About 43 million Americans have overdue medical debt on their credit reports, according to a report released by the Consumer Financial Protection Bureau.
Julie Linsey, a part-time knitting instructor from Aurora, Illinois, is one of them. Hospitalized in 2005, she soon found herself in debt.
“It piled up a whole lot of bills and then the recurring, follow-up visits and prescription costs just really hit us hard,” she says.
When her doctor stopped taking her insurance, she ended up paying her bills out of pocket. Linsey says she faced "hundreds of dollars a month in bills."
As the CFPB report highlights, medical debt isn’t the same as other debt. Many small collection agencies, with differing reporting and recordkeeping practices, try to collect the debt. In addition, medical debt is often involuntary. Someone could wake up after getting hit by a bus owing thousands of dollars.
Judith Fox, a consumer law professor at Notre Dame University, says consumers often think their insurance already paid a medical bill or don't realize a balance is due.
“Sometimes [an] insurance company did pay for it, but they pay for it late and it goes to collection,” Fox says.
Lenders sometimes “park” unpaid debts on a report, even if they are beyond the statute of limitations. This means that the next lender to examine the report will see an unpaid bill, even years after the fact. A Fox client who was trying to rent a new place ran into this problem.
“The landlord pulled up the credit report, and there was this old debt on there and they said: ‘Well, you’ve got collections, you’ve got to pay that or we won’t rent to you,’” Fox says. “Legally, they really didn’t have to pay it, but if they wanted to rent the apartment, they did.”
Inaccuracy is a widespread problem, according to Gail Hillebrand, associate director for consumer education and engagement at the CFPB.
“There are lots of smaller collectors, and they have a variety of practices. Some will put it on your credit report when it’s only 30 days late,” Hillebrand says. “It’s very hard to tell if you owe the money, when you owe the money, and how much of it you owe because of the intersection of the medical billing and what’s happening with your insurance company.”
Linsey had the same problem. Even after paying, it took time before the debt collectors updated their information and stopped calling her. “After a while I turned off my phone,” she says, with a sigh.
Until new rules are written, there’s really only one thing consumers can do: Keep a close eye on their credit reports.