The Medical Debt Responsibility Act, federal legislation HR 2086 and S 2149, is entering a critical phase as the calendar of the 112th Congress is running short. This proposed change in the law would require medical collections to be removed completely (not just shown as paid) from a consumer’s credit report within 45 days from the date of payment. This is a common sense bill that everyone should be able to embrace, as consumers typically don’t “choose” to frivolously over-consume medical services. Medical debts are different, often thrust upon someone in combination with at least a disruption in their ability to work, compounding their financial burden.
This bill will also help stimulate the housing market. Everyone in the industry knows that mortgage credit is tight, and that many potential borrowers do not have the credit scores needed to qualify at today’s higher standards due to the lingering impact of paid medical collection accounts. Some consumers are being frozen out of the housing market only due to credit problems associated with medical debts that have been paid, but are still dragging down the consumer’s credit score. With residential inventory at staggering highs and the economy still struggling for life, helping consumers who have been hit with medical collections that show the financial responsibility to pay those accounts is an excellent vehicle to help the market recover with no expense to the taxpayer.
Craig Watts of FICO reported to Ken Harney of the Washington Post during this bill’s run in the 111th Congress that “Just the presence of a collection impacts the score.”
Unfortunately, that bill never made it through the Senate in the last Congress. It passed in the House by an overwhelming vote of 336-82. It was bi-partisan and had strong support of the GOP leadership on the House Financial Services Committee, but weak GOP support in the Senate.
In this Congress, the same path is being followed, only there is still time for a different outcome. A bipartisan letter from 20 members of the House Financial Services Committee has been sent to the House leadership requesting a hearing on HR 2086 to rekindle the strong support the previous bill had in the last Congress. Part of that communication is a letter from a broad array of professional/trade/consumer groups in support of HR 2086 and S 2149. Many of the groups you would expect to be interested in housing legislation, NAMB—The Association of Mortgage Professionals, the Mortgage Bankers Association (MBA), National Association of Independent Housing Professionals (NAIHP), the National Association of Home Builders (NAHB) and Leading Builders of America (my employer, the National Credit Reporting Association [NCRA] is supportive as well) have all signed the letter. Along with all these trade groups, you also have a “Who’s Who” list of every major consumer group in the nation; all supporting this legislation.
Despite this, the Senate is deadlocked on moving the bill forward, missing GOP leadership support. Sen. Jeff Merkley (D-OR) is actively gathering support where he can with a great deal of outreach to both sides of the aisle; however, the current support is only from senior Democrats. Anyone with interest in lending a hand in gathering Senate support for this bill would be welcomed. For some additional background and recent press accounts from the AP and The New York Times, and an editorial regarding this issue in general and the legislation in particular, try these links:
►http://news.yahoo.com/medical-bills-wreck-credit-even-paid-off-183216201.html
►http://www.nytimes.com/2012/05/05/your-money/medical-debts-can-leave-stains-on-credit-scores.html?pagewanted=1
►http://www.buffalonews.com/editorial-page/buffalo-news-editorials/article848471.ece
As mortgage professionals, you know the impact that these collection accounts, even when paid and correctly reported, can have long term on a consumer’s credit profile. Since policymakers are searching for any initiatives to kick start the economy and housing in particular, it is disappointing that the Medical Debt Responsibility Act has not been granted stronger support. It doesn't cost the government one cent, is market based, bipartisan, recognizes the true creditworthiness of consumers, and would help many Americans re-finance their homes or enter the housing market. In many ways it's a “no-brainer” and there are good people with honorable intentions working hard to move this through the legislative process before time runs out … once again. That may be the problem with this bill—it makes too much sense.
Terry W. Clemans is executive director of the National Credit Reporting Association Inc. (NCRA). He may be reached at (630) 539-1525 or e-mail
[email protected].
