PRESENTATION OUTLINE
Many Americans are being trapped by debt
They are confused by the notices they get from hospitals and insurance companies about the cost of treatment.
Surprised to find they are stuck with lower credit score!
Making it harder for them to borrow to buy a home or an automobile!
"When people fall ill and end up at the hospital with unexpected bills, far too often they have entered into a financial maze"
- CFPB director Richard Cordray
On average, a person with only overdue medical debt owes $1,766.
More than half of all debt on credit reports stems from medical expenses.
The report by the federal regulator indicates that much of this trouble could be avoided.
But complaints to the CFPB indicate that consumers are confused!
The confusion tends to generate disputes from consumers about the unpaid debts.
The unpaid claims determine how much money people can borrow and the interest rates for mortgages and auto loans.
An unpaid bill of at least $100 could lower an otherwise sterling credit score of 780 by over 100 points.
- The Fair Isaac Corp
But, according to the new model, Consumers with only medical expenses in collection would see their credit score increase by a median of 25 points once model is fully implemented.
The latest CFPB analysis overlaps with a separate study released in July by the Urban Institute, a Washington, DC-based think tank.
That points to a sizeable share of Americans who are not only struggling to understand medical bills but also have no choice but to take on debts they have little chance of repaying.
The Urban Institute found that 35.1 percent of people with credit records had been reported to collections for debt that averaged $5,178, based on September 2013 records.
