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CFPB Issues Proposed Rule Banning Medical Bills From Credit Reports

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB) has issued a proposed rule that would ban medical bills from credit reports.

The proposed rule would stop credit reporting companies from sharing medical debts with lenders and would prohibit lenders from using medical information to make lending decisions, the agency said in a Tuesday (June 11) press release.

“Medical bills on credit reports too often are inaccurate and have little to no predictive value when it comes to repaying other loans,” CFPB Director Rohit Chopra said in the release.

The proposed rule would close a “regulatory loophole” that has kept “vast amounts” of medical information in the credit reporting system, the CFPB said in the release.

Although Congress restricted lenders from obtaining or using medical information, including information about debts, in 2003, federal agencies later issued a special regulatory exemption that allows creditors to use medical debts in their credit decisions, according to the release.

The CFPB has found that medical debts provide less predictive value to lenders than other debts on credit reports and that medical bills accounted for $88 billion of reported debts on credit reports, the release said.

Following the release of this data in CFPB reports, the three nationwide credit reporting agencies — EquifaxExperian and TransUnion — said they would take many medical bills off credit reports, per the release. In addition, two major credit scoring companies — FICO and VantageScore — decreased the degree to which these bills impact consumers’ scores.

Despite the voluntary changes, the credit reporting system still includes $49 billion in outstanding medical bills in collection, impacting 15 million Americans, according to the release.

“The complex nature of medical billing, insurance coverage and reimbursement, and collections means that medical debts that continue to be reported are often inaccurate or inflated,” the CFPB said in the release.

The CFPB’s proposed rule would eliminate the special medical debt exception, establish guardrails for credit reporting companies and ban repossession of medical devices, per the release.

Members of the public can comment on the proposed rule until August 12.

The agency began this rulemaking process in September, saying that removing medical bills from Americans’ credit reports would provide financial relief to families dealing with medical crises, prevent debt collectors from pressuring individuals into paying potentially inaccurate bills, and ensure that creditors do not rely on flawed and unreliable data.