CFPB report warns consumers about medical debt financing

On Behalf of | May 8, 2023 | Bankruptcy |

Many Florida residents are struggling to cope with medical debt. Unmanageable doctor and hospital bills are the leading cause of personal bankruptcy in the United States, and about $88 billion in medical debt has been placed for collection. Advocacy groups and lawmakers view medical debt as a serious problem that must be addressed, but some lenders see it as an opportunity. In recent years, several finance companies have introduced medical credit cards and loans that are marketed to Americans who cannot afford to pay their health care bills.

Interest charges

A report released on May 4 by the Consumer Financial Protection Bureau reveals that American consumers paid about $1 billion in interest charges on medical loans and credit cards between 2018 and 2020. People apply for medical financing to make their monthly payments more manageable, but the interest they pay can increase the amount they owe by up to 25% according to the CFPB.

Deceptive tactics

Medical loans and credit cards have replaced the no-interest payment plans that many hospitals once offered. Patients are now encouraged to take on debt to pay their medical bills, and some lenders use deception to make their loans and credit cards appear more attractive. In 2013, the CFPB ordered a leading medical debt lender to pay its customers $34.1 million for using deceptive enrollment practices. Lawmakers in several states have taken action to protect consumers from medical debt and help them avoid bankruptcy. In Florida, bills that would prevent medical debt collectors from seizing certain personal assets have been unanimously approved by committees and are expected to be passed.

A fresh start

These issues will likely become more serious in the years ahead as more and more Americans fall into debt because of soaring health care costs. The CFPB report warns Americans not to apply for medical loans or credit cards, but it does not provide much in the way of alternatives for people with few other options.