Dive Brief:

  • The Consumer Financial Protection Bureau is launching a rulemaking process to remove medical debt from consumer credit reports, Vice President Kamala Harris and CFPB Director Rohit Chopra announced Thursday.
  • If the rule is finalized, “it will mean, one, that consumer credit reports will not include medical debt, and two, that creditors will not be able to use medical debt to determine a person’s eligibility for credit,” Harris said during a press call Thursday.
  • The CFPB expects to issue a notice of proposed rulemaking next year, and then seek public feedback before determining when it may be finalized, a senior administration official said.

Dive Insight:

About 100 million Americans struggle with unpaid medical bills, and a disproportionate number are Black, Latino or live in rural areas, Harris noted. The Biden administration envisions wiping such debt from credit reports will bolster consumers’ credit scores, meaning more people will qualify for car loans or home mortgages.

The move by President Joe Biden, a Democrat, comes as he faces re-election next year. In kicking off the rulemaking process, the CFPB aims to tackle what is a “serious pain point” for many families, Chopra said.

“Families are often barraged with a stream of confusing and error-ridden bills, and too many of us have ended up in a doom loop of disputes between insurance companies and healthcare providers,” Chopra said. “These bills — even ones where the patient doesn’t owe anything further — can end up being reported on the patient’s credit report,” leaving many to dispute errors, he added.

Research has indicated medical billing history “has very limited predictive value” when it comes to loan underwriting decisions, Chopra said.

Last year, credit bureaus Equifax, TransUnion and Experian said medical debt under $500 would be removed from consumers’ credit reports. 

Additionally, large credit scoring companies such as FICO and VantageScore are shifting to models that exclude medical bills, either partially or completely, Chopra noted.

Action taken by the credit bureaus didn’t go far enough to address the problem, which needs a broader solution, a senior administration official said. The CFPB’s proposal would be more of a “blanket prohibition.”

“If credit bureaus are pulling off much of this information already because it isn’t a good predictor of risk, why should creditors see your medical bills at all?” Chopra contended. “And if creditors don’t need to see your medical billing history, why are we continuing to allow debt collectors to use credit reports to pressure people into paying questionable bills at all?”

Sen. Elizabeth Warren (D-MA) voiced her support for the move. “By proposing to erase medical debt from credit reports, the CFPB is doing what the consumer agency does best: saving Americans money,” Warren said Thursday in an emailed statement. 

The proposal wouldn’t prevent creditors from obtaining medical bill information to verify the need for medical forbearances, or assess loan applications to cover medical services, the CFPB said in a news release. 

Thursday’s announcement is part of a broader Biden administration effort to address the burden of medical debt. The credit bureaus’ move to wipe some medical debt from credit reports came not long after the CFPB issued a report on medical debt last year. 

The CFPB, the Department of Health and Human Services and the Treasury Department said earlier this year that they are also taking a closer look at medical credit cards, potentially increasing regulation in that area.


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