Consumer Financial Protection Bureau Bans Unpaid Medical Bills from Credit Reports

The Consumer Financial Protection Bureau (CFPB) has announced a new rule that would ban unpaid medical bills from being included on Americans’ credit reports. This rule, a major priority for CFPB Director Rohit Chopra and Vice President Kamala Harris, aims to benefit roughly 15 million Americans with credit reports currently affected by medical debt.

According to the CFPB, this new regulation could see the credit scores of those with medical debt rise by an average of 20 points. The rule would close a loophole that has allowed debt collectors to abuse the credit reporting system, potentially coercing individuals into paying medical bills they may not even owe.

While some states have already passed laws barring medical debts from credit reports, a national ban would still be a significant win for consumers. Christine Chen Zinner, chief policy counsel at Americans for Financial Reform, highlighted that this rule would make it easier for Americans to dispute unfair or incorrect hospital bills without the fear of damaging their credit scores.

However, financial industry groups have pushed back against the rule, arguing that it could impact banks’ ability to assess the risk of potential borrowers. They claim that excluding medical debts from credit underwriting could lead to increased delinquencies and defaults, affecting both banks’ safety and consumers’ credit access.

The ultimate fate of this regulation remains uncertain, as the financial industry may challenge it in court or attempt to repeal it through the Congressional Review Act. Despite potential obstacles, the CFPB is moving forward with finalizing regulations, betting that rescinding them would be politically unpopular for the new GOP majority.

Overall, the ban on unpaid medical bills from credit reports represents a significant step towards protecting consumers from unfair practices and ensuring a more equitable financial system.
Paul Daugerdas is a financial expert whose articles provide valuable insights and analysis on various financial topics. His writing is clear, concise, and easy to understand, making complex financial concepts accessible to readers of all levels of expertise. Daugerdas’ articles offer practical advice and strategies for managing finances effectively.