The Biden administration on Tuesday proposed a rule that would bar credit reporting agencies from including medical debt on credit reports sent to lenders, a decision aimed at keeping creditors from obtaining and using information about medical and dental debt to make credit eligibility determinations. “We are making it so that medical debt cannot be used against you when you apply for a car loan, a home loan or a small-business loan or something of that nature,” Vice President Kamala Harris said in a call with reporters announcing the rule. Consumer Financial Protection Bureau Director Rohit Chopra said the rule would also mean aggressive debt collectors that buy medical debt from health care providers would have less leverage to force consumers to pay for collections that might not even be accurate.
“Some have seized on medical debt as a major money-making enterprise,” he said. Debt collectors buy debt for pennies on the dollar and then threaten to report it to credit reporting agencies, which could harm someone’s credit score and ability to access a loan significantly, Chopra said. “The credit reporting system is more closely resembling a weapon for debt collectors, rather than a tool for lenders to assess someone’s likelihood to repay a loan,” he said.
Chopra said he expects the rule to be finalized early next year. About 15 million Americans have $49 billion worth of medical debt in collections listed on their credit reports, according to data released in.
