June 11, 2024 — Press Release

Consumer advocates hail the measure, which will bring financial relief to millions

BOSTON – Consumer advocates at the National Consumer Law Center (NCLC) cheered today’s proposal from the Biden administration and the Consumer Financial Protection Bureau (CFPB) to prohibit the reporting of medical debts on credit reports. 

“This is a huge relief for the millions of people who’ve been severely harmed by the cascading effects of medical debt,” said Chi Chi Wu, senior attorney at the National Consumer Law Center. “For far too long, medical debt has devastated the credit history of too many consumers, harming their economic prospects. Yet, as the CFPB has found, medical debt has limited predictive value for creditworthiness compared to other types of debts.”

NCLC has long advocated the ban, filing 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. 

“This proposal by the CFPB will improve the lives of Americans,” said Jenifer Bosco, senior attorney at NCLC. “The CFPB’s proposed rule will help tens of millions of Americans who have medical debt on their credit reports, providing immediate relief to people unfairly harmed simply because they got sick.”

Previously, voluntary credit reporting changes by Equifax, Experian, and TransUnion eliminated medical debts under $500 from credit reports, as well as debts that were paid off, and instituted a one-year delay before including such debts on credit reports. However, an April 2024 report from CFPB found that, even after these changes, 15 million Americans still had more than $49 billion in outstanding medical bills on their credit reports, and that these consumers were more likely to live in predominantly Black and Hispanic census tracts. 

“Removing medical debt from credit reports is a racial justice victory as well as an economic one. It will improve the credit scores of millions of Black and Latino consumers who are disproportionately burdened by medical bills. This change also will provide significant relief for families in the South, the region with the highest concentration of medical debt and poor credit scores,” said Berneta Haynes, senior attorney at NCLC and author of the report, The Racial Health and Wealth Gap: Impact of Medical Debt on Black Families.

NCLC advocates noted that this rulemaking would have been stymied had the U.S. Supreme Court ruled that the CFPB’s funding structure was unconstitutional. 

“Once again, the CFPB delivers for millions of consumers,” said Lauren Saunders, associate director at NCLC. “This is why the Supreme Court’s decision to reject the baseless challenge to the stable and independent funding Congress gave the CFPB’s existence was so crucial and why we must ensure the CFPB’s continued survival in the face of attacks by corporate America.”

Advocates urged the CFPB to also ban negative reporting of credit card debts that reflect medical debts. Those debts can appear on both medical credit cards and general purpose credit cards. 

“A lot of medical debt is carried on credit cards, where it can be obscured when reported to the credit bureaus,” said April Kuehnhoff, senior attorney at NCLC. “Medical debt shouldn’t harm credit records regardless of how it shows up.”

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