Biden Administration Moves to Ban Medical Debt from Credit Reports
The Biden administration is making a significant move to alleviate the burden of medical debt on Americans by proposing a rule to ban medical debt from credit reports. Vice President Kamala Harris announced on Tuesday that this rule, facilitated through the Consumer Financial Protection Bureau, aims to reduce the number of Americans with medical debt on their credit reports to zero, down from 46 million in 2020.
During a press call, Harris emphasized that this initiative would greatly improve the financial health and wellbeing of millions of Americans. She highlighted the unfairness of medical debt, stating that it hinders individuals from getting ahead financially. The administration estimates that implementing this rule could raise affected individuals’ credit scores by an average of 20 points and potentially lead to the approval of approximately 22,000 additional mortgages annually due to cleaner credit reports.
A recent study revealed that one in five U.S. households, including those with health insurance, are burdened with medical debt, with the average amount owed being around $4,600 per household. CFPB Director Rohit Chopra emphasized the need to end the practice of using credit reports to pressure patients into paying medical bills they may not owe, citing the inaccuracy and lack of predictive value of medical bills on credit reports.
In addition to the proposed rule, Harris called on states, local governments, and healthcare providers to utilize federal funds, such as those from the American Rescue Plan, to purchase and eliminate medical debt, prevent its further accumulation, and protect patients from aggressive debt collectors by expanding access to charity care.
The rule will be open to comments until August 12, 2024, with the earliest potential implementation date being next year. The Consumer Data Industry Association, representing major credit bureaus, stated that it is reviewing the proposal and highlighted measures already taken to remove a significant portion of medical collection debt accounts, extend the time before medical collections debt appears on credit reports, and delete resolved debts and medical collection debts below $500.