at all. The report argues that medical debt is not an indication of credit-worthiness and therefore should not be reported to consumer credit reports.

As it stands now, however, medical debt will be reported and can have a significant impact on a person's financial life. With the right help, debt relief options are available that can help consumers free themselves from the burden of medical debt.

Source: International Business Times, "Keep Medical Debt Off Credit Reports, Says Consumer Advocate Group," Catherine Dunn, Sep. 11, 2014

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