Medical Debt Banned from Credit Reports by New Biden Administration Rule

The Biden administration has implemented a new rule that prohibits the inclusion of medical debt on consumer credit reports. This regulation, finalized by the Consumer Financial Protection Bureau (CFPB), aims to alleviate the financial burden of medical debt on Americans. It is expected to remove $49 billion in unpaid medical bills from the credit reports of approximately 15 million individuals, potentially improving their access to credit for mortgages, car loans, and small business loans.

The rule is set to take effect 60 days after its publication in the Federal Register. However, industry groups, including the Consumer Data Industry Association and the Cornerstone Credit Union League, have filed a lawsuit challenging the rule. They argue that it violates the Fair Credit Reporting Act, which they claim permits the inclusion of medical debt in credit reports.

Despite this legal challenge, the CFPB maintains that the rule will enhance consumer privacy and protect against inaccurate or coercive billing practices. While this will certainly provide important assistance for consumers,  medical creditors,  no longer able to use negative credit reporting  to coerce repayment,  may turn  to other more aggressive collection efforts.  According to bankruptcy expert Ed Boltz, "it is important to note that medical debt will not be reported to the credit bureaus, but people will still owe those amounts, subjecting them to collection activity, lawsuits, and even eventual sale by Sheriffs of their possessions, including potentially their home or car".  Bankruptcy, however,  remains a powerful option to fully and finally eliminate these medical debts.

If you have questions or concerns about your debts, take a free consultation at the Law Offices of John T. Orcutt to put your mind at ease and find out your options.