Personal Finance

Biden administration moves to ban medical debt from credit reports

It said affected individuals’ credit scores would improve by an average of 20 points and lead to the approval of approximately 22,000 additional mortgages every year.

Vice President Kamala Harris speaks during a Juneteenth concert on the South Lawn of the White House in Washington, Monday, June 10, 2024.
Susan Walsh/AP (File)

The Biden administration is moving to ban medical debt from credit reports.

Vice President Kamala Harris said Tuesday that the proposed rule, taken through the Consumer Financial Protection Bureau, would reduce the number of Americans with medical debt listed on their credit reports to zero, down from 46 million in 2020.

In a press call Tuesday, Harris said the move would help improve the financial health and wellbeing of millions of Americans.

Medical debt, she said, "makes it more difficult to get by, much less get ahead. That is simply not fair."

The administration calculates that if implemented, the rule would raise affected individuals' credit scores by an average of 20 points, and could lead to the approval of approximately 22,000 additional mortgages every year as a result of the cleaned-up credit reports.

A recent study estimated that one in five U.S. households live with medical debt, including people with health insurance; and that on average, a typical American household owes about $4,600 in medical debts.

“The CFPB is seeking to end the senseless practice of weaponizing the credit reporting system to coerce patients into paying medical bills that they do not owe,” said CFPB Director Rohit Chopra. “Medical bills on credit reports too often are inaccurate and have little to no predictive value when it comes to repaying other loans.”

In a separate release, Harris also called on states, local governments and health care providers to provide further relief by using available federal funds, especially from the American Rescue plan, to purchase and eliminate medical debt, prevent the further accumulation of medical debt and protect patients from aggressive debt collectors by expanding access to charity care.

Following the proposal, the rule will be open to comments until August 12, 2024. A CFPB representative said the earliest the new rule would take effect would be next year.

In a statement, the Consumer Data Industry Association, which represents the major credit bureaus, said it was reviewing the proposal — but that it had already taken measures that had resulted in the removal of nearly 70% of medical collection debt accounts.

The association said it had also extended the time before medical collections debt appears on credit reports and deleted resolved debts and medical collection debts below $500.

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