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Biden administration This week it finalized a new rule that prevents medical debt from being included on credit reports and also prohibits lenders from using certain medical information in loan decisions.
This should come as a relief to the millions of Americans whose credit reports or scores have been compromised Affected by unpaid medical bills. For context, about 46 million people had medical debt in 2020 reports, according to the government.
What this law means for Americans:
When it goes into effect, 60 days after publication in the Federal Register, it is $49 billion Unpaid medical bills According to the Consumer Financial Protection Bureau (CFPB), 15 million Americans will be removed from their credit reports.
Healthcare is expensive and frustrating. Government participation is a big driver
The government said this would ensure patients would no longer be denied access to credit for a mortgage, car loan or small business loan.
The CFPB has projected that approximately 22,000 additional affordable mortgages will be approved each year after the rule goes into effect.
A patient is waiting in a room in a doctor's office. (iStock)
According to the CFPB, Americans who currently have medical debt on their credit reports can increase their credit score by an average of 20 points.
The new law also prevents debt collectors from using the credit reporting system to pressure people to pay bills they don't owe.
15 million Americans continue to suffer from medical debt despite changes by the credit agencies
Previously, creditors were allowed to consider medical debt, which, according to the CFPB, “enabled debt collectors to bypass the credit reporting system to compel payments from patients for medical bills.” improperly or improperly used.”
New CFPB Rule to Create Protections for Credit Reporting Firms:
Prohibits lenders from considering medical information
According to the CFPB, Americans who currently have medical debt on their credit reports can increase their credit score by an average of 20 points. (Matt McClain/The Washington Post via Getty Images/Getty Images)
Lenders can no longer use certain medical information in making loan decisions. This means that lenders will also be prohibited from using information about medical devices, such as prosthetic limbs, to claim them as collateral for loans for repossession purposes.
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Bans medical debt on credit reports
Consumer reporting agencies will be prohibited from including medical debt information in credit reports and credit scores sent to lenders. This will help end the practice of using the credit reporting system to force you to pay bills regardless of their authenticity. However, lenders may still use medical information to verify medically-based tolerances, verify medical expenses a consumer needs to pay for a loan, count certain benefits as income during underwriting, and other legitimate uses.
In 2023, after the CFPB raised concerns about medical debt credit reporting, the three national credit reporting companies—Equifax, Experian, and TransUnion—agreed to remove certain types of medical debt from credit reports, including the following collections: 500 dollars.
Major credit scoring companies FICO and VantageScore also downplayed the impact of medical debt on a consumer's score.
Even with the changes, 15 million people still had delinquent medical bills in collections that appeared on the credit reporting system.