Removing Medical Debt from Credit Reports: $49B in Collections to Disappear

CFPB announces plan to remove medical debt from credit reports

$49 billion of debt in collections could soon disappear from credit reports, thanks to a rule proposed by the Consumer Financial Protection Bureau (CFPB).

The new rule would prohibit the reporting of all medical debt on consumer credit reports. Currently, the three major credit bureaus (Experian, Equifax, and TransUnion) only report medical debt exceeding $500.

However, the CFPB reports that 15 million Americans currently have a total of $49 billion in medical debt being reported on consumer credit reports.

"The CFPB is seeking to end the senseless practice of weaponizing the credit reporting system to coerce patients into paying medical bills that they do not owe,” said CFPB Director Rohit Chopra. "Medical bills on credit reports too often are inaccurate and have little to no predictive value when it comes to repaying other loans."

The CFPB is proposing to close the regulatory loophole that has kept vast amounts of medical debt information in the credit reporting system. The proposed rule would help ensure that medical information does not unjustly damage credit scores, and would help keep debt collectors from coercing payments for inaccurate or false medical bills.

Medical debt on credit reports is not a good predictor of an individuals likelihood of repaying other debt, according to CFPB research. However, when credit scores are lowered due to medical debt, the ability to access credit, including mortgages, can be put at risk.

Under the new rule, legitimate medical debt could still be collected, but these collections would not be indicated on a consumer credit report and therefore, would not impact other credit decisions.

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