On June 11, 2024, the CFPB proposed a rule that would remove medical bills from most credit reports, increase privacy protections, help to increase credit scores and loan approvals, and prevent debt collectors from using the credit reporting system to coerce people to pay. According to CFPB Director Rohit Chopra, medical bills on credit reports too often are inaccurate and have little to no predictive value when it comes to repaying other loans.
In 2003, Congress banned lenders from accessing medical information for credit decisions. However, federal agencies later allowed creditors to consider medical debts in credit assessments under a special rule. In December 2014, the CFPB released a report showing that medical debts provide less predictive value to lenders than other debts on credit reports. Then in March 2022, the CFPB released another report estimating that medical bills made up $88 billion of reported debts on credit reports. Thus, the CFPB announced that it would assess whether credit reports should include data on unpaid medical bills.
Since the March 2022 report, the three big credit reporting conglomerates announced that they would take many of those bills off credit reports, while other major credit scoring companies have reduced how much medical bills affect a person's credit score. Despite these changes, the CFPB still saw $49 billion in outstanding medical bills in collections appearing in the credit reporting system.
The CFPB is proposing to ban medical bills in credit reports that unjustly lower credit scores for many consumers. In particular, the proposed rule would:
Eliminate the special medical debt exception. The new rule would limit lenders from using medical debt details for credit decisions but would still allow considering certain medical information as long as specific conditions are followed.
Establish guardrails for credit reporting companies. The proposed rule would prohibit credit reporting companies from including medical debt on credit reports sent to creditors when creditors are prohibited from considering it.
Ban repossession of medical devices. The proposed rule would prohibit lenders from taking medical devices as collateral for a loan and ban lenders from repossessing medical devices if people are unable to repay the loan.
Comments on the proposed rule must be received on or before August 12, 2024.
Read the CFPB’s announcement here.
The proposed rule can be found here.