The Consumer Financial Protection Bureau today finalized a rule removing medical debt and medical bills from credit reports. The rule also prohibits lenders from considering medical information when making lending decisions.
In 2003, Congress restricted lenders from obtaining or using medical information, including information about medical debts, but gave regulators the authority to issue a rule to protect lenders’ legitimate risk, consumer, and other needs. Federal regulators subsequently issued a rulemaking to protect lenders’ ability to use medical debts in their credit decisions pursuant to Regulation V, which implements the Fair Credit Reporting Act, or FCRA. The CFPB’s new rule amends Regulation V to remove that protection.
The American Bankers Association and other groups raised numerous concerns about the rule after it was first proposed, saying it would increase credit risk and reduce credit availability for consumers. ABA also said the rule violates the Administrative Procedure Act because the CFPB is giving itself authorities that Congress did not intend and the rule is not supported by adequate evidence or reasoning.
“Prohibiting consideration of medical debt in credit underwriting would reduce lenders’ ability to understand consumers’ credit risk and ability to repay,” ABA said in comments to the bureau, with harmful consequences including “triggering tighter credit standards, higher prices, and reduced lending, and ultimately reducing access to consumer credit.”
