Biden administration seeks to eliminate consumer medical debt from most credit reports with proposed rule

The Biden administration is pushing to prevent medical debt to be considered in most decisions made about whether someone qualifies to rent an apartment, buy a car or take out a mortgage.

The Consumer Financial Protection Bureau said Tuesday it is planning a rule that would remove medical bills from credit reports and prevent creditors from making decisions based on medical information.

The proposed rule would also prevent lenders from repossessing medical devices, such as wheelchairs, if people are unable to repay the loan.

“No one should be denied access to economic opportunities simply because they experience a medical emergency,” Vice President Kamala Harris said during a conference call outlining the planned rule.

The administration announced plans for the rule in September, and a senior administration official said he hopes to finalize it early next year.

The CFPB has stated that medical debt can be a poor indicator of how likely someone is to repay a loan. These expenses are often unplanned like buying a car or a house, and patients may have little control over the progress of a serious illness.

CFPB Director Rohit Chopra also noted Tuesday that research shows billing errors frequently appear on credit reports. He said the rule would stop debt collectors “from using the credit report as a cudgel” to force people to pay bills they may not owe.

The three national credit reporting agencies — Experian, Equifax and TransUnion — said last year that they were removing medical collections debts under $500 from U.S. consumer credit reports.

But the CFPB said Tuesday that even with that change, 15 million people still have $49 billion in medical bills outstanding from collections that show up in the credit reporting system.

The CFPB will receive comments or feedback on the proposed rule until August 12.

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