U.S. agency proposes rule to eliminate medical debt from most credit reports, saying it’s an unreliable predictor of payment
Kentucky Health News
The federal Consumer Finance Protection Bureau is proposing to eliminate medical debt from most credit reports, stop companies from sharing debt information and bar lenders from making decisions based on medical data.
The agency’s research has found that medical debt “is not a good predictor of loan repayments,” so it thinks the regulation would “improve underwriting, stop denials of loans to consumers who would repay, and lead to about 22,000 additional safe mortgages a year,” Lotven writes.
CFPB Director Rohit Chopra said the credit-reporting system is often inaccurate, yet is used “to coerce patients into paying medical bills that they do not owe.”
In 2003, Congress restricted lenders from using medical information about debts, but “agencies created a regulatory loophole that let creditors use such information in their decisions,” Lotven reports. The proposed rule “would close the regulatory loophole from 2003 by establishing guardrails for credit-reporting companies and banning lenders from taking medical devices as collateral for a loan as well as from repossessing a device if the loan is not repaid.”
UPDATE, June 12: “Tuesday’s announcement builds on a 2022 effort by the big credit bureaus TransUnion, Equifax and Experian to keep debt off consumers’ reports until it’s at least a year old,” Axios reports. “The two major credit scoring companies, FICO and VantageScore, have also reduced how much medical debts can factor into consumers’ scores at that time.”