CFPB Finalizes Rule to Remove Medical Bills from Credit Reports
Benefiting Approximately 15 Million Americans
In a landmark decision, the Consumer Financial Protection Bureau (CFPB) has finalized a rule that will eliminate an estimated $49 billion in medical bills from credit reports, benefiting approximately 15 million Americans. Announced on January 7, 2025, this rule is a significant step toward addressing the pervasive issue of medical debt and its detrimental impact on consumers' financial health.
The CFPB's action prohibits the inclusion of medical debt on credit reports used by lenders and bans lenders from utilizing medical information in their lending decisions. This measure aims to protect consumers from coercive debt collection practices and enhance financial privacy. The CFPB has found that medical debts provide little predictive value to lenders regarding borrowers' ability to repay other debts, and consumers frequently report receiving inaccurate bills or being asked to pay bills that should have been covered by insurance or financial assistance programs.
"People who get sick shouldn’t have their financial future upended," said CFPB Director Rohit Chopra. "The CFPB’s final rule will close a special carveout that has allowed debt collectors to abuse the credit reporting system to coerce people into paying medical bills they may not even owe."
A Relief for Struggling Americans
Medical debt is a leading cause of financial hardship in the United States, disproportionately affecting low- and middle-income households. Even for insured individuals, unexpected medical expenses can lead to unmanageable debt, which often ends up reported to credit bureaus, tarnishing credit scores and limiting access to housing, loans, and employment opportunities. The CFPB's research reveals that a medical bill on a person’s credit report is a poor predictor of whether they will repay a loan and contributes to thousands of denied applications on mortgages that consumers would be able to repay. The CFPB expects the rule will lead to the approval of approximately 22,000 additional, affordable mortgages every year and that Americans with medical debt on their credit reports could see their credit scores rise by an average of 20 points.
Privacy Protections Strengthened
In addition to removing medical debt from credit reports, the CFPB’s rule enhances privacy protections. It explicitly prohibits lenders from using medical information to make credit decisions, ensuring that individuals’ health-related financial data remains confidential. This move aligns with Congress's decision to safeguard consumers' privacy by restricting lenders from obtaining or using medical information, including information about medical debts.
Industry Response and Legal Challenges
The CFPB's final rule has faced opposition from industry groups. Two trade associations have filed a lawsuit challenging the rule, arguing that the CFPB lacks the legal authority to prohibit creditors from considering medical debt in lending decisions. They contend that the rule could lead to unintended consequences, such as increased litigation from debt collectors or upfront payment demands by healthcare providers.
Additionally, a recent executive order issued by President Donald Trump upon taking office has frozen new regulations, which could delay the implementation of the CFPB's rule. This order directs federal agencies to halt proposing new rules, publishing pending rules in the Federal Register, and delays implementing rules that have already been published. The CFPB's rule, set to go into effect in March, may be impacted by this directive.
What Comes Next
The implementation of this rule will require collaboration between credit reporting agencies, lenders, and regulators. Consumers are encouraged to monitor their credit reports and reach out to the CFPB or their financial institutions for guidance on how this change will affect their personal finances. The rule will be effective 60 days after publication in the Federal Register.
The CFPB's action reflects growing recognition of the systemic issues associated with medical debt in America and represents a significant victory for consumer rights advocates. For millions of Americans burdened by past-due medical bills, this rule offers hope and a fresh start.
Take Control of Your Financial Information
Understanding the implications of this new rule is vital for protecting your financial future. Through transparent reporting platforms like Info Decon provide tools and resources to help you manage your personal data, review your credit history, and ensure that outdated or inaccurate information, such as medical debts, is not impacting your financial decisions! Visit Info Decon to learn more about how you can safeguard your credit and take charge of your financial health.
References
CFPB Finalizes Rule to Remove Medical Bills from Credit Reports
CFPB's Medical Debt Credit Reporting Ban Faces Industry Lawsuit
Medical Debt, Overdraft Fee Rules Could Be Delayed by Trump Order
