In a move aimed at alleviating the financial strain on millions of Americans, the Biden administration has announced plans to remove medical bills from credit reports. The proposed rule change, put forth by the Consumer Financial Protection Bureau (CFPB), seeks to prevent consumer reporting agencies from including medical debts and collection information on consumer reports used by creditors in making underwriting decisions.
The decision comes as Vice President Kamala Harris highlighted the staggering amount of unpaid medical debt in the country, stating that over 100 million Americans are burdened by these financial obligations. According to a 2022 report by the CFPB, approximately 20% of Americans reported having medical debt, equating to around 66 million individuals based on the current population.
The CFPB’s analysis found that medical billing data on credit reports is less reliable in predicting future repayment compared to traditional credit obligations. Mistakes, inaccuracies, and complexities in medical billing processes can often contribute to these discrepancies. Director Rohit Chopra of the CFPB emphasized that medical bills should not be a determining factor in credit decisions, especially when individuals are already dealing with health issues.
The proposed rule change will restrict creditors from using medical information when evaluating credit applications and prevent debt collectors from leveraging the credit reporting system to pressure consumers into paying potentially questionable debts. However, creditors will still be able to access medical bill information for other purposes, such as verifying the need for medical forbearances or evaluating loan applications for medical services.
Once the proposed rule is formally submitted, there will be a public comment period to gather input from various stakeholders. The CFPB will carefully review the feedback received before finalizing the rule.
This initiative by the Biden administration aims to prioritize the well-being of individuals facing financial hardships due to medical emergencies. By removing medical debt from credit reports, the administration hopes to provide relief and enable Americans to focus on their health and recovery, rather than being burdened by debt collectors.
