• Posted June 12, 2024

Biden Administration Pushes for Rule Wiping Medical Debt From Credit Reports

In an effort to keep medical debt from destroying credit scores, the Biden administration announced Tuesday that it is moving ahead with a proposal that would remove health care bills from consideration in credit checks.

Along with making it easier for folks to rent an apartment, get a mortgage or buy a car, the proposed rule would prevent lenders from repossessing medical devices like wheelchairs if people cannot repay a loan, the Consumer Financial Protection Bureau (CFPB) said in a news release announcing the proposal.

"Today, more than 100 million Americans struggle with medical debt," Vice President Kamala Harris said during a Tuesday briefing on the proposed rule. "Usually, medical debt is the result of a medical emergency -- an unplanned, unexpected expense often of tens to hundreds of thousands of dollars."

"And one of the most significant consequences of carrying medical debt is the harm it does to a person's credit score," Harris added. "And that is simply not fair, especially when we know that people with medical debt are no less likely to repay a loan than those without medical debt. No one should be denied access to economic opportunity simply because they experienced a medical emergency."

CFPB Director Rohit Chopra also noted that research shows medical billing errors frequently appear on credit reports and the rule would prevent debt collectors from forcing people to pay medical bills they may not owe.

Although the three national credit reporting agencies -- Experian, Equifax and TransUnion -- removed medical collections debt under $500 from consumer credit reports, 15 million people still have $49 billion in outstanding medical bills appearing in the credit reporting system, Chopra added.

"The CFPB is seeking to end the senseless practice of weaponizing the credit reporting system to coerce patients into paying medical bills that they do not owe,” Chopra said. "Medical bills on credit reports too often are inaccurate and have little to no predictive value when it comes to repaying other loans."

The administration first announced plans for the rule last September, and the CFPB is taking public comment on the proposal until Aug. 12.

Public support for the proposal is strong: A University of Chicago Harris/NORC poll released Tuesday shows a majority of adults, 51%, believe it is extremely or very important that medical debt is forgiven.

If finalized, the rule's impact could be significant.

"As a result of this change, millions of Americans will see an increase in their credit score, on average, of 20 points, which will mean every year an estimated 22,000 more American families will be approved for a mortgage and able to buy a home," Harris noted.

More information

The Peterson Center on Healthcare and KFF have more on the scope of medical debt in the United States.

SOURCE: Consumer Financial Protection Bureau, news release, June 11, 2024; White House, news release, June 11, 2024