CFPB Proposes Banning Medical Bills from Credit Reports

Earlier this month, the Consumer Financial Protection Bureau (CFPB) proposed a rule that would remove medical bills from credit reports and prohibit lenders from making lending decisions based on medical information. It would also increase privacy protections for consumers, help increase loan approvals and credit scores, and prevent debt collectors from using credit reporting to get people to pay.

“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,” said Rohit Chopra, CFPB Director. “Medical bills on credit reports too often are inaccurate and have little to no predictive value when it comes to repaying other loans.”

The Consumer Finance and Fintech Blog noted that Chopra has heavily focused on medical debt in recent years. In March 2022, the CFPB published a report that found that medical bills made up about $88 billion of reported debts on credit reports. Several major credit reporting companies then announced they intended to remove paid medical debts from credit reports as well as delinquent debts less than a year old. 

The CFPB has found that medical debts penalize consumers by making underwriting decisions less accurate; thus medical bills on consumer credit reports are not a sufficient predictor of whether the consumer will repay a loan. Under the proposed rule, the Bureau expects lenders will benefit from better underwriting and more safe loan approvals. 

If finalized, the proposed rule would ban repossession of medical devices, like prosthetic limbs or wheelchairs, if consumers are unable to repay the loan. The CFPB expects that consumers with medical debt on their credit reports will see their credit scores rise by an average of 20 points.