The Consumer Financial Protection Bureau announced on Tuesday that it has finalized a rule that will remove medical debt from consumer credit reports. This move aims to alleviate the burden on Americans needing credit for various purposes, such as home mortgages, car loans, and small business loans.
Impact of the Rule
The CFPB stated that debt reporting agencies will no longer include medical debt on consumer reports used for credit checks. Additionally, debt collectors are prohibited from using the credit reporting system to pressure consumers into paying questionable debts.
Vice President Kamala Harris emphasized the significance of the rule by stating, "This will be life-changing for millions of families, making it easier for them to be approved for a car loan, a home loan, or a small-business loan."
Statistics on Medical Debt
As of 2020, an estimated 46 million Americans had medical debt listed on their credit reports. Despite this, the White House argued that the amount of medical debt does not accurately predict a person's ability to repay a loan.
Following a previous initiative by Experian, TransUnion, and Equifax in April 2023 to remove medical debts lower than $500 from credit reports, about 70% of individuals with medical debt had it eliminated from their reports. However, approximately 15 million Americans still had medical debt on their credit reports, amounting to an estimated $49 billion.
Potential Reversal of the Rule
It is crucial to note that the rule does not erase the debt itself and could potentially be reversed by the Trump administration, which has expressed intentions to reduce government regulations.
medical debt, credit reports, CFPB rule, debt collection, consumer protection
