Biden administration proposes banning medical bills from credit reports
The Consumer Financial Protection Bureau on Tuesday proposed banning medical bills from being included in credit reports, hoping to ease the burden on American consumers.
The federal agency also wants to stop credit reporting companies from sharing medical debt information with lenders and prohibit borrowers from making decisions based on healthcare IOUs.
CFPB estimates the rule would remove as much as $49 billion in medical debts that “unjustly” lower credit scores for 15 million Americans.
“The CFPB is seeking to end the senseless practice of weaponizing the credit reporting system to coerce patients into paying medical bills that they do not owe,” Director Rohit Chopra said June 11. "Medical bills on credit reports too often are inaccurate and have little to no predictive value when it comes to repaying other loans.”
Congress in 2003 restricted lenders from using medical information to make decisions. However, federal agencies later issued a special regulatory exception overturning this policy. The Consumer Financial Protection Bureau wants to “close the regulatory loophole” and keep collectors from “coercing payments for inaccurate or false medical bills.” CFPB estimates the rule could help lead to the approval of 22,000 additional “safe” mortgages each year.
A 2022 report from the bureau estimated that medical bills make up $88 billion of reported debt on credit reports. Equifax, Experian and TransUnion have said in recent years that they would remove many of these medical bills off credit reports. However, 15 million Americans still have $49 billion in outstanding medical bills in collections appearing in the credit reporting system, the CFPB noted.
The agency is accepting comments on the rule before Aug. 12. Consumer advocacy groups praised the proposal on Tuesday while others criticized it.
“Millions of families have been hit with steep medical bills, which can greatly hamper their ability to access affordable credit,” Chuck Bell, advocacy program director for Consumer Reports, said June 11. “The CFPB’s proposed rule will help ensure consumers won’t see their credit records damaged because of medical bills that pile up and bust their budgets. By banning medical debt on credit reports, the CFPB will help families obtain the healthcare they need without fear of having their credit scores unfairly ruined.”
“The CFPB’s proposal will have a broad negative impact on businesses, healthcare providers, patients and consumers because by suppressing information about a consumer’s debt, this will increase the cost of medical care and force more upfront payments,” Scott Purcell, CEO of the ACA International, the nation’s largest association of credit and collection professionals, said Wednesday. “The rule, if finalized, would fundamentally alter the U.S. credit-based economy as it is today in terms of reduced consequences for not paying your bills, which in turn will reduce access to credit and healthcare for those that need it most.”
The CFPB also issued a bulletin in 2022 urging providers to refrain from “unlawful medical debt collection” following the launch of the No Surprises Act.
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.