Consumers in the United States are about to see major changes in how medical debt is handled on credit reports, in a shift aimed at making it easier for millions of people to get loans. The Consumer Financial Protection Bureau said Tuesday it would no longer allow lenders to consider medical debt when determining whether to lend to someone.
This new rule would wipe away some $49 billion in medical debt from the credit reports of more than 15 million Americans. The research by the CFPB indicates that medical debt does not predict with precision how well borrowers pay their bills, adding this shift could mean the approval of up to an estimated 22,000 more mortgages annually.
People who get sick shouldn’t have their financial future upended,” said CFPB Director Rohit Chopra, adding the rule is designed to close a loophole that has been exploited by debt collectors misusing the credit reporting system to coerce consumers into paying medical bills that are often not owed.
U.S. Vice President Kamala Harris said this rule “will help more Americans save money, build wealth, and thrive.”
This comes just days before President Joe Biden is set to transfer power to President-elect Donald Trump. The rule takes effect in 60 days and its future is uncertain: Trump has indicated he wants to reduce government regulations and reverse much of Biden’s policy agenda.
A number of Republicans have expressed concern that the shift could hurt the accuracy of credit reports. The Consumer Data Industry Association and several trade groups that represent financial institutions opposed the change, while the American Medical Association supported it.
