The Consumer Financial Protection Bureau (CFPB) has announced plans to eliminate medical bills from most credit reports.
The proposed rule would prevent credit reporting companies from sharing medical debts with lenders and would prohibit lenders from making decisions based on medical information. According to the bureau, this change could remove up to $49 billion in medical debts that negatively impact credit scores for around 15 million Americans. Additionally, it aims to enhance privacy protections, improve credit scores and loan approvals, and prevent debt collectors from using the credit reporting system to pressure individuals into payment.
In 2023, Congress enacted restrictions on lenders’ ability to access or use medical information, including debt details. However, federal agencies later provided a special exception allowing creditors to consider medical debts in their decision-making processes.
The CFPB is now seeking to eliminate this loophole, asserting that the presence of a medical bill on a credit report is not a reliable indicator of an individual’s ability to repay a loan.
Rohit Chopra, director of the CFPB, stated, “Medical bills on credit reports too often are inaccurate and have little to no predictive value when it comes to repaying other loans.”