Consumer watchdog releases potential new rules banning medical debt from consumer credit reports

CFPB medical debt rules overview:

• Who: The Consumer Financial Protection Bureau is proposing new rules prohibiting medical debt from inclusion on consumer credit reports.
• Why: Medical debt tradelines on credit reports can potentially affect consumers’ ability to obtain credit after a medical emergency, the CFPB says.
• Where: The proposed credit report medical debt rules would affect credit reporting agencies and data brokers nationwide.

The Consumer Financial Protection Bureau is proposing new rules to ban medical debt from being included on consumer credit reports and increase regulation of the data broker industry, Law360 reports.

The CFPB released an early outline of its plans to regulate the data broker industry and address the issue of unpaid medical bills on credit reports. In the 100-page outline, the CFPB expresses concern over the usefulness of including medical debt information on consumer credit reports.

“Medical debt collection tradelines appearing on consumer reports can have negative consequences for consumers, including impacting consumers’ ability to obtain credit (or to obtain it at favorable rates) after experiencing, for example, a medical emergency,” the CFPB’s outline states.

The CFPB also notes that medical debt can be utilized by debt collectors as leverage to potentially coerce consumers to pay false unpaid medical bills.

The Fair Credit Reporting Act was enacted by Congress in 1970 to regulate the consumer reporting industry, recognizing the need to balance the benefits of evaluating consumer credit while respecting consumers’ right to privacy.

FCRA establishes standards for accuracy and restricts certain aspects of data sharing to protect consumers’ sensitive data.

The CFPB is reportedly considering whether it should regulate data brokers as consumer reporting agencies if they collect and sell certain types of customer data like payment history, criminal records and income.

The proposed rules would limit the sale of certain data for marketing or advertising and subject data brokers to FCRA obligations, such as ensuring consumers have a right to obtain information held by the data brokers and dispute inaccurate information.

Proposed credit report medical debt rules are part of White House’s goal to relieve financial stress due to health care

On Sept. 21, the CFPB Director Rohit Chopra and Vice President Kamala Harris made a joint announcement about the proposed rules. Medical debt is one of the White House’s targets as part of its effort to relieve financial burdens tied to health care.

Harris said that the proposed rules would prohibit credit reporting agencies from utilizing medical debt collection tradelines on credit reports provided to lenders to determine a consumers’ credit eligibility.

Harris says the regulations would “make clear that medical debt cannot impact the credit scores of the American people.”

Chopra noted that the proposed credit report medical debt rules would not prevent lenders from having access to information needed for underwriting purposes, but that it would instead “increase the validity of the data creditors are accessing, and stop them from using information that says more about someone’s unexpected medical emergencies than their risk of late payments.”

CareCentrix recently agreed to pay $6.3 million to settle a class action lawsuit over a medical debt collection data breach.

What do you think about the CFPB’s proposed credit report medical debt rules? Join the discussion in the comments!

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