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PsychDoc

BULLETIN: Medical Debt Relief Act passes House

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Creditboards friends, it's been some time since I've posted, but this is huge news, and I didn't see it noted here yet. For certain folks struggling with credit repair due to medical problems, this could make all the difference.

 

WHAT HAPPENED: Last night, September 29, 2010, the US House passed a little known bill, the Medical Debt Relief Act (MDRA). When this proposed legislation was first introduced and debated last year, nobody thought it would EVER get past the powerful financial services lobbyists and, so, was presumed DOA. But yesterday the thing was snuck back and passed practically unnoticed. Clearly this was done before house leadership likely passes from one party to the other in a few weeks. Now the bill is expected to easily pass the Senate.

 

WHAT IT DOES: Once this bill becomes law, any FULLY PAID OR SETTLED medical bills -- even those that had been charged-off and sent to collections before being settled -- will no longer negatively impact credit scores. The negative information will be expunged.

 

WHY THIS IS DIFFERENT: This represents the first time that credit scoring algorithms reward responsible fiscal behavior involving collections accounts. It may be hard to believe for many (although well known to the many wise Creditboards brethren), but up to now, paying off a charged-off or collections account has had practically ZERO positive impact upon a credit score. Rather, the fact that the account ever charged off was what mattered.

 

Incidentally, the full bill is just a couple of pages long and is really heartening to read, acknowledging, among other things:

 

1) Americans do not choose when accidents happen or when illness strikes.

 

2) According to credit evaluators, medical debt collections are more likely to be in dispute, inconsistently reported, and of questionable value in pre- dicting future payment performance because it is atypical and nonpredictive.

 

3) Nevertheless, medical debt that has been completely paid off or settled can significantly damage a consumer’s credit score for years.

 

Here's the text of the full bill: http://frwebgate.access.gpo.gov/cgi-bin/ge...h3421eh.txt.pdf

 

Source (note #3 "passed House"): http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.+3421:

 

This is an incredibly relevant and exciting development for consumers generally and for those engaging credit repair in particular.

 

Warm regards,

 

Randy (PsychDoc)

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Haven't seen any of your posts in a while...

 

Welcome back...This is great news...They should be deleted completely and not just their effect on scores...

 

:D

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Haven't seen any of your posts in a while...

 

Welcome back...This is great news...They should be deleted completely and not just their effect on scores...

 

:D

 

It looks like they will be... :)

Edited by Frank13

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(B) Exclusion for Paid or Settled Medical Debt- Section 605(a) of the Fair Credit Reporting Act (15 U.S.C. 1681c(a)) is amended by adding at the end the following new paragraph:

`(7) Any information related to a fully paid or settled medical debt that had been characterized as delinquent, charged off, or in collection which, from the date of payment or settlement, antedates the report by more than 45 days.'.

 

Meaning ... that we need to be sure not to pay/settle within 45 days of reporting?

 

--

 

Section 605(a) lists exclusions from reporting ...

 

§ 605. Requirements relating to information contained in consumer reports [15 U.S.C. § 1681c]

(a) Information excluded from consumer reports. Except as authorized under subsection (B) of this section, no consumer reporting agency may make any consumer report containing any of the following items of information:

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(:D Exclusion for Paid or Settled Medical Debt- Section 605(a) of the Fair Credit Reporting Act (15 U.S.C. 1681c(a)) is amended by adding at the end the following new paragraph:

`(7) Any information related to a fully paid or settled medical debt that had been characterized as delinquent, charged off, or in collection which, from the date of payment or settlement, antedates the report by more than 45 days.'.

 

Meaning ... that we need to be sure not to pay/settle within 45 days of reporting?

 

--

 

Section 605(a) lists exclusions from reporting ...

 

§ 605. Requirements relating to information contained in consumer reports [15 U.S.C. § 1681c]

(a) Information excluded from consumer reports. Except as authorized under subsection (:) of this section, no consumer reporting agency may make any consumer report containing any of the following items of information:

 

 

As usual, they could have been clearer for us mortals. In this case, "the report" refers to the the credit report. So, paid or settled medical items can only appear on a report if the date of full payment (or settlement) is less than 45 days old. In other words, except in those states whose credit reporting temporal limits are even more consumer friendly, here would be the credit reporting period maximums:

 

-- 7 years, except for:

-- 10 years for bankruptcy related tradelines, and

-- 45 days for paid or settled medical accounts

 

Btw, thanks for the kind word, Frank!

 

Randy

Edited by PsychDoc

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Great news...finally some common sense being injected in credit reporting regulations...

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I'm sorry, it's early and I haven't had my coffee yet. :lol:

 

So, if you pay or settle your medical debts, they then disappear from your reports 45 days later? Or are just no longer factored into your score? This seems too good to be true...I hope I'm not misinterpreting!

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Hi Randy,

Nice to see you back. Thanks for the info and hope you're doing well!

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Keep in mind a Few things.

 

1. It hasn't fully went into effect yet. We don't know what the effective date will be.

 

2. It might only cover accounts that happened AFTER the effective date, therefore not retroactive.

 

I may be wrong on some things, (and i really hope i am) but it's something to think about before we get hopes TOO high for current accounts.

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I get the feeling that this will happen alot sooner than that... just sayin'.

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I get the feeling that this will happen alot sooner than that... just sayin'.

 

I really hope so.

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I get the feeling that this will happen alot sooner than that... just sayin'.

 

I really hope so.

 

There is a bigger picture..

 

A lot of people have unpaid medical bills on their CR. If people know that paying it will get it off their CR and make their score higher, they'll PAY. Higher credit scores mean more credit available to people normally NOT credit-worthy. Banks WILL make more money from this, and economy should benefit overall...

 

Common sense move that should have happened a LONG time ago....

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