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Medical Debt Relief: A New Hope for Americans' Credit Scores

Medical Debt Relief: A New Hope for Americans' Credit Scores

The Consumer Financial Protection Bureau (CFPB) has proposed a groundbreaking rule that aims to significantly lighten the burden of medical debt for millions of Americans. The rule proposes to eliminate medical bills from credit reports and prevent credit reporting agencies from sharing medical debt information with lenders. Furthermore, it would restrict lenders from using medical information in their lending decisions. This proposal, if finalized by early 2025, could face challenges but promises substantial benefits. Medical bills currently appearing on credit reports are often inaccurate and do not predict the ability to repay other loans, according to CFPB Director Rohit Chopra. The new safeguards could elevate credit scores, making it easier for consumers to access loans like mortgages. On average, affected Americans may see a 20-point increase in their credit scores. Additionally, the rule would protect consumers' health and safety by preventing medical devices from being used as collateral for loans. This proposal builds on recent changes, such as the removal of paid medical bills from credit reports and the exclusion of unpaid medical bills under $500. Despite these changes, over 15 million Americans still had medical collections on their reports as of June 2023, disproportionately affecting Southern and low-income communities. If the new rule is finalized, it would retroactively remove all medical collections from credit reports. The CFPB is accepting comments on the proposal until August 12, with the final rule expected early next year. The 2024 election could influence the rule’s fate, particularly given a recent Republican proposal to defund the CFPB. In the meantime, consumers should check their credit reports for accuracy and ensure any medical debt information complies with current reporting rules.

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