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Medical Debt Relief Act protects credit scores after payment

A bill on medical debt  has been introduced by Congresswoman Mary Jo Kilroy. This bill is going to be known as the Medical Debt Relief Act, 2010. However, this bill handles the issue of reporting of medical debts, mainly those that has been in collections, and has later been paid off.

The main problem with medical bills in collections is that, these generally stay on your credit report even after getting paid. So, this act speaks of removing the paid medical bills which were once in collections from the debtor’s credit report. According to those who have introduced the bill, medical debts are unique as medical conditions can arise all of a sudden unlike consumer debts. So, these kinds of debts should be handled in a different way.

According to recent findings by the Congress in 2007, at least 28,000,000 American adults were contacted by a collection agency for unpaid medical bills. This also shows that hospitals and clinics are turning more towards collection agencies to retrieve payments from the patients.

As more medical debts are getting handed over to collection agencies, they are also getting listed on the consumer credit reports. This can have bad effect on a person’s credit. As a result, the consumer may not qualify for new credit, or even if they qualify, the credit card companies or lenders may charge high interests on the cards and loans.

Sometimes, such situations arise where the medical insurance of the consumer fails to cover all his medical expenses. In this situation the debt if unpaid can get handed over to a collection agency. Thus, unpaid medical can have bad effect on both insured and uninsured consumers.

According to the Fair Credit Reporting Act (FCRA) the medical bills in collections can still remain on the consumer’s credit report for 7 long years, even if paid. Thus, Rep. Kilroy has introduced this act that looks at amending the FCRA. The bill mentions that the medical bills in collections should be removed from the consumer’s credit report within 30 days of the payment of the collection account. One can hope that this Act will make it easier for consumers to have a better credit report, and a better credit score.


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