CFPB Launches Rulemaking to Remove Medical Debt from Credit Reports

Last week, the Consumer Financial Protection Bureau (CFPB), announced a new rulemaking process to remove medical debts from Americans’ credit reports. The Bureau says that the proposals under consideration would help families recover financially from medical emergencies, stop debt collectors from coercing people to pay bills they may not owe, and ensure that creditors are not depending on data that is often inaccurate.

“Research shows that medical bills have little predictive value in credit decisions, yet tens of millions of American households are dealing with medical debt on their credit reports,” said Rohit Chopra, CFPB Director. “When someone gets sick, they should be able to focus on getting better, rather than fighting debt collectors trying to extort them into paying bills they may not even owe.”

If finalized, the proposed rulemaking would prohibit consumer reporting companies from including medical debt and collection data that would be used by creditors making underwriting decisions. It would also prohibit creditors from using medical collections data in reviewing borrowers’ credit applications.

Since unpaid medical bills would not show up on credit reports, the Bureau claims debt collectors would no longer be able to intimidate consumers into paying controversial debts. However, the proposal would not stop creditors from getting medical bill information for instances such as verifying the necessity of medical forbearances or reviewing applications to pay for medical services.

Roughly 20 percent of Americans report having medical debt according to a 2022 report, but previous CFPB research has found that medical billing data is less telling of consumers’ future repayment than traditional credit obligations. Medical billing inaccuracies are common due to complicated billing practices or disputes over insurance payments.

The CFPB’s released document is an outline of alternatives and proposals under consideration for the Fair Credit Reporting Act (FCRA) Rulemaking. The FCRA currently restricts creditors’ abilities to use medical data to make credit decisions, and limits the inclusion of medical data on credit reports.