Biden administration proposes banning medical debt from credit reports
The Biden administration has proposed a groundbreaking move to alleviate the burden of medical debt on millions of Americans by banning such debt from credit reports. This proposal could potentially raise credit scores by an average of 20 points for more than 15 million individuals, leading to the approval of thousands more mortgages annually.
According to a fact sheet from Vice President Kamala Harris’s office, approximately 46 million people had medical debt listed on their credit reports in 2020. The proposed rule would not only remove medical debt from credit reports but also prevent lenders from using medical devices as collateral for loans and repossessing them if patients are unable to repay the loans.
The Consumer Financial Protection Bureau has been considering proposals since last fall to spare millions of Americans with unpaid medical bills from having that debt impact their credit reports. This move comes as part of the Biden administration’s efforts to address the rising costs of living and dissatisfaction with President Joe Biden’s handling of the economy.
Harris emphasized the importance of eliminating medical debt, noting that $7 billion in American Rescue Plan Act funds are being used to wipe out the debt of up to nearly 3 million people by the end of 2026. The proposed rule could be finalized early next year and would also prevent debt collectors from using medical debt listings on credit reports as leverage to pressure consumers into paying questionable bills.
The White House has been actively working to reduce Americans’ medical debt burden, with efforts dating back to 2022 when a four-point plan was laid out to protect consumers. The three largest credit reporting agencies have also taken steps to remove a significant portion of medical debt from consumer credit reports, providing relief to many individuals struggling with healthcare bills.
Overall, the proposed ban on medical debt from credit reports represents a significant step towards alleviating financial stress for millions of Americans and ensuring fairer access to credit opportunities.