Banking trade groups, too, have sharply critiqued the proposal. In a comment letter in August, the Bank Policy Institute and the Consumer Bankers Association argued that the proposal would harm consumers by increasing the cost and decreasing the availability of credit.
“By significantly limiting creditors’ visibility into and consideration of a consumer’s medical debts and expenses in underwriting decisions, consumers may be extended more credit than they can afford, which could lead to default,” the groups wrote.
New Rule by Credit Reporting Agencies
The new rule comes after the three major credit reporting agencies — TransUnion, Equifax, and Experian — announced in 2022 that they would take certain types of medical debt off credit reports, including debts smaller than $500.
Consumer Advocacy Response
Consumer advocacy groups have praised the rule. Christine Chen Zinner, a senior policy counsel at Americans for Financial Reform, said it would help many Americans saddled with medical debt.
“For somebody who happened to have the misfortune of an unplanned health event, it’s really unfair for them now to be punished with a lower credit score, more expensive loans and less access to credit,” she said.
Potential Challenges
Although Republicans could try to undo the rule, Ms. Chen Zinner said lawmakers could find it difficult to do so. “Undoing these protections would not be looked upon very favorably by the general public,” she said.
medical debt, credit reporting rule, consumer advocacy, financial reform
