CFPB Proposes Rule to Remove Medical Bills from Credit Reports

Impact of the Proposed Rule

The Consumer Financial Protection Bureau (CFPB) proposed a rule on June 11, 2024, that would remove most medical bills from credit reports. The proposed rule aims to: * Eliminate medical debt from consumer credit reports * Curb the use of medical debt in underwriting * Increase the accuracy of credit reporting

Key Provisions of the Proposed Rule

* Removes a regulatory exception in Regulation V from the limitation in the Fair Credit Reporting Act (FCRA) on creditors reporting medical debt * Prohibits creditors from reporting medical debt that is paid or is less than $500 * Extends the time consumers have to dispute medical debt on their credit reports

Benefits of the Proposed Rule

The CFPB estimates that the proposed rule would: * Remove approximately 70% of medical debt from credit reports * Increase credit scores for approximately 23 million consumers * Save consumers an estimated $2.2 billion per year in interest and fees

Concerns Raised by the Proposed Rule

Some concerns raised by industry groups about the proposed rule include: * Potential for increased costs to consumers as lenders may increase interest rates or fees to compensate for the loss of medical debt information * Difficulty for lenders in assessing creditworthiness without medical debt information * Potential for increased fraud as consumers may be less likely to pay medical bills if they know it will not impact their credit score

Next Steps

The CFPB is seeking public comment on the proposed rule until September 11, 2024. After considering the comments, the CFPB will issue a final rule. The final rule is expected to be effective in 2025.