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ICFE eNEWS #15-08 - March 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 confused by:

  • 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 doesn't)
  • How to improve their credit scores

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.


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 Bureau's website.

The ICFE is introducing a new Certification, accepted for 5 CEs. The Certified Credit Scoring Specialist course covers both commercial and consumer credit scoring. For more information please visit icfe.org

ICFE eNEWS is available FREE upon request by visiting our Web site and filling out the contact form, and 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: StudentDebtHelp.org

Sent by:

Paul S. Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)

About the ICFE:

The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation).  The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely. 
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.

The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org).  CASDRAP disbanded in 2010, shortly after the web site project was completed.  In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.

The ICFE is also an on-line help for consumers who spend too much.  ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.

Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org.  Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G,  a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.

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Copyright ©  1997 - by Paul S. Richard
and the Institute of Consumer Financial Education, All Rights Reserved.
View our
Privacy Policy Our Terms and Conditions

Institute of Consumer Financial Education
PO Box 34070
San Diego, Ca 92163
Paul S. Richard, Executive Director
Phone 619-239-1401

FAX 619-923-3284

Questions for www.financial-education-icfe.org Click to go to Website Contact Us or 
Website Design Donated by Desgn School Programs