Source: WFAE
The Consumer Financial Protection Bureau proposed new federal regulations this month that would prohibit including current and future medical debt on credit reports. The proposal would protect tens of millions of Americans burdened by medical bills they cannot afford.
The regulations help fulfill a pledge by the Biden Administration to address the uniquely American problem of medical debt, which is estimated to affect 100 million Americans. For those with large health care debts, the impact can be devastating. A low credit score can threaten access to housing and fuel homelessness, and make it harder to get a loan or force one to borrow at higher interest rates. All this despite research that says medical debt (unlike other types of debt) does not accurately predict a consumer’s creditworthiness.
“We’ve heard stories of individuals who couldn’t get jobs because their medical debt was impacting their credit score and they had low credit,” said Mona Shah, a senior director at the nonprofit Community Catalyst. Shah said the proposed regulations would have a major impact on patients’ financial security and health. “This is a really big deal,” she noted.
The three largest credit agencies, Equifax, Experian, and TransUnion, stopped including medical debt less than $500 on credit reports last year. While that helped many, the limited scope left out many patients with bigger medical bills on their credit reports.
A recent CFPB report found that 15 million people still have such bills on their credit reports, despite the voluntary changes. Many of these people live in low-income communities in the South, according to the report.
“No one should be denied access to economic opportunity simply because they experienced a medical emergency,” Vice President Kamala Harris said in regards to the new proposal.
The Biden administration called on state and local governments to make further reforms, including buying and retiring medical debt, restricting debt collection by hospitals, and making hospitals provide more charity care to low-income patients to help prevent medical debt in the first place.
The new federal regulations are now open for public comments, and administration officials hope to issue a final rule early next year.
