CFPB Bans Medical Debt From Credit Reports—But GOP Wants to Reverse It

Months after more than half of respondents to an Associated Press poll said it was "extremely or very important" for the federal government to take action to help people with medical debt, the Consumer Financial Protection Bureau on Tuesday finalized a rule to keep such debt off credit reports.

With broad public support, the rule appeared to be an uncontroversial slam dunk for the Biden administration in the last days of President Joe Biden's presidency—but Republicans, who now have majorities in Congress and are poised to take over the White House in less than two weeks, have signaled that they would take action to undo the CFPB's regulations, including the medical debt rule.

U.S. Sen. Tim Scott (R-S.C.), the new chair of the Senate Banking Committee, said last month that the CFPB should halt all rulemaking until President-elect Donald Trump takes office.

"It is paramount that President Trump can begin his administration on January 20 with a fresh slate to implement the economic agenda that the American people resoundingly voted for," Scott said.

The senator's comments suggested that Americans who voted for Trump did so in order to continue paying overdraft fees, having their personal information sold by predatory data brokers, and being penalized for owing medical bills—all of which the CFPB has taken action on since the November elections.

As Noam N. Levey wrote at KFF Health News, the CFPB on Tuesday "effectively dared the incoming Trump administration and its Republican allies in Congress to undo rules that are broadly popular and could help millions of people who are burdened by medical debt."

"People who get sick shouldn't have their financial future upended."

The new rule would remove $49 billion in unpaid medical debt from credit reports by amending Regulation V, which implements the Fair Credit Reporting Act.

Lenders are restricted from obtaining or using medical information to make lending decisions. But federal regulators have created an exception to that restriction, allowing companies to consider medical debt. The new rule ends that exception by banning medical bills on credit reports, which the CFPB said has led to a practice of using the credit reporting system to coerce payments even if bills are inaccurate, as they frequently are, according to the agency.

About 15 million people will be helped by the new regulation, said the CFPB, with credit scores of people with medical debt boosted by an average of 20 points.

An estimated 100 million Americans owe debt for healthcare they've obtained, forcing many to cut spending on groceries, housing, and other essentials.

An informal KFF Health News poll of people facing eviction or foreclosure in the Denver area in 2023 found that nearly half of people surveyed said medical debt played a role in their housing insecurity.

The inclusion of medical debt on credit reports by companies like Experian, Equifax, and TransUnion can harm Americans' ability to obtain jobs, mortgages, and rental apartments, even as CFPB research shows that medical debt is a poor predictor of whether a consumer will repay a loan.

"People who get sick shouldn't have their financial future upended," said CFPB Director Rohit Chopra. "The CFPB's final rule will close a special carveout that has allowed debt collectors to abuse the credit reporting system to coerce people into paying medical bills they may not even owe."

Billionaire Trump megadonor Elon Musk, who has become a top adviser to the president-elect and was picked to co-lead the proposed Department of Government Efficiency, has made clear that the CFPB would be a key target of the advisory body, calling for the agency to be "deleted" in November.

Despite Republicans' repeated claims that Trump will lead the party in securing an agenda that serves working families, lobbying by the credit reporting industry over the medical debt rule has made clear whose side the GOP is on.

Equifax said in August, two months after the CFPB proposed the rule, that the government is "not permitted" to regulate the industry in such a way.

House Financial Services Committee Chairman Patrick McHenry (R-N.C.) also called the proposal "regulatory overreach."

Chopra said last month that despite Republicans' objections, the CFPB would not "be a dead fish" ahead of Trump's term.

"We will continue to defend consumers' rights," he said, "and to hold companies accountable."