A new rule by the Consumer Financial Protection Bureau (CFPB) aims to help millions of American families by removing unpaid medical bills from their credit reports. As of 60 days after publication in the Federal Register, lenders will no longer consider outstanding medical debts when evaluating potential borrowers for mortgages, car loans, or business loans.
This change is expected to increase the credit scores of approximately 15 million Americans by an average of 20 points. Currently, one in five Americans have at least one medical debt collection account on their credit reports, with over half being for medical debts. However, this rule disproportionately affects people of color, with 28% of Black people and 22% of Latino individuals carrying medical debt compared to 17% of white people.
The CFPB estimates that $49 million in medical debt will be removed from the credit reports of Americans, making it easier for them to access loans and increasing the approval rate of mortgages. Additionally, lenders will no longer use information about medical devices as collateral for loans or subject to repossession.
Advocates praise this decision, stating that it’s great news for everyday Americans who are struggling with medical debt due to illness or injury. They emphasize that medical debt should not be a reflection of someone’s financial responsibility, but rather an unpredictable event. Nonprofits and consumer organizations are encouraging individuals to explore their options for relief, including charity care, the No Surprises Act, and appealing bills.
Consumers can take steps to resolve high medical bills by comparing estimates of fair charges with insurance companies’ prices, itemizing bills, and contacting state insurance commissioners for support. By removing unpaid medical bills from credit reports, this new rule aims to alleviate financial burdens on millions of Americans, improving their access to loans and credit scores.
Source: https://apnews.com/article/rule-banning-medical-debt-from-credit-reports-8a81e776bf4cb3aa3c1bc7187f5af96a