It was less than a year ago that we discussed the Consumer Financial Protection Bureau’s (CFPB) proposed new rule that would have prohibited medical debt from being included on people’s credit reports. A lot has changed since then.
Now, shortly before the new rule was scheduled to take effect, it appears to be essentially dead. The CFPB, which would have enforced it, has been ordered to stop work by the Trump administration and specifically the recently appointed head of the agency, which has now closed its doors.
Could Congress overturn the rule?
What makes this new rule even less likely to ever be enforced is proposed legislation by two members of Congress to overturn the Medical Debt on Credit Reports rule. With that said, lawmakers are hearing from consumer advocates and others who support it.
An open letter to Congress from some 277 organizations noted how widespread the problem is. For example, “more than 100 million people owe at least $220 billion in medical debt, and about 15 million people have medical debt on their credit reports.”
Medical debt has become overwhelming for millions of Americans from young adults who may not have insurance or only minimal coverage to older adults who aren’t yet old enough for Medicare or who have unpaid medical debt dating back years. Even current and former servicemembers have a combined $6 billion in medical debt.
Medical debt has little connection with creditworthiness
As supporters of the proposed rule during the Biden administration noted, medical debt often has nothing to do with whether or not someone is a good credit risk. There’s often no way to prevent going into debt caused by medical bills from a serious injury or illness.
While the new rule wouldn’t have lowered anyone’s medical debt, it would have prevented this debt from further disrupting people’s lives by lowering their credit score. A low credit score can derail a mortgage or other loan application, prevent people from getting a credit card (or at least one without a high interest rate) or a car. It can even be used to deny an apartment rental application or, in some cases, a job application.
If you’re dealing with insurmountable medical debt, it’s important to know that there are options for getting your financial life back on track. Getting legal guidance can be a smart first step.
