Unreimbursed medical bills will no longer show up on credit reports, preventing people from getting mortgages, auto loans and small business loans, according to a final rule released by the Biden administration on Tuesday.
According to the bureau, Consumer Financial Protection Bureau rules will remove $49 billion in medical debt from the credit reports of more than 15 million Americans, which will affect whether lenders issue loans. This means that you will no longer be able to take it into account when making decisions.
The change is estimated to increase credit scores by an average of 20 points and could result in 22,000 additional mortgages being approved each year, the bureau said.
In a statement announcing the rule, Vice President Kamala Harris said the rule would be “life-changing” for millions of families and would “make it easier to get approved for auto loans, mortgages, and small business loans.” It will become.” Our historic rules help more Americans save money, build wealth, and prosper. ”
“No one should be denied economic opportunity because they become ill or experience a medical emergency,” she said.
However, Reuters notes that Tuesday’s announcement came despite calls from Republicans in Congress for the Biden administration to halt enacting new rules ahead of President-elect Donald Trump’s inauguration. That means he or his allies in Congress could try to repeal the ban.
“Team Trump will likely seek to freeze or reverse these actions, but that is not guaranteed,” Jarrett Seiberg, an analyst at TD Cowen Washington Research Group, said in a report. No,” he said. “Trump 2.0 is more populist than 2017, so reversing the ban on including medical debt on credit reports or dropping enforcement actions against credit reporting agencies may not be a priority. be.”
Harris also announced that state and local governments leveraged sweeping pandemic-era relief measures in 2021 to eliminate more than $1 billion in medical debt for more than 700,000 Americans.
The administration announced plans for this rule in fall 2023.
The CFPB said medical debt is a poor predictor of a person’s ability to repay loans. Three national credit reporting agencies, Experian, Equifax and TransUnion, announced last year that they would remove medical collection debts under $500 from U.S. consumer credit reports.
“Medical debt burdens millions of families across the country, can unfairly harm an individual’s credit record, and can be difficult to qualify for affordable loans,” said Chuck Bell, director of advocacy programs at Consumer Reports. It makes it difficult to get a job, get a job, even rent an apartment.” said in a statement. “Many consumers have inaccurate or disputed medical debts on their credit reports because the medical billing and insurance reimbursement systems are so complex and confusing.”
The Biden administration’s new rules will target unpaid bills that appear on credit reports.
