Unpaid medical bills will no longer appear on credit reports, where they can block people from mortgages, car loans, or small business loans, according to a final rule announced Tuesday by the Biden administration.
Impact of Consumer Financial Protection Bureau Rule
The Consumer Financial Protection Bureau rule will remove $49 billion in medical debt from the credit reports of more than 15 million Americans. This means lenders will no longer consider this debt when deciding to issue a loan.
The change is estimated to raise credit scores by an average of 20 points and could lead to 22,000 additional mortgages being approved every year. Vice President Kamala Harris stated that it would be "lifechanging" for millions of families.
“No one should be denied economic opportunity because they got sick or experienced a medical emergency,” she said.
Elimination of Medical Debt Through Pandemic-Era Aid
Harris also announced that states and local governments have used a sweeping 2021 pandemic-era aid package to eliminate over $1 billion in medical debt for more than 700,000 Americans.
The administration announced plans for the rule in fall 2023. The CFPB stated that medical debt is a poor predictor of an individual's ability to repay a loan. Experian, Equifax, and TransUnion, the three national credit reporting agencies, removed medical collections debt under $500 from U.S. consumer credit reports last year.
Conclusion
The new rule from the Biden administration is set to take on the outstanding bills appearing on credit reports. This move aims to provide financial relief to millions of Americans burdened by medical debt and improve their access to credit and economic opportunities.
Unpaid medical bills, credit reports, Biden administration, Consumer Financial Protection Bureau, medical debt
