The US government has finalized a rule to end medical debt from being included on credit reports and ban lenders from using certain medical information in loan decisions. The Consumer Financial Protection Bureau (CFPB) estimates that this rule will remove $49 billion in medical bills from the credit reports of approximately 15 million people.
Under the new rule, lenders can no longer use medical devices such as wheelchairs or prosthetic limbs as collateral for loans, and they cannot repossess these devices if patients are unable to repay loans. However, lenders may still consider medical information when a consumer requests a loan to pay health expenses or asks for a temporary postponement of loan payments due to medical reasons.
Credit reporting agencies had initially expressed concerns about the proposed rule, but consumer groups have welcomed the move. Mona Shah, senior director of policy and strategy at Community Catalyst, said that “nobody should be forced to make impossible choices between getting essential care and going into debt.”
The CFPB’s research has found that medical debt is not a good predictor of a person’s ability to pay other loans. In fact, health care bills often contain mistakes, leading to extended battles among patients, health insurers, and medical providers.
The Biden administration had made this rule a priority as part of its effort to assist Americans struggling with higher healthcare costs. In 2022, the administration announced a four-point plan to protect consumers, including investigating credit reporting companies and debt collectors that violate patients’ rights.
This new rule is expected to lead to improved access to credit for lower-income individuals, with an estimated 22,000 additional mortgages approved every year. The Consumer Data Industry Association has expressed concerns about the impact of the rule on the credit reporting system, but consumer groups see this as a major victory in protecting consumers from financial harm.
As Vice President Kamala Harris said, “This will be life-changing for millions of families, making it easier for them to get approved for a car loan, home loan, or small-business loan.”
Source: https://edition.cnn.com/2025/01/07/business/medical-debt-credit-reports-ban-biden/index.html