The news headlines are very reassuring, almost angelic in providing hope.
"It just got harder for Debt Collectors to Destroy Your Credit." "How Medical Debt in the U.S. Just Got (a little) Less Scary." "Credit Reporting Agencies to Improve Medical Debt Policies."
But, as the principals know here at RIP Medical Debt (and I am one of them), the devil is in the details.
Starting With the Positives
Thanks to muscular promptings by NY State Attorney General, Eric Schneiderman, the three major U.S. credit reporting agencies announced changes in the way in which medical debt will be scored when they deliver an individual's credit report.
Equifax, Experian and Transunion will no longer treat medical debt as just one more black mark against your credit score - right up there in severity with that 72" TV Set or that vacation in the Bahamas. They have even agreed not to add delinquent medical bills onto their reports until these items have been outstanding for 180 days - presumably, the amount of time it will take for your insurance company to finally get a check off to the doctor or hospital.
Thanks as well to Fair Isaac, the company which produces the FICO score. In August of 2014, they announced their new FICO® Score 9 which touts "a more nuanced way to assess consumer collection information...and offering a sophisticated treatment of differentiating medical from non-medical collection agency accounts."
Now, medical collections will "have a lower impact on the score, commensurate with the credit risk they represent... The median FICO Score for consumers whose only major negative references are medical collections will increase by 25 points."
Now, that's major important.
Since a prospective employer, mortgage firm, the auto dealer or apartment rental firm will likely pull your file before granting you credit - this could make the difference between having a job and a place to live and a way to get there - or not.
And, it's the FICO score which is accessed and used by the three agencies. How could anyone find fault with such improved, "multi-faceted modeling approach?"
RIP Medical Debt Details the Negatives
Those devilish details.
1. FICO won't reduce a consumer's score for late bill payments - if those bills have been paid off!
2. That score will rise by 25 points if your only major late payment is an unpaid medical debt.
3. This won't go into effect for months.
4. This only concerns itself with newly reported debt - past paid medical debt that already exists on a credit report from months and years back do not factor into the new scores.
5. If you use credit cards to pay off medical debt and then find yourself unable to pay off the cards, your medical debt is not distinguishable between a trip to the hospital or to Hawaii. Ergo, you lose the FICO protection.
Which now leads to a more essential question - why not simply abolish that debt?
Craig Antico, CEO of RIP Medical Debt and himself a veteran of the collections and debt buying industry, believes that his 501(c)(3) nonprofit both poses the question and answers it.
"There are over 43,000,000 Americans with medical debt showing on their credit reports. Every year, personal circumstances will force a number of them to declare bankruptcy. In fact, medical debt is listed as the major cause in over 60% of all bankruptcies."
"We step in at the point in time when the account has been in circulation in the third-party collection process for years. In many cases, uncollected accounts are "parked" in a credit report and waiting for the day when someone needs to buy that car or home," he adds, "and that's when they pounce."
"What we do, thanks to the generous donors who make our work possible, is to go into the debt selling market or directly to hospitals and offer to buy that debt. But, unlike a bill collector," he declares emphatically, "we don't pursue it - we ABOLISH it!
The Best "Aftershock" Eliminator
Consider the alternatives to the RIP Solution.
Bankruptcy. The most draconian of all, but the ONLY other way to wipe out medical bills and stop the bill collector. This takes care of the immediate and past pains, but at both financial and emotional cost. And, can impair your credit for years to come as it will remain on your credit report for seven years.
Credit Counseling. This is where an organization contacts your medical provider to personally set up a payment program that fits into your budget. This does not eliminate the bill; it simply extends and shares the pain to debtor and creditor alike.
Worse, as pointed out by the FTC, this organization's "non profit" status "doesn't guarantee that services are free, affordable, or even legitimate. In fact, some credit counseling organizations charge high fees, which they may hide; others might urge their clients to make "voluntary" contributions that can cause more debt."
Paying Bill Collectors a Monthly Pittance. Many agencies, or even medical practices, will accept payments of $10 - $100 a month on monies owed. In their minds, "something is better than nothing," and it keeps you from filing for bankruptcy. Again, the bill is not eliminated (and will get larger due to interest and penalties added), and it competes the need to buy medicine, food, or even the water bill.
Suicide. This is not a joke, and it is not funny, and it is an option actually considered. Medical problems and mounting bills are known to lead people to contemplating...and acting on...suicidal thoughts. An article in the Daily Kos reported on one such case. It is heart-wrenching to read, but it must be read.
The RIP Solution Need: Donations and Volunteers
The necessary task of raising funds to support this campaign has honed the enthusiasm on the part of supporters for the unique "RIP Solution."
"It's an idea whose time has not only come, but has been overdue for years," declares activist, Justin Wedes. Under the handle of @JustinWedes on Twitter, he regularly tweets his support and work with RIP Medical Debt.
"There's a great profile of the two founders in NYC's "Metro" newspaper," and the more publicity that they and this cause can get the more likely its success," he adds.
Marni Halasa, a colorful activist on her own partr who has volunteered as the organization's publicist and introduced the RIP Solution to Metro, echoes this. "How can you not get behind a nonprofit whose only purpose is to obliterate personal medical debt?" she asks, and adds "it is one of the best random acts of kindness you can make."
"As for that credit report," Craig Antico adds, "once we have purchased an individual's debt and advised that person in a letter that this particular bill has been abolished, the next thing we do is to work to see to it that this bill is removed from that person's credit file."
He adds, with finality, "No more debt, and no more aftershocks from credit reporting agencies. It serves us and our donor partners' mission. To abolish medical debt. For Good."
If you -- or someone you know -- need help, please call 1-800-273-8255 for the National Suicide Prevention Lifeline. If you are outside of the U.S., please visit the International Association for Suicide Prevention for a database of international resources.