In a significant shift, the Consumer Financial Protection Bureau (CFPB) implemented a new federal rule that prohibits medical debt from appearing on consumer credit reports.
Overview of the Rule
The CFPB finalized the rule in early January, marking a landmark change in credit reporting practices. Under this rule, credit reporting agencies are no longer permitted to include medical bills on consumer credit reports. This move eliminates one of the primary sources of credit score damage for many Americans who have struggled to pay for unexpected or excessive medical expenses.
The Rationale Behind the Change
Medical debt is often incurred under circumstances beyond an individual’s control, such as sudden illnesses, accidents, or emergency procedures. Unlike other types of debt, it does not always reflect a person’s ability or willingness to manage their finances. According to the CFPB, medical bills have historically been a leading cause of poor credit scores, disproportionately affecting low-income households.
CFPB Director Rohit Chopra stated, “Medical debt has been weaponized by debt collectors and credit reporting agencies, causing untold harm to individuals and families. This rule ensures that medical debt no longer sabotages people’s financial futures.”
