Medical Debt and Payment Plans- The Medical Debt Relief Act

Posted on April 9, 2019April 10, 2019 by Dawn Kennedy

“The hospital is saying that if we need a lower payment, we have to take out a loan.” I wouldn’t have believed it myself, but that statement came from my client. I actually was at a loss for words. “So, if you do not make the minimum payment the hospital has set you up with on the “plan” they won’t accept any payment at all?” Apparently, that is what the hospital told them. So, what to do if you are faced with this issue? Let’s talk about it.

First of all, the hospital is not required to carry your debt balances. They can decide that they will make payment plans with patients, provided the debt is paid in 12 months, or 6 months, or whatever. To be honest, medial providers of all types, private doctors, hospitals, labs, etc, are often very quick to turn an outstanding medical debt to collections. It is that fear of collections that can cause consumers to make mistakes in handling these debts.

About 18 months ago, on September 15, 2017, the three credit reporting agencies, Equifax, Experian, and Transunion changed the way they report medical collections on the consumer’s credit report. These changes were designed to help consumers who are paying medical bills on a payment plan or are waiting for insurance to pay some or all of the outstanding debt. I wrote about this briefly in an earlier article, it is not unusual for insurance claims to be filed with errors, and payment is delayed.

What to advise my client? Well, if you cannot afford the payment, and it was a very large payment, the bill will probably be sent to collections, but until it is, make your lower payment amounts to the hospital. Do not stop paying because you cannot afford the amount they are asking. And I gave them the same option I am going to share here. These are the things to consider if your hospital is threatening to send you to collections because you cannot afford their plan.

First, DO NOT take out a loan or put the balance of a medical debt on a credit card. It changes the “character of debt” from medical to “personal loan” or “credit card debt.” The reporting agencies will not report a medical collection on the consumer’s report for 180 days, that’s six months, after the account is sent to collections. This gives consumers six months to pay the debt in full. If you change medical debt to anything else, you are adding interest, and any late payment can be reported.

Second, many medical collection accounts can be removed, once they are paid. In certain scoring models used by creditors, paid medical collection accounts do not factor in at all, even if the paid debt is not removed.

Third, there will be more flexibility to lower your payment each month with a collection agency. Collectors want a payment. Period. If it takes longer than six months, see above.

Fourth, do not make the medical debt payment at the expense of any of the family’s “four walls.” Food, utilities, rent or mortgage, and transportation are the priorities with your income. PLEASE do not put your “FICO” in front of the electric bill or pay the debt before you get food in the pantry.

The last little tidbit of news here is that the credit reporting agencies must remove any medical collection account within 45 days after it is paid in full by insurance. As I said earlier, mistakes in claim filing, not by the consumer, but by the provider, can delay payment beyond the six months.

Great News- We Now Get FREE Credit Freezes

Posted on November 6, 2018February 8, 2019 by Dawn Kennedy

It’s November! Tis the season for increased identity theft. The increased risk is due to the sheer number of transactions, hacking attempts, and ecommerce fraud attempts, which is staggering. Even more staggering? According to a report by the Identity Theft Resource Center, while most consumers detect identity theft within three months about 16% of consumers won’t detect identity theft for three years. Wow.

One of the more surprising things I read on this topic is that stolen personal information was widely used to purchase very authentic looking “fake” paychecks and other documents online, which thieves used to open accounts and even rent apartments. Since chip cards are making it harder to commit credit card fraud, auto loan fraud is growing. And the thieves are creating “synthetic identities” where the fraudsters steal some of a consumers real information and combine it with fake information, such as using a new address for statements.

The consistent thread in all identity theft schemes is that a fraudster has a consumer’s personal information. Maybe not everything, but enough to convince someone else that the thief is really the identity of the victim. And the credit bureaus have that personal information. They have it all. The three credit reporting bureaus are goldmines for personal information for ID thieves, and these keepers of your info have been hacked by savvy criminals to get it.

The only option is to freeze your credit report. A “credit freeze” restricts access to your credit reports to themselves and currently open accounts. But not everyone took the steps required to freeze accounts, even if they were not looking to open new credit, because those freezes averaged about $30.00 and were only free AFTER they were a victim of ID theft. And there were additional fees to “thaw” the account for access by new lenders for a specified period of time. But now all of those fees are gone. You do not have to pay a fee anymore. New credit law changes, effective September 21, 2018, mean any consumer can freeze and unfreeze their credit file for free. Here’s what you need to know.

1. You have to contact each bureau individually to have the freeze placed on each.
Here are the contact links and numbers to do so. You will have to verify your identity with personal info to freeze your reports, so have that ready.

• Equifax or 800-349-9960
• Experian or 888-397-3742
• TransUnion or 888-909-8872

2. You can get a free freeze for your children who are under 16. And you can also place a free freeze for anyone that you have a valid power of attorney for, when you are a fiduciary, guardian or a conservator.

3. You can still access your own credit reporting records and can order your free annual credit reports from www.annualcreditreport.com. Make sure you only use Annual Credit report, that’s the free one authorized by federal law.

4. Any current creditors or debt collectors will continue to have access after the freeze is placed.

For more information, you can read the Frequently Asked Questions (FAQ’s) directly from the Federal Trade Commission. I encourage every consumer to set aside time before the holidays to put freezes on their credit reports, which will help to protect themselves, their children, and people at risk, from identity theft.

Continue reading “Great News- We Now Get FREE Credit Freezes” →

The Unspoken Danger of the UltraFICO- Creditor Judgments

Posted on October 30, 2018February 8, 2019 by Dawn Kennedy

In my last article on the “UltraFICO” I touched on the motivation for Fair Issacs Co. to change their scoring criteria to include consumers banking information, of course, only when the consumer provides this information. I also spoke to some of my particular issues of concern, including cybersecurity and creditors deciding to only use the UltraFICO calculation in future lending decisions because they know the consumer supplies banking information. But I have another concern, and it has nothing to do with FICO score or creditworthiness. I want to know what happens when a creditor receives a judgment against a debtor.

