CT medical debt law cited in proposed federal rule

The Consumer Financial Protection Bureau (CFPB) is currently considering amending the Fair Credit Reporting Act (FCRA) to prevent creditors from considering medical debt and cited Connecticut’s recent passage of a state law which did the same, as evidence supporting the measure. If the proposed rule is finalized, it would prevent creditors nationwide from considering medical debt to make eligibility determinations.

“The CFPB is proposing this rule to address concerns that information about medical debt is not necessary and appropriate for credit underwriting and, as a result, does not warrant an exception to the medical information privacy protections established by Congress,” reads the CFPB’s proposed rule change.

The CFPB is a federal agency which has purview and rulemaking authority over financial institutions and has the ability to enforce federal laws concerning consumer protections, as well as monitor banking and lending institutions to ensure legal compliance. The CFPB has primary regulatory authority over FCRA first passed in 1970, giving it the ability to make rulings that can alter its implementation.

Connecticut’s passage of its medical debt shield law, as well as the shield laws enacted in states such as Colorado, New York, and Virginia, were used to support arguments, saying that national credit ratings agencies already have to change their reporting systems to fall into compliance with state laws.

Connecticut’s shield law, which is set to go into effect on July 1, passed in this year’s session by a vote of 106-44. It sparked a contentious debate along party lines, with Democrats supporting the bill and Republicans opposing it. Governor Lamont released a statement in support of the law this May.

“When medical debt is included in a person’s credit report, creditors are making decisions based on a person’s medical history that is not necessarily representative of their financial responsibility and household finances,” Governor Lamont said. “By prohibiting medical debt from being reported to creditors, we are protecting patients who may have otherwise been apprehensive about seeking essential medical care.”

If the CFPB’s proposed rule change is made official, it would essentially enshrine the consumer protections enacted under Connecticut’s state law at the national level.

In its proposed rule change, the CFPB highlights Regulation V of the act as its proposed target. This regulation was introduced by other federal financial agencies in 2005, introducing a “financial information exception” to the act that would allow creditors to evaluate medical debts to determine loan eligibility.

The CFPB argues in its proposed rule change that this exception, “is not ‘necessary and appropriate’ to protect legitimate operational, transactional, risk, consumer, or other needs, nor is an exception consistent with the intent of the creditor prohibition to restrict the use of medical information for inappropriate purposes.”

The CFPB is currently looking for public comment submissions on its proposed rule change. Instructions on how to do so can be found here .

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