On Tuesday, Vice President Kamala Harris announced that the proposed regulation, put forth by the Consumer Financial Protection Bureau (CFPB), aims to eradicate the presence of medical debt on Americans’ credit reports entirely, down from a staggering 46 million individuals in 2020.
During a press briefing on Tuesday, Harris emphasized that this initiative would significantly enhance the financial stability and overall wellness of countless Americans. She underscored how medical debt exacerbates financial hardships, hindering individuals from making progress. According to Harris, “It makes it more difficult to get by, much less get ahead. That is simply not fair.”
The administration’s projections suggest that if enforced, this regulation would elevate affected individuals’ credit scores by an average of 20 points. Additionally, it could potentially facilitate the approval of approximately 22,000 more mortgages annually due to the improved credit reports.
Recent research indicates that one out of every five households in the United States grapples with medical debt, irrespective of whether they possess health insurance. On average, an average American household carries a medical debt burden of around $4,600.
Rohit Chopra, Director of the CFPB, emphasized, “The CFPB is seeking to end the senseless practice of weaponizing the credit reporting system to coerce patients into paying medical bills that they do not owe.” He highlighted the prevalence of inaccuracies in medical bills on credit reports, which hold minimal predictive value regarding repayment of other loans.
In a separate statement, Harris urged states, local governments, and healthcare providers to utilize available federal funds, particularly from the American Rescue Plan, to alleviate medical debt burdens. She encouraged the purchase and elimination of existing medical debt, prevention of further accumulation, and expansion of access to charity care to shield patients from aggressive debt collection tactics.
Following the proposal, the rule will remain open to public comments until August 12, 2024. A representative from the CFPB indicated that the earliest implementation of the new rule would likely occur next year.
The Consumer Data Industry Association, representing major credit bureaus, stated that it was reviewing the proposal. It noted that prior measures had resulted in the removal of nearly 70% of medical collection debt accounts. Furthermore, the association extended the time frame before medical collections debt appears on credit reports and deleted resolved debts and medical collection debts below $500.
