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CFPB Finalizes Rule to Remove Medical Bills from Credit Reports
On January 7, 2025, the Consumer Financial Protection Bureau (CFPB) finalized a rule set to remove an estimated $49 billion in medical debt from the credit reports of approximately 15 million Americans. This new regulation bans the inclusion of medical bills on credit reports used by lenders and prohibits lenders from considering medical information in their lending decisions.
The rule enhances privacy protections and prevents debt collectors from leveraging the credit reporting system to pressure individuals into paying debts they don’t owe. The CFPB has determined that medical debt offers little predictive value regarding a borrower’s ability to repay other debts. Moreover, consumers often report receiving inaccurate medical bills or being asked to pay amounts that should have been covered by insurance or financial assistance programs.
Here, we break down the details of the rule, its implications, and what it means for you.
The Problem with Medical Debt on Credit Reports
Medical debt has long been a contentious issue in the United States. Unlike other forms of debt, medical expenses are often unexpected and unavoidable. According to the CFPB, millions of Americans face damage to their credit scores due to unpaid medical bills, which can result in:
Difficulty securing loans or credit cards.
Higher interest rates on borrowed money.
Challenges in renting apartments or landing jobs.
Medical debt disproportionately impacts low-income individuals and those without comprehensive health insurance, perpetuating cycles of financial hardship.
Key Features of the New Rule
The CFPB's new rule removes medical debts from consumer credit reports entirely. This decision comes after extensive research and consultation with consumer advocacy groups, healthcare providers, and credit bureaus. Key aspects include:
Complete Removal of Medical Debt: Credit reporting agencies will no longer include medical bills on credit reports, regardless of the amount or status.
Retroactive Application: The rule applies to both new and existing medical debts already reported on credit files.
Compliance Timeline: The Consumer Financial Protection Bureau (CFPB) finalized a rule on January 7, 2025, prohibiting the inclusion of medical debt on credit reports and barring lenders from using medical information in credit decisions. This rule was published in the Federal Register on January 14, 2025, and will become effective 60 days later, on March 17, 2025. CFPB
Implications for Consumers
Improved Credit Scores
The removal of medical debt from credit reports is expected to boost the credit scores of millions of Americans. A higher credit score opens doors to better financial opportunities, such as:
Lower interest rates on mortgages and car loans.
Increased access to credit cards with favorable terms.
Better rental and employment prospects.
Reduced Financial Stress
For individuals struggling with unpaid medical bills, this rule alleviates the pressure of seeing their creditworthiness affected by circumstances often beyond their control. It’s a step toward recognizing that healthcare-related expenses should not define financial stability.
Potential Criticism and Challenges
While the rule is widely celebrated, it’s not without controversy. Critics argue that removing medical debt from credit reports might:
Disincentivize payment of medical bills.
Lead to higher healthcare costs as providers seek alternative ways to recoup unpaid balances.
What You Can Do Now
If you have medical debt on your credit report, here’s how you can prepare:
Check Your Credit Reports: Obtain free credit reports from AnnualCreditReport.com to identify any medical debts listed. Or Credit monitoring provider ScoreTribe
Dispute Errors: If any medical debt remains on your report after the rule’s enforcement date, file a dispute with the credit bureau. TransUnion, Experian and Equifax
Get sample letters for disputing collection accounts on your credit report from the AltoCredit Community.
Communicate with Providers: Consider discussing payment plans or financial assistance programs with healthcare providers to address outstanding bills directly.
A Step Toward Financial Equity
The CFPB’s rule marks a pivotal moment in consumer protection, signaling a move toward greater financial equity and recognition of the unique challenges posed by medical debt. By eliminating medical bills from credit reports, millions of Americans can focus on recovering from medical emergencies without the added burden of a damaged credit profile.
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