CFPB Proposes Prohibiting Inclusion of Medical Debt on Consumer’s Credit Reports 

WASHINGTON – Consumer advocates at the National Consumer Law Center (NCLC), Community Catalyst, Americans for Financial Reform, National Association of Consumer Advocates, Undue Medical Debt, U.S. PIRG, and Colorado Center on Law and Policy cheer today’s announcement that the Consumer Financial Protection Bureau (CFPB) is proposing a prohibition on the reporting of all medical debts on credit reports.  

“Negative credit reporting is one of the biggest pain points for patients with medical debt,” said Chi Chi Wu, senior attorney at the National Consumer Law Center. “When we hear from consumers about medical debt, they often talk about the devastating consequences that bad credit from medical debts has had on their financial lives.  A bad credit score doesn’t just affect your ability to get credit, but also your employment prospects, insurance rates, and ability to get rental housing. Yet, as the CFPB has found, medical debt has limited predictive value for creditworthiness compared to other types of debts.”

NCLC filed a petition to the CFPB in September 2022 requesting that the CFPB start a rulemaking process to ban the reporting of medical debts on credit reports.  Community Catalyst also filed a petition to ban the reporting of medical debts in April 2023, for which U.S. PIRG filed a comment in support.

“We applaud the Biden-Harris administration for taking important steps to address the medical debt crisis in America,” said Emily Stewart, executive director, Community Catalyst. “This is an important milestone in our collective efforts and will provide immediate relief to people that have unfairly had their credit impacted simply because they got sick. Nobody, no matter where we live or how much money we have, should be forced to make the impossible choice between getting essential care and going into debt.”

Voluntary credit reporting changes by Equifax, Experian, and TransUnion instituted a one-year delay before including alleged medical debts on credit reports. The three credit bureaus also eliminated the reporting of unpaid medical debts less than $500 and removed paid medical debts. However, CFPB research highlighted the limitations of these changes, including that about half of consumers with medical debts on their credit reports would continue to have those debts reported after the voluntary changes and that consumers whose debt would be removed were more likely to be white and higher income. 

“The voluntary changes by the credit bureaus were simply not enough,” said Julia Char Gilbert, Connelly Policy Advocate at Colorado Center on Law and Policy. “Patients with medical debts over $500 are often most vulnerable to the catastrophic harms of damaged credit reports, a key reason that Colorado moved to ban credit reporting of all medical debt. The CFPB’s decision to extend these protections to all Americans is a huge win for patients and their families.”

“Once again, the CFPB delivers for millions of consumers,” said Elyse Hicks, consumer policy counsel at Americans for Financial Reform “This is why it’s so important to defend the CFPB and ensure its continued survival in the face of attacks by corporate America.” 

“With this thoughtful action, the Bureau will relieve patients of the burden that unpredictable and often confusing medical bills could negatively impact other aspects of their financial lives,” said Christine Hines, legislative director at the National Association of Consumer Advocates. “Removing credit reporting of shock medical debts will no doubt improve the financial well-being of millions of people.”

“As the leader of an organization committed to erasing burdensome medical debts, I’m thrilled to see this action taken by the CFPB,” said Undue Medical Debt CEO and president Allison Sesso. “This proposal ensures no one’s credit worthiness hinges on their necessary healthcare. And while this is a great stride, we need the federal government to also identify, absent credit reporting data, how we can continue to track the scale of this enormous crisis. Medical debts are often obscured from reporting when patients pay with credit cards or borrow money from friends/family.”  

“As health care prices rise and patients are left shouldering more of the costs in out-of-pocket expenses, this announcement is welcome news,” said Patricia Kelmar, senior director of health care campaigns for U.S. PIRG.  “We’ve known for years that medical debt doesn’t predict credit defaults, nor does it accurately predict a person’s desire and willingness to pay off loans. In fact, CFPB’s own research showed that medical billing data on a credit report is ‘less predictive of future repayment than reporting on traditional credit obligations.’”

“This will help millions of consumers whose credit reports contain medical debts, including Black consumers who are disproportionately burdened by medical bills,” said Berneta Haynes, senior attorney at the National Consumer Law Center. “The CFPB’s research found that 13.5 percent of consumers with credit reports – about 27 million Americans – have medical debts shown on their credit reports.”  Ms. Haynes is the author of a March 2022 NCLC report The Racial Health and Wealth Gap: Impact of Medical Debt on Black Families.