The Trojan horse-like nature of the Reporting Medical Debt Payments as Positive Consumer Credit Information Act of 2024 poses potential dangers and setbacks for consumers. The bill, aiming to enable positive medical debt reporting, may seem beneficial at first glance but is unlikely to offer true advantages to consumers, and could even have adverse effects on them.

One major issue with the bill is its limited ability to assist consumers. Typically, medical debts are reported as collection items by debt collectors, which automatically gives them a negative connotation. Even if medical bills were reported as regular credit accounts instead of collection items, the act of reporting medical debt payments would not significantly enhance credit scores due to the way scores are calculated.

If medical bills were reported as regular credit accounts, they would be perceived as newly established accounts with short histories. These two characteristics are crucial factors in credit scoring models, and similar accounts, like Buy Now, Pay Later credit, could potentially harm credit scores rather than help improve them.

The bill may be seen as an attempt to counter the Consumer Financial Protection Bureau’s proposed rule against the inclusion of medical debts in credit reports, a rule that provides better protection for consumers. Unlike the proposed rule, this bill fails to prevent the reporting of negative information related to medical debts, making it likely that debt collectors reporting on-time payments will also report missed payments.

This bill is unnecessary as there is no existing statutory limitation against reporting positive medical debt payments to credit reporting agencies, contrary to the claims of the bill’s sponsors. Prior to a voluntary modification by the major credit bureaus in 2022, paid medical debts were already reflected as such on consumers’ credit reports.

Furthermore, this bill could potentially override recent state laws that prevent medical debts from appearing on credit reports in nine states, including California, Connecticut, and New York. By promoting the reporting of “alternative data,” this bill ultimately serves the interests of powerful entities like the credit reporting industry and landlords rather than benefiting consumers. Rather than providing more data to credit bureaus, it is essential to explore innovative methods of assessing creditworthiness that introduce competition among credit reporting entities and empower consumers to have more control over their data.

In conclusion, Congress should not be misled by the deceptive nature of this bill, which could undermine state laws and the CFPB’s efforts to eliminate medical debt from credit reports, potentially causing harm to consumers.