RSSA bill introduced last week by Sen. Mike Rounds (R-S.D.) would overturn the Consumer Financial Protection Bureau rule banning medical debt and medical bills from credit reports.
The rule, finalized during the final days of the presidency of former President Joe Biden, would also ban lenders from considering medical information when making lending decisions. Lenders would be banned from using information about medical devices, such as prosthetic limbs, that could be used to require the devices’ use as collateral for a loan for the intention of repossession.
The bill was cosponsored by Banking Committee Chair Tim Scott (R-S.C) and Sens. Mike Crapo (R-Idaho), Bill Hagerty (R-Tenn.) and Cynthia Lummis (R-Wyo.). Rounds’ bill is supported by the American Bankers Association, U.S. Chamber of Commerce and other trade associations.
The bill was introduced as the fate of the rule remains in limbo. The administration of President Donald Trump has enacted significant cuts to the bureau and dismissed several pending lawsuits against companies that were launched by the Biden administration.
“The CFPB going beyond their statutory authority to eliminate all medical debt from credit reports is irresponsible and a clear example of regulatory overreach,” Rounds said in a statement. “This rule gives credit card companies a less clear credit picture of who they’re lending money to, which could lead to banks limiting access to capital for consumers. In addition, this rule goes beyond the CFPB’s rulemaking authority by banning practices that were expressly permitted by Congress in the Fair Credit Reporting Act.”
The rule would have still allowed lenders to review medical information to verify medical-based forbearances, medical expenses that a consumer can only repay through a loan and consider some benefits as income when underwriting.
At the time, the bureau said medical debt didn’t accurately predict whether borrowers can repay other debt. The CFPB also alleged that consumers often reported receiving inaccurate bills, or were asked to pay bills that should have been covered by financial assistance programs or insurance.
Credit reporting companies Equifax, Experian and TransUnion have already committed to removing medical debt under $500 from credit reports. Credit scoring companies FICO and VantageScore have decreased the degree to which medical bills impact a consumer’s score.
