The CFPB today proposed a rule to prohibit lenders from considering medical debt and remove medical bills from most credit reports. The goal, the bureau said, is to increase privacy protections, increase credit scores and loan approvals, and prevent debt collectors from using credit reporting “to coerce people to pay.” The CFPB began the rulemaking in September last year, and it is expected that the bureau may issue additional proposals to implement other credit reporting changes the CFPB discussed at that time.
The CFPB’s proposed rule would prohibit credit reporting agencies from sharing information about medical debts with lenders and prohibit lenders from making lending decisions based on medical information. In 2003, Congress restricted lenders from obtaining or using medical information, including information about debts, through the Fair and Accurate Credit Transactions Act. Federal agencies subsequently issued a special regulatory exception to allow creditors to use medical debts in their credit decisions. The CFPB proposes reversing this policy. In support, the CFPB cited its own research claiming that information about medical debt was less predictive of creditworthiness than other types of debt. Notably, that report did not find medical debt had no predictive value.
The proposed rule would define “medical debt information” to exclude debt owed to third-party lenders and instead apply to debt the consumer owes directly to a healthcare provider, including after such debt has been sold on the secondary market. As a result, the rule would not prohibit use or reporting of information about debts for medical care charged to credit cards, including medical credit cards offered specifically for the payment of medical services. The CFPB issued an RFI last year seeking input on medical payments products. ABA’s comments at the time highlighted the banking industry’s concerns with any proposal that would reduce the availability of credit to pay for healthcare.
