The Consumer Financial Protection Bureau (CFPB) has announced a new rule aimed at removing nearly $49 billion in medical debt information from the credit reports of about 15 million Americans. This policy will prevent banks and other lenders from considering medical bills when approving loans, and it will strengthen consumer privacy protections. More importantly, it will also end the practice of debt collectors using the credit reporting system to pressure consumers into paying bills they should not be responsible for.
In short, medical bills or debt will no longer affect credit scores or credit reports.
Here’s what the new rule does:
- No medical information in lending decisions: The rule ends the previous special exception that allowed certain medical information to be used in lenders’ credit decisions.
- No medical bills on credit reports: The rule explicitly prohibits consumer reporting agencies from including medical debt information in credit reports sent to lenders. This will effectively stop the use of the credit reporting system to pressure consumers into paying inaccurate bills.
According to the CFPB’s estimates, this rule will help add about 22,000 more affordable mortgage approvals each year, and Americans with medical debt could see their average credit scores rise by 20 points. Before the rule was finalized, the three major credit reporting companies—Equifax, Experian, and TransUnion—had already announced that they would remove certain types of medical debt from credit reports, including collections under $500.
The rule will take effect 60 days after it is published in the Federal Register, and consumers can submit complaints about financial products or services through the CFPB’s website.
