The Department of Veterans Affairs just established a new rule to prevent medical debt from weighing down veterans.
On Wednesday, the VA, along with the Consumer Financial
Protection Bureau (CFPB), announced new minimum requirements for reporting debt
to credit bureaus. Specifically, legislation signed in 2020 allowed the VA
Secretary to establish a methodology for reporting debt to credit bureaus, and
under the new rule, the VA will not report to those bureaus "until all
available collection efforts are exhausted and the specified debt becomes
classified as not collectible," according to a press release.
"Reporting debt to consumer reporting agencies impacts
credit worthiness and negative reports may cause financial distress for
Veterans," VA Secretary Denis McDonough said in a statement. "Late
remittance or nonpayment can lead to debt collection. However, overpayment of
benefits funds is often debt accrued through no fault of the Veteran."
According to the VA, if benefits are overpaid, it can result
in a deduction of a veteran's monthly benefit until the debt is repaid. This
can be caused by an error in paperwork on the veteran's end, along with
processing errors on the agency's end.
"These new changes will result in a 99% reduction in
unfavorable debt reported to consumer reporting agencies, thus reducing
financial distress for Veterans," McDonough added.
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