FOR IMMEDIATE RELEASE: Jan. 7, 2025
CONTACT: Carter Dougherty, carter@ourfinancialsecurity.org
Medical Debt Rule Will Protect 15 Million People from Negative Credit Impacts
CFPB plan will also curb medical debt collection abuses
Washington DC – Today, the CFPB finalized a requirement to remove medical bills from most credit reports, prohibiting companies like Equifax, TransUnion, and Experian from sharing medical debt information with lenders and barring them from considering medical debts in their credit determinations.
This new protection will help lessen the negative credit impacts of medical debt and bring financial relief to 15 million people in the United States.
“Today’s rule is yet another example of the CFPB’s commitment to lessening the crushing financial burdens of medical debt, which is one of the most common reasons people file for bankruptcy in the United States. These debts erode savings and force families to cut back on basic living expenses like groceries and health care,” said Christine Chen Zinner, senior policy counsel for Americans for Financial Reform. “Medical debt should not be weaponized to undermine people’s ability to take out a loan or qualify for a mortgage or even to damage employment prospects.”
Click here for a fact sheet about today’s medical debt rulemaking.
People incur medical debt when their health care costs exceed their insurance coverage but this debt is not an accurate predictor of their ability to pay bills and loans. It is inappropriate for lenders to consider medical debt in credit eligibility determinations. People with inadequate health coverage can find themselves owing thousands of dollars in medical bills that, if left unpaid, can lower their credit score and harm their ability to access credit. The CFPB found that removing all medical debts from people’s credit reports raised their credit scores by an average of 20 points, significant enough to give them a higher score tier, which promotes access to credit and more affordable loans.
This rule will help alleviate the negative credit impacts stemming from historic and ongoing of racist policies and practices in housing, employment, education, and health care, which have left Black and Latine families with less income and wealth, less robust health coverage, less access to affordable and quality health care, which leads to far higher medical debt burdens. Black households are more likely to carry medical debt (13 percent versus 8 percent) than white households, to carry medical debt. Latine households are 14 percent more likely.
“Today’s medical debt rule will lessen the financial burdens for all households, but particularly for Black and Latine families, who carry more medical debt due to decades of intentionally racist policies and practices across health care, employment, housing, education, and financial services,” said Amanda Jackson, consumer campaign director for Americans for Financial Reform. “Without the protections offered by today’s rule, an unexpected medical event can turn into years of more expensive loans.”
The CFPB’s recent guidance on illegal medical debt collections partly addressed the problem of abusive medical debt collection, which this rule will also help. Medical debt is one of the most disputed forms of debt, and people often receive collection notices for debts they did not owe and for bills that should have been covered by insurance. Without this rule, people who are about to apply for a loan or mortgage may feel pressured into paying off disputed medical bills just to minimize harm to their credit score.
###