Noah McCrory
Medical debt could soon be removed from credit reports, in a change proposed by the White House that could help millions of Americans get a job, rent a home or get a car loan.
Vice President Kamala Harris and Rohit Chopra, director of the Consumer Financial Protection Bureau, formally announced the proposal to take unpaid medical bills off the table to determine a person’s creditworthiness, at a news conference on Tuesday.
The idea is to no longer “unfairly punish people for getting sick,” Chopra said. He highlighted the potential financial damage caused by a trip to a hospital emergency room, a debt “taken on unexpectedly and in times of crisis,” he said.
The Biden administration signaled its intentions in September to craft the measure, among the most significant federal actions taken to resolve medical debt.
The three biggest credit bureaus — Equifax, Experian and TransUnion — stopped including some medical debts on credit reports starting last year. Excluded medical debts included bills paid and less than $500.
But the agencies’ voluntary actions left millions of patients with larger medical bills off their credit reports.
About 15 million Americans have more than $49 billion in medical bills pending collections, according to discoveries released by the CFPB in April.
Letting debts pile up due to often unplanned health care needs is a problem shared by many, forcing some to take on extra work, abandon homes and ration food and other basic needs, a KFF Health News-NPR investigation found. found.
Credit reports, a threat designed to force patients to pay their bills, are the most common collections tactic used by hospitals, according to one study. KFF Health News Analysis.
“Negative credit reports are one of the biggest problems for patients with medical debt,” said Chi Chi Wu, senior attorney at the National Consumer Law Center. “When we hear from consumers about medical debt, they often talk about the devastating consequences that bad credit from medical debt has had on their financial lives.”
While a single black mark on a credit score may not have a big effect for some people, it can be devastating for those with large unpaid medical bills. There is growing evidence, for example, that credit scores depressed by medical debt can threaten people’s access to housing and fuel homelessness in many communities.
At the same time, CFPB researchers I found that medical debt, unlike other types of debt, does not accurately predict a consumer’s creditworthiness, calling into question its usefulness on a credit report.
The rules announced Tuesday would prevent credit reporting agencies from considering medical debt when calculating credit scores. Lenders will no longer be able to use medical debt to determine whether someone is eligible for a loan.
The proposal will be subject to weeks of public comment and, if approved, will likely not come into force until 2025, after the November presidential elections – the result of which could derail the rule entirely.
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