The Consumer Financial Protection Bureau wants to remove medical bills from credit reports. The proposal, announced Sept. 21, would ban creditors from relying on medical bills to make underwriting decisions and narrow an exception to the Fair Credit Reporting Act allowing creditors to use medical billing data if it could be characterized as financial information. The rules are expected to be developed next year.
According to the CFPB, medical billing information is less predictive of future repayment than traditional credit obligation data. “As unpaid medical bills would no longer appear on consumers’ credit reports used by creditors in making underwriting decisions, debt collectors would no longer be able to use the credit reporting system as leverage to pressure consumers into paying questionable debts,” the CFPB stated.
An estimated 100 million Americans have medical debt. According to the Kaiser Family Foundation, roughly 23 million people owe more than $250 each in health costs, with about half of those being more than $2,000 in debt.
“Research shows that medical bills have little predictive value in credit decisions, yet tens of millions of American households are dealing with medical debt on their credit reports,” said CFPB Director Rohit Chopra. “When someone gets sick, they should be able to focus on getting better, rather than fighting debt collectors trying to extort them into paying bills they may not even owe.”
Consumer groups have called on the CFPB to tackle medical debt. In March, approximately 50 groups urged the agency to ban the reporting of medical debt, eliminate deferred interest in medical credit cards and enforce actions against medical debt collectors engaging in unfair, deceptive and abusive practices.