I have never met anyone who takes out credit without any intention of paying it back. But I know many people who lost a job, had an accident, had a medical issue, or other personal crisis that forced them to choose between their mortgage and Visa. And that is never a fun decision. But when it happens, sometimes Visa will sue. And Visa can get a court to order a judgment against the debtor. And that judgment has specific procedural rules but can be enforced through garnishment.

Each state has its own rules regarding creditor judgments. Which assets can be garnished, what percentage of a paycheck, whether a bank account can be raided, etc. But read that last statement again. Whether a bank account can be raided. It recently happened in Georgia. A law firm working for a creditor paid a private investigator to find the bank accounts of Connie James, and not only did the PI find the bank accounts, but the balances down to the penny. And they judgement was quickly settled, via a garnishment order, filed by the law firm against one of her bank accounts. Yup, with a court order, the law firm went in and just took the amount of the judgement. The firm recovered $2,624.00 in one fell swoop. And Mrs. James didn’t even know how the raid on her account occurred until she filed a complaint with the Georgia State Bar, which subsequently found that the law firm did not violate ethics rules. So be it.

The Federal Law which is supposed to keep your banking information private, the 1999 Gramm-Leach-Bliley Act, forbids anyone from attaining your bank accounts by “pre-texting” meaning, “under false pretenses.” Where there is a court order to find assets? Hmmm. It appears to be a gray area because the law office that garnished Mrs. James said it was, “common practice” to hire a PI to get the info.

Wow, scary story, but how is this relevant to credit bureau scores, right? Well, why would a creditor or creditor’s attorney with a judgment hire a private investigator if Experian already has your banking info? A court ordered judgment and subpoena straight to Experian cuts out the middle man. Based on judgment enforcement today, each state would need to pass legislation limiting access to account information- but how can you restrict that information AFTER the consumer gives consent to use the information to apply for credit? As I mentioned in my last post- Experian will likely keep the consumer banking information used to calculate scores. And, remember, the summary of bank accounts was already sent to the lender for consideration in the UltraFICO calculation.

Imagine emerging from personal circumstances that caused a financial hardship, only to learn (as you go to pay your bills), that Visa enforced their judgment against you- by emptying your account. They waited on the judgment until you started a new job, received a tax return, or an inheritance, or whatever, then boom. This is the unspoken danger of giving Experian banking information for the calculation of the UltraFICO, one that has, as of yet, been mitigated by legislation to protect consumers

Credit: nlipw.com

Your New “UltraFICO” Score! A Good Thing?

Posted on October 23, 2018February 8, 2019 by Dawn Kennedy

The Fair Issacs Corporation, the creators of the mysteriously calculated FICO Credit Score, are changing the scoring method using new criteria, again. In early 2019, a new scoring method will allow consumers to contribute their banking information to a third party, Finicity, which, “allows Americans to benefit from positive financial behaviors.” The idea is that if you are newer to credit, or have a lower score, the credit bureau can have a look at your checking, savings, and money market accounts to check your credit worthiness. One argument in support of this new approach is that consumers do not currently have any input into their credit scores, because the FICO is calculated only on debt account data submitted by creditors and lenders.

Fair enough. What could possibly go wrong?

From my lowly perch, a lot. First of all, while the consumer will have a choice of accounts to include, they will not have any control over how it is collected, and whether the information is kept by the credit bureau. The process, as published in the Wall Street Journal, is as follows,“Experian will compile consumers’ banking information with help from financial-technology firm Finicity and will distribute the new score to lenders.” Yeah, read that again, Experian will send a summary of consumer bank accounts to lenders. FICO won’t keep any of that information after the score is calculated, but the credit bureau will have your banking Information.

Anyone hear about the hack on Equifax? Anyone? Of course, you have. Well, have you heard about the Experian hack? 15 Million T-Mobile customers personal data was hacked via Experian, including social security and passport numbers. Lovely. Since I don’t use T-Mobile, I am already standing in line to provide my banking info. Eyeroll. It’s already happened once, and they will not be less of a target if they are the bureau with your bank accounts.

Cybersecurity aside, who here believes that when the UltraFICO is available, creditors will accept the FICO? Lenders know the consumer can opt in banking information, so why not rely on the UltraFICO for lending decisions? This is the plot from the classic children’s book by Laura Joffe Numeroff, If You Give a Mouse a Cookie. The lesson? If you give a mouse a cookie, he will want a glass of milk, then a straw, then a napkin, and on and on.

So, why the change? Benevolent Credit Bureaus? Hardly. Since the housing melt down, the pool of traditionally “highly qualified” borrowers shrunk. The change is due to lenders requesting, “credit-reporting firms and FICO to figure out a way to help them boost lending without taking on significantly more risk.” Oh.

As a consumer law advocate, I see danger ahead. Who would be “at fault” if banking information is compromised? Any hack could mean consumer’s accounts are cleaned out until the necessary fraud investigations are completed, and the money is returned by the bank. Missed or late mortgage, car payments, or utility bills can have consequences and mean financial insecurity for the most basic needs of a family. Will your mortgage company waive the late fee if it isn’t your fault? Will the electric company leave the lights on? If not, late fees on every bill owed by the American family could add up to hundreds of dollars. And over 75% of families already live paycheck to paycheck. In my humble opinion, a “free” 12-month credit monitoring product is not going to repair that mess. Or, maybe I am just a cynic and Fair Isaacs is looking out for consumers.

photo:credit.org