CFPB Proposed Rule Banning Reporting of Medical Debt

On June 11, the Consumer Financial Protection Bureau (CFPB or Bureau) released a proposed rule amending Regulation V, which implements the Fair Credit Reporting Act (FCRA), concerning medical debt. The proposed rule would remove a regulatory exception that currently allows creditors to obtain and use information on medical debts for credit eligibility determinations. Additionally, the proposed rule would generally prohibit consumer reporting agencies (CRAs) from furnishing consumer reports containing medical debt information to creditors. Comments on the proposed rule are being accepted until August 12, 2024. The Bureau aims to finalize the rule by early 2025.

According to the CFPB, unlike voluntary consumer debt (mortgages, credit cards), medical debt often arises unexpectedly and can lead to financial hardships. The CFPB stated its belief that medical debt information is frequently inaccurate on consumer reports due to the complexity of medical billing, insurance, and other third-party reimbursement processes. These inaccuracies can adversely affect consumer’s ability to obtain credit, according to the CFPB.

The Bureau also remarked that its research indicates that medical debt has limited predictive value for credit underwriting purposes. Consequently, the CFPB believes that the current exception allowing creditors to use medical debt information is neither warranted nor consistent with the intent of the Fair and Accurate Credit Transactions Act of 2003 (FACTA).