The Consumer Financial Protection Bureau is considering a proposal that could provide relief to millions of Americans burdened by unpaid medical bills. Under this initiative, medical debt would no longer be reported on credit reports, potentially easing the financial strain on many individuals.
Currently seeking input from small businesses that might be impacted by this proposed rule and anticipates issuing it in the upcoming year, the CFPB hopes to prohibit credit reporting agencies from including medical debt and collection data in reports used by creditors to assess loan applications. Instead, creditors would solely consider non-medical information when making lending decisions. Additionally, debt collectors would lose the ability to leverage medical debt listings on credit reports to pressure consumers into paying disputed bills.
CFPB Director Rohit Chopra emphasized that medical bills often contain errors, leading many individuals into disputes between insurance companies and healthcare providers. Despite the limited predictive value of medical bills in credit decisions, approximately 20% of Americans currently report having medical debt on their credit reports.
This proposal aligns with the CFPB's broader efforts to alleviate the impact of medical debt on consumers, including scrutiny of medical billing practices such as costly products like medical credit cards and installment loans. The White House also aims to mitigate Americans' medical debt burden as part of its strategy to address inflation and rising living costs.
Vice President Kamala Harris highlighted that medical debt can harm credit scores, affecting people's ability to purchase homes, secure mortgages, or start small businesses. Last year, the three major credit reporting agencies—Equifax, Experian, and TransUnion—committed to removing nearly 70% of medical debt from consumer credit reports.
Link: CNN
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