White House to propose removing medical bills from credit reports

The Biden-Harris administration announced Thursday it has begun looking into removing medical debt from consumer credit reports in an effort to lessen the impact unexpected medical costs can have on people and help them recover from the expenses, which can be immense.

In a press release, the Consumer Financial Protection Bureau (CFPB) said the proposal would help to “stop debt collectors from coercing people into paying bills they may not even owe, and ensure that creditors are not relying on data that is often plagued with inaccuracies and mistakes.”

Collection agencies, which often purchase debt from creditors for pennies on the dollar, have frequently been accused of employing overly aggressive tactics and sometimes taking legal action against patients. In some cases, the person being contacted by the agency may not even have any outstanding fees.

In a report from last year, the CFPB found that medical debt is the most common collection type found on credit reports, showing up disproportionately more when compared to other forms of debt.

“Research shows that medical bills have little predictive value in credit decisions, yet tens of millions of American households are dealing with medical debt on their credit reports,” CFPB Director Rohit Chopra said in a statement.

“When someone gets sick, they should be able to focus on getting better, rather than fighting debt collectors trying to extort them into paying bills they may not even owe.”

While the Fair Credit Reporting Act of 1970 restricts the sharing of medical information, exemptions passed in the early 2000s permitted creditors to obtain medical information in connection with credit eligibility determinations.

Under the proposal, consumer reporting companies would be blocked from using medical debts and collection information on consumer reports. Creditors would also be barred from using medical debt for underwriting decisions and debt collectors would no longer be able to use what the CFPB referred to as “coercive collection practice.”

In a press briefing, Vice President Harris noted that more than one out of three U.S. adults struggle with medical debt, a disproportionate number of whom are from communities of color. Harris said this action would allow for more people to qualify for loans to purchase cars or homes or to qualify for rent.

Senior administration officials said Wednesday that they will solicit feedback from small businesses that may be affected by the proposed rule. The officials said the administration plans to proceed “expeditiously” and is aiming to propose the rule next year.