Biden Admin. Removing Medical Debt Records from Credit Reports
OAN’s Abril Elfi
2:18 PM – Friday, September 22, 2023
The Biden Administration has announced their plans to erase medical debt records from consumer credit reports.
On Thursday, the Consumer Financial Protection Bureau (CFPB) outlined its proposed rules to prevent unpaid medical bills from negatively impacting patients’ credit scores. The bureau expects to issue a proposed rule next year.
Vice President Kamala Harris spoke on the matter, stating that more than 100 million Americans have unpaid medical debt.
She also emphasized how medical debts have lowered residents’ credit scores, impacting their ability to buy a home, get a mortgage, or own a small business.
“We know credit scores determine whether a person can have economic health and well-being, much less the ability to grow their wealth,” she said. “Today, we are offering a solution to fix this problem … Together, these measures will improve the credit scores of millions of Americans so that they will better be able to invest in their future.”
If the rule is approved, consumer credit companies will be prohibited from including medical debt and collection information on reports used by creditors to make underwhelming decisions.
When reviewing borrowers’ loan applications, creditors would only be authorized to evaluate non-medical information. The agency also stated that debt collectors would no longer be able to use the inclusion of medical debt on credit reports as leverage to compel individuals into paying questionable invoices.
CFPB Director Rohit Chopra also spoke on the function of the proposals, emphasizing that when someone is sick, their focus should be on getting better.
“Research shows that medical bills have little predictive value in credit decisions, yet tens of millions of American households are dealing with medical debt on their credit reports,” Chopra said. “When someone gets sick, they should be able to focus on getting better, rather than fighting debt collectors trying to extort them into paying bills they may not even owe.”
Chopra also highlighted how many of these healthcare bills contain mistakes that often burden families.
“Families are often barraged with a string of confusing and error-ridden bills, and too many of us have ended up in a doom loop of disputes between insurance companies and healthcare providers,” he said. “These bills, even ones where the patient doesn’t owe anything further, can end up being reported on the patient’s credit report.”
The White House is also actively working to reduce Americans’ medical bill debts as part of an effort to help people cope with inflation and the higher cost of living.
CFPB is also reportedly investigating medical bill practices, including medical credit cards and installment loans.
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What types of stakeholders are encouraged to provide feedback on the proposed rules regarding the removal of medical debt from credit reports
That are incorrect, can wreak havoc on a person’s credit and financial well-being.”
The proposed rules aim to address these issues by removing medical bills from credit reports. However, the CFPB notes that the impact of medical debt on credit scores may still linger due to other negative factors such as missed payments or collections related to non-medical debts.
Consumer advocates and healthcare organizations have praised the Biden Administration’s plans. They argue that medical debt should not be a determining factor in a person’s creditworthiness, as healthcare costs often arise from unforeseen circumstances and should not penalize individuals financially.
However, critics have raised concerns about the potential consequences of removing medical debt from credit reports. They argue that lenders rely on credit scores to assess an individual’s financial responsibility and ability to repay debts. Without including medical debt in credit reports, lenders may not have a complete picture of a borrower’s financial situation.
The CFPB is currently seeking public input on the proposed rules. Stakeholders, including consumers, industry experts, and organizations, can submit comments and provide feedback before the final rule is issued.
Overall, the Biden Administration’s efforts to erase medical debt records from consumer credit reports aim to provide relief to millions of Americans burdened by healthcare expenses. By removing this debt from credit reports, individuals may have improved access to credit and financial opportunities, ultimately contributing to their economic well-being and ability to invest in their future.
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