The Biden administration completed a new rule Tuesday that will prevent medical debt from showing up on credit records for U.S. customers.
About 15 million Americans will have $49 billion in medical bills removed from their credit records as a result of the adjustment, which administration officials had suggested during the summer and is scheduled to go into effect in March. Additionally, lenders will not be allowed to use medical information when making lending choices, according to the Consumer Financial Protection Bureau.
CFPB Director Rohit Chopra said in a statement that people’s financial futures shouldn’t be disrupted by illness. A specific carveout that has permitted debt collectors to misuse the credit reporting system to pressure consumers into paying medical bills they may not even owing will be closed by the CFPB’s final rule.
A 2024 survey conducted by KFF, a nonprofit organization that studies health policy issues, found that almost one in twelve American adults owe money for medical bills. Despite being a contributing factor in thousands of denied mortgage applications, the CFPB found that a medical bill on a person’s credit report was a poor indicator of whether they would repay a loan.
According to the agency, Americans with medical debt on their credit reports may experience an average 20-point increase in their credit scores, and the change is expected to result in the approval of around 22,000 more mortgages annually.
In 2023, the three main U.S. credit bureaus declared that any medical debts under $500 or those that had already been paid off would no longer be listed on credit reports.
Weeks before President-elect Donald Trump returns to office, Biden administration officials are scrambling to protect parts of their work. On Monday, for instance, the White House declared that new offshore oil and gas drilling will not be permitted along the majority of the U.S. coastline. Advocates are getting ready for the anticipated repeal of several consumer finance protections that the CFPB has put in place over the past four years. The CFPB has been a prominent target of some Republican politicians and Trump supporters, such as Elon Musk.
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