The Consumer Financial Protection Bureau finalized a rule on Tuesday that will bar medical debt from being included in credit scores. Medical debt impacts people’s ability to qualify for home mortgages, car loans, and even renting. The rule will go into effect 60 days after it has been published in the Federal Registrar, which has not happened yet.
The rule was proposed in June, and there was concern after Donald Trump’s victory in the 2024 presidential election that the Biden administration would not have enough time to finalize it. Such anxieties have been especially acute considering long-held conservative antipathy for the CFPB. Elon Musk has been especially vocal about his desire get rid of the CFPB.
“Today, we are building on this meaningful work by announcing an unprecedented final rule that will make it so medical debt is no longer included in your credit score,” Vice President Kamala Harris said in a statement. “This will be life-changing for millions of families, making it easier for them to be approved for a car loan, a home loan, or a small-business loan.”
The Trump administration could potentially reverse this move through its own rulemaking process. Collection companies are all but certain to oppose the finalized rule. As the CFPB notes, its rule “will help end the practice of using the credit reporting system to coerce payment of bills regardless of their accuracy.” In other words, it could slow down collections for medical debt, which people may not want to pay off if it is incorrect.
Disabled adults are disproportionately impacted by medical debt. According to the Centers for Disease Control and Prevention, around one in five families with at least one disabled family member have medical debt, versus one in 10 families without a disabled family member. Given that disabled people are two times more likely to live below the poverty level than non-disabled people, it can be much harder for them to pay off debt. In addition, Black people are 2.6 times more likely to have medical debt than white people.
Some states, including California, already have laws that prevent medical debt from being reflected in credit scores. In addition, in July 2022, Equifax, Experian, and TransUnion announced that all paid-off medical debt would be excluded from consumer credit reports. This led to the percentage of people with medical debt reflected in their credit scores dropping from over 15 percent to 5 percent.
“I know that our historic rule will help more Americans save money, build wealth, and thrive,” Harris concluded in her statement.
