ICFE eNEWS #15-08 - Mar 23rd 2015
Consumer Financial Protection Bureau’s Consumer Advisory Board discusses
credit scores and medical debt
UPDATE: Shortly after the meeting described below of the Consumer Advisory Board
on credit scores and medical debt, the three major credit reporting agencies, Trans Union,
Experian and Equifax, announced a mutual policy of not reporting medical debt into their
credit reporting system for six months from the date it is received by the CRAs. The purpose
is to give insurance payments to made to creditors by insurance companies time to be processed.
The Consumer Financial Protection Bureau (CFPB) Consumer Advisory Board
is an appointed group of experts in consumer protection, community
development, consumer finance, fair lending and civil rights convened to
provide the CFPB with guidance for its work. Last month, the Consumer
Advisory Board (CAB) gathered for its quarterly meeting in Washington,
DC, and credit scores and medical debt were on the agenda.
“A credit score can truly unlock people’s financial potential. It’s like
a passport to the financial mainstream,” said CAB member Jose Quinonez
from Mission Asset Fund at the meeting. That is why many believe medical
debt—often incurred unexpectedly—should not be given as much weight as
credit-related debts in consumer credit scores.
According to the CFPB, 50 million consumers now have free access to
credit scores on their monthly credit card statements, one year after
the CFPB launched its Open Credit Score Initiative. Currently, more than
a dozen major credit card issuers provide customers with free access to
their FICO (Fair Isaac Company) credit score—the magic number that
affects whether they qualify for loans, credit cards, insurance,
mortgages and jobs, and at what price.
“When companies make credit scores available regularly for free,
consumers can see their scores change over time and see the impact of a
credit score on their financial lives,” CFPB Director Richard Cordray
said when addressing the advisory board.
The CFPB said it learned from recent focus groups that consumers are
Another area of confusion for consumers is medical debt, also discussed
at the CAB meeting. Consumers often don't know what portion of their
medical bills is covered by insurance and what amount they must pay out
of pocket. Critics of the medical billing process say it is complex and
problematic. The Bureau explained that their research found that medical
debt is different from other types of debt, yet it is given the same
weight in credit scoring models.
- How credit scores and credit reports from various companies differ
- How to access a truly free credit report
- If checking their reports or scores would hurt their credit standing (it
- How to improve their credit scores
The Bureau's research shows that people with medical debt tend to be
more likely to pay it off. Others are even unaware that they owe a debt.
More than half (52%) of consumers with medical debts in collections tend
to owe small amounts, with an average of $579, according to the CFPB. In
addition, billed amounts are often incorrect.
The consumer bureau concluded that consumers with medical debt are being
"over-penalized" in their credit scores. Consumers with reported medical
collections that are later paid by an insurance company are being penalized even more,
leaving consumers with lower
scores than they deserve. Credit scoring company FICO agreed with the
Bureau's findings and has announced it will weigh medical debts in
collections less heavily than other debts when calculating credit scores
using its latest FICO 9 scoring model. (Currently the FICO 8 scoring
model is in wide use, and it could be many years until companies switch
to the latest FICO scoring model for making lending decisions.)
VantageScore, a credit rating product created by the three major credit
bureaus (Equifax, Experian and TransUnion), excludes paid medical debt.
However, it is less used today than FICO scores.
To learn more about the CFPB Consumer Advisory Board, visit
The ICFE is introducing a new Certification, accepted for 10 CEs.
The Certified Credit Scoring Specialist course covers both commercial
and consumer credit scoring. For more information please visit
ICFE eNEWS is available FREE upon request by visiting the ICFE's
and filling out the contact form, selecting "Yes" for "Add to Mailing List."
Please pass this eNEWS on to your peers and interested others and
invite them to subscribe for free. Also, visit the ICFE's new Web site:
Paul S. Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)
ICFE - Institute of Consumer Financial Education -