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Legislation seeks to remove medical debt from credit reports

When it comes to a serious injury or illness, there is no such thing as a small medical bill. People trying to recover their health often find they have been stricken again; by credit agencies that use those medical bills as a reason to cut credit ratings and portray the debtor as a poor financial risk. An Ohio woman whose $6,200 medical debt tanked her credit rating got Congress' attention and began what has become an odyssey to amend the Fair Credit Reporting Act.

Those bland, dispassionate credit scores can be the most powerful financial weapon on earth. Debt collectors report overdue accounts religiously and all debt is considered equal. Hospitals, doctors, and health care providers have a third party in the bill-paying mix, the insurance companies. Medical bills can also contain numerous errors and are frequently adjusted by the insurer to reflect standard reimbursement rates. Sorting out claims can take months while bills languish unpaid in the meantime. Health care providers seldom report on-time payments but delinquencies sent to collecting agencies always show up. It's hard to see the system as anything less than a mess.

The three big credit reporting companies, Equifax, Experian, and Trans-Union say medical bills are a good indicator of credit-worthiness. They oppose any changes to the current law. The Consumer Data Industry Association, which represents the credit reporting agencies, say they are actually doing people a favor by downgrading their credit scores. Spokesman Norm Magnuson told the Columbus Dispatch, "Isn't it true that a household that is under serious financial distress is not well-served by being extended additional lines of credit that put it further into debt?"

Consumers are almost powerless against the credit agencies, which often post incorrect or out of date information. The Federal Trade Commission about 12 percent of the complaints it receives are about errors. The hidden nature of credit reports - consumers are not notified when their scores drop - and the near-impossibility of getting corrections made frustrates many people. While a handful of lawmakers are passionate about changing the system, don't expect it to happen soon. High-powered and well-financed lobbyists for the credit rating agencies have effectively killed the bills for the last four years. The latest version is being reviewed by Congressional committees, but its future is iffy at best.

Source: Columbus Dispatch, "Incurable financial wounds plague many," Mike Wagner, Oct. 9, 2012

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