| June 21, 2011

Medical Debts Disappear

Credit Report Relief From New Act Will Remove Paid Medical Debt

The United States House of Representatives introduced new legislation titled The Medical Debt Responsibility Act of 2011 which if passed, would require credit reporting agencies such as Equifax, Experian, and TransUnion to remove paid or settled medical debt from Americans credit reports within 45 days. Exclusions apply to this bill whereas only medical debt up to $2,500 per collection will be allowed to be removed. For people who have many old smaller medical debts on their report, this means an almost immediate improvement to credit scores, unless the credit report is still filled with other negative information and/or excessive credit card debt.

This bill was introduced by Representatives Don Manzullo (R-IL), Ralph Hall (R-TX) and Heath Shuler (D-NC) who intends to generate a bi-partisan effort to get the bill passed.

The potential effect that this bill could have on the credit industry and the overall economy are vast — more Americans will have higher credit ratings and therefore have access to credit that they can use to purchase homes and major consumer goods possibly enabling the economy to grow. With the current laws in tact regarding medical debt and credit reports, consumers who have paid-off or settled medical debts will still see the negative charge-off remain on their credit reports for up to seven years. With H.R. 2086, Americans will not have to suffer financially with a bad credit score because of an illness or medical accident if this bill is passed.

Unlike other types of debt, medical debt is quickly sent to collection agencies and is much more prone to error. More than 44 million Americans have medical debt and nearly a third of those individuals, 14 million, have medical debt items on their credit reports as a result of mistakes in billing.

With confusing language in credit reports in addition to creditors being unclear in notice letters and telephone calls, millions of consumers have been unable to identify mistakes and errors on their credit reports and therein find themselves stuck with a low credit rating and having to pay high interest rates on credit and loans.

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