CFPB Releases Final Medical Debt Credit Reporting Rule

The Consumer Financial Protection Bureau this morning announced the release of its final rule prohibiting the inclusion of medical debt on consumer credit reports. This rule is expected to remove $49 billion in medical debt from credit reports, impacting approximately 15 million consumers. Additionally, it bars lenders from considering medical information in credit decisions, addressing concerns about the fairness and accuracy of medical debt in credit assessments.

Why it matters: Medical debt has long been a controversial factor in credit reporting. Unlike other debts, medical expenses are often unexpected and can involve disputes over billing errors or insurance coverage. The CFPB’s research found that medical debt is a poor predictor of loan repayment, leading to unnecessary denials for mortgages and other credit products. By eliminating medical debt from credit reports, the CFPB estimates an additional 22,000 affordable mortgages could be approved annually, with affected consumers seeing credit score increases of about 20 points.

Critics argue that the CFPB is overstepping its regulatory authority, targeting practices that are not within its purview and have sounded off against it. Industry groups, including ACA International, have already challenged the CFPB in court over similar measures, citing concerns about overreach and potential harm to credit markets. Congressional Republicans have also expressed their displeasure.

Credit: mikegibb

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