The Consumer Financial Protection Bureau (CFPB) has issued final rules blocking medical bills from being included in credit reports. The CFPB estimates that this action will remove $49 billion from credit reports, impacting approximately 15 million individuals.
The CFPB says the rule will increase privacy protections and prevent debt collectors from using the credit reporting system to coerce people to pay bills they may not owe.
The CFPB adds that it has found that medical debts provide little predictive value to lenders about borrowers’ ability to repay other debts. Consumers frequently report receiving inaccurate bills or being asked to pay bills that should have been covered by insurance or financial assistance programs.
The CFPB predicts the rule will lead to the approval of approximately 22,000 additional mortgages every year and that Americans with medical debt on their credit reports could see their credit scores rise by an average of 20 points.
Health care is a mess in the US as costs continue to rise and the government continues to meddle in the market. While Obama Care (the Affordable Care Act) was supposed to fix all of this, it has accomplished little. Meanwhile, policymakers have squabbled as to how to address the many challenges; thus, many issues remain. Hospitals and healthcare providers have had to adapt to the moving target of health pricing, which suffers from government influence. At times, this has led to arbitrary pricing. Astute individuals frequently challenge invoices, and disputes can last for months or years. On the bright side, at least the US is not Canada or the UK, where universal care has led to challenges such as rationing and a two-tier system.
The final rule includes the following:
- Prohibits lenders from considering medical information: The rule ends the special regulatory carveout that previously allowed creditors to use certain medical information in making lending decisions. This means lenders will also be barred from using information about medical devices, such as prosthetic limbs, that could be used to require that the devices serve as collateral for a loan for the purposes of repossession.
- Bans medical bills on credit reports: The rule bans consumer reporting agencies from including medical debt information on credit reports and credit scores sent to lenders. This will help end the practice of using the credit reporting system to coerce payment of bills regardless of their accuracy. Lenders will continue to be able to consider medical information to verify medical-based forbearances, verify medical expenses that a consumer needs a loan to pay, consider certain benefits as income when underwriting, and other legitimate uses.
The rule will be effective 60 days after publication in the Federal Register.