Podcast - The CFPB's Rule to Remove Medical Debt from Credit Reports

Welcome to another podcast of Clearly Conspicuous. As we've noted in previous sessions, our goals in these podcasts is to make you succeed in an environment that's very, very aggressive, make you aware of what's going on and give you practical tips for success. As always, it's a privilege to be with you today.

CFPB Announces Rulemaking to Remove Medical Bills from Consumer Credit Reports

Today, we discuss the CFPB's interest in removing medical debt from credit reports. The Consumer Financial Protection Bureau announced it is beginning a rulemaking process to remove medical bills from Americans' credit reports. The CFPB outlined proposals under consideration that would help families financially recover from medical crises, stop debt collectors from coercing people into paying bills they may not even owe, and ensure that creditors are not relying on data that is often plagued with inaccuracies and mistakes. According to the CFBP Director Rohit Chopra, "Research shows that medical bills have little predictive value in credit decisions. Yet tens of millions of American households are dealing with medical debt on their credit reports. When somebody gets sick, they should be able to focus on getting better, rather than on finding debt collectors trying to extort them into paying bills they may not even know." A 2022 report found that roughly 20 percent of Americans report having medical debt, but previous research by the CFPB has shown that medical billing data on a credit report is less predictive of future repayment than reporting on traditional credit obligations. Mistakes and inaccuracies in medical billing are common and can be compounded by problems such as disputes over insurance payments or complex billing practices. The Fair Credit Reporting Act, the FCRA, restricts creditors' ability to use medical information in making credit decisions and places limits on the inclusion of medical information on credit reports. The FCRA also granted five financial regulators authority to create regulatory exemptions to the restriction on creditors' use of medical information. And in 2005, those regulators created an exception to allow creditors to rely on medical data if it could be characterized as "financial information." The document released by the CFPB is an outline of proposals and alternatives under consideration for the CFPB medical debt rulemaking.

If finalized, they would:

1. Remove medical bills from consumers' credit reports. Consumer reporting companies would be prohibited from including medical debts and collection of information on consumer reports that creditors use in making underwriting decisions.
2. Stop creditors from relying on medical bills for underwriting decisions. The proposal would narrow the 2005 exception and prohibit creditors from using medical collections information when evaluating borrowers' credit applications.
3. Stop coercive collection practices. As unpaid medical bills would no longer appear on consumer credit reports used by creditors in making underwriting decisions, debt collectors would no longer be able to use the credit reporting system as leverage to pressure consumers into questionable debts. The proposal would not stop creditors, however, from obtaining medical billing information for other purposes, such as verifying the need for medical forbearance or evaluating loan applications to pay for medical services.

Public Feedback on the Issue

In advance of beginning the rulemaking process, the CFPB is engaged with the public on the issue. In a public hearing in July of [2023], the CFPB met with and listened to people from across the nation on the impact poor medical billing practices and coercive credit reporting have on patients and families. The CFPB, in partnership with other agencies, is currently reviewing information submitted by the public on medical billing practices, including highcost specialty financial products such as medical credit cards and installation loans. The CFPB continues to receive complaints from the public about illegal debt collection and credit reporting practices related to medical billing. The document released to date is an outline of proposals and alternatives under consideration for the CFPB Fair Credit Reporting Act rulemaking. The medical debt announcement and the August announcement on data brokers are part of that rulemaking.

So please stay tuned for further developments on this issue as we identify and address the key issues and developments, and provide strategies for success. As always, I wish you continued success in a meaningful day. Thank you.