The three national credit bureaus have agreed to improve the way they handle consumers’ requests to correct inaccuracies on their credit reports. The bureaus will also change the way they report on unpaid medical bills.
The agreement is a result of an investigation by the New York Attorney General. Under the agreement, the bureaus will be required to use trained employees to review the documentation consumers submit when they believe there is an error in their files. If a creditor says its information is correct, an employee at the credit-reporting firm must still look into it and resolve the dispute. However, and this is a severe limitation, the new and improved investigations only apply to instances of fraud, ID theft and mixed files. Most errors do not fall into one of these categories. How well these changes will be implemented is an open question.
The way the bureaus handle the vast majority of cases is that they merely parrot whatever the creditors say thus perpetuating errors. The Consumer Financial Protection Bureau found that 85% of disputes were referred to the creditors meaning the bureaus did not conduct meaningful investigations as required by the FCRA.
The bureaus will say they will make changes in the way they report on unpaid medical debt. The changes may be significant given that 43 million Americans have past-due medical debt on their credit reports and 52% of all debt on credit reports is from medical expenses according to a CFPB study. Collection agencies typically report medical debt to the bureaus on behalf of doctors and hospitals. In many cases, the debts are unpaid because an insurance company has failed to pay debts for which they are liable. Under the agreement, the credit-reporting firms will wait 180 days before adding medical debts to consumers’ credit reports. During that period, consumers will have time to clear up discrepancies and catch up with other unpaid bills. When medical debts are paid by an insurance company, regardless of the time frame, they will have to be removed from the credit report soon after. However, it is a pretty rare event for a medical insurance company to pay a debt over 6 months old.