The CFPB Is Going to Wipe Out Medical Debt From Americans’ Credit Reports
The CFPB Is Going to Wipe Out Medical Debt From Americans’ Credit Reports
A new rule proposed by the Biden administration will remove as much as $49 billion in medical debt, raising the credit scores of millions of Americans.
By Paul Blest, More Perfect Union
The Consumer Financial Protection Bureau announced a sweeping effort Tuesday to erase medical debt from credit reports, which would help millions of Americans across the country wipe nearly $50 billion from their credit history.
The proposed rule, which CFPB Director Rohit Chopra told ABC News could go into effect next year, would ban credit reporting companies from including medical debt on reports sent to creditors. It would also close a loophole that allows lenders to use medical debt as a justification for lending decisions, and ban repossession of medical devices, including wheelchairs and prosthetic limbs, as loan collateral. (Yes, Americans have had their prosthetic limbs repossessed.)
If the rule is finalized, the CFPB projects that it would increase the credit scores of people who currently hold medical debt by an average of 20 points, and lead to the approval of tens of thousands of additional new mortgages every year.
“Our research shows that medical bills on your credit report aren't even predictive of whether you'll repay another type of loan,” Chopra told ABC News. “That means people's credit scores are being unjustly and inappropriately harmed by this practice.”
See our previous coverage of growing state and local efforts to buy up and forgive medical debt, which has become the #1 driver of personal bankruptcy in the United States:
An April report by the same body found that the approximately 15 million Americans who have outstanding medical debt carry an average balance of more than $3,100, and are disproportionately from the South and live in low-income communities. Chopra said in an interview with Good Morning America Tuesday that the decision is “going to be an enormous relief for so many people battling bills when it comes to medical visits.”
The decision will likely face pushback from the debt industry. The Association of Credit and Collection Professionals (ACA), an industry trade group, said last year that the Biden administration was “arbitrarily picking winners and losers in the marketplace and discriminating against certain professions such as health care providers.” (The ACA has donated more than $600,000 to Republicans running for Congress since 2020, according to Open Secrets).
The CFPB’s move comes as attention has grown in recent years to the albatross of medical debt, which a 2022 report by the same agency found totaled at least $88 billion. Under pressure from the Biden administration, the nation’s three largest credit reporting agencies in 2023 removed medical debt under $500 from credit reports.
Several state and local governments have passed legislation to remove medical debt from credit reports, in addition to working with the group Undue Medical Debt (formerly RIP Medical Debt) to buy out residents’ medical debt for pennies on the dollar and then abolish it.
In March, a group of Senate Democrats led by Sen. Sherrod Brown of Ohio called for the CFPB to wipe medical debt from credit reports, saying the practice “places patients at risk of downgraded credit and falling victim to predatory practices.”
Hope the CFPB continues to clean the credit reporting industry up. Taking unconscionably high and unmonitored medical debt reporting off the table is a fabulous step in the right direction.
Incredibly high medical equipment costs are just one of the many medical financial scams inflicted on American consumers by legalized theft under the guise of Agency driven “rules” promulgated under Borkism, unfettered capitalism or neoliberalism.
The mere act of requiring a prescription for a bewildering array of ADL and IADL support devices gives rise to unconscionable profits in the medical device industry. The current batch of medical device economic termites is exactly like a giant herd of Texas Longhorn steers running amok to fleece every possible consumer penny out of every American city and state without exception.
If a robber steals your cash at gunpoint, the GOP and Magatites go crazy for law and order. But, if a major corporation steals the same amount of money using a specifically written law that has no other purpose other than its use as an economic gun, the same folks think it’s ok. Ouch!