STATEMENT: New rule to remove medical debt from some credit reports

WASHINGTON —  The Consumer Financial Protection Bureau (CFPB) finalized on Tuesday a rule that would eliminate medical debt from most credit reports. Under the new rule, when a lender asks a credit agency for information about an applicant’s debt, the agency will need to exclude medical debt from  the report it sends to the lender. 

U.S. PIRG and other advocates worked for years to get the CFPB to protect people from the negative impact that medical debt has on consumer credit ratings. 

U.S.PIRG pointed to two main reasons why creditors should not make decisions about loans based on medical debt:

1. The frequency of medical billing errors. According to the CFPB, more than four in ten people with medical debt have received an inaccurate bill. And almost seven in ten have been asked to pay a bill that should have been covered by insurance.
2. Medical debt is not a predictor of credit-worthiness. The CFPB’s own report showed that medical debt is not an indicator of a person’s desire and willingness to pay off loans. As opposed to consumer debt, which often results from irresponsible spending, medical debt is often unavoidable.  

The CFPB first proposed this rule on June 11, 2024, and then finalized it this week. PIRG submitted comments to support the rule and urged the agency to go further by removing medical debt from reports sent to landlords and employers as well. Furthermore, PIRG has asked the CFPB to take action against the purveyors of medical credit cards and stop health care providers from marketing medical credit cards.

In response to the CFPB issuing its final rule, Patricia Kelmar, U.S. PIRG’s health care campaigns director, made the following statement:

 “Any one of us could incur crushing medical debt after a sudden injury or illness. This new rule is good news for at least 14 million Americans – including many financially responsible families who have accumulated medical debt from unpredictable health issues, high out-of-pocket costs, insurance claim denials and billing errors.The CFPB’s important work on medical debt reporting offers yet another example of how this crucial agency protects consumers from unfair practices.”