Feds want to remove medical bills from credit scores in sweeping change



(The Center Square) – The federal government doesn’t want medical debt to sink American consumers’ credit scores and borrowing power.

The Consumer Financial Protection Bureau proposed a rule Tuesday that would remove medical bills from most credit reports, boost privacy protections, help to increase credit scores and loan approvals, and prevent debt collectors from using the credit reporting system to coerce people to pay.

The proposal would stop credit reporting companies from sharing medical debts with lenders and prohibit lenders from making lending decisions based on medical information. The proposed rule is part of the CFPB’s efforts to address the burden of medical debt and coercive credit reporting practices.

The Association of Credit and Collection Professionals, an industry trade group, has criticized the plan.

ACA CEO Scott Purcell said Tuesday it was a bad idea.

“The CFPB’s proposal will have a broad negative impact on businesses, health care providers, patients and consumers because by suppressing information about a consumer’s debt, this will increase the cost of medical care and force more upfront payments,” he said in a statement. “The rule, if finalized, would fundamentally alter the U.S. credit-based economy as it is today in terms of reduced consequences for not paying your bills, which in turn will reduce access to credit and health care for those that need it most.”

The CFPB sees it differently.

“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,” CFPB Director Rohit Chopra said in a statement. “Medical bills on credit reports too often are inaccurate and have little to no predictive value when it comes to repaying other loans.”

The agency cited its own research.

“The CFPB’s research reveals that a medical bill on a person’s credit report is not a good predicter of whether they will repay a loan,” according to the agency. “In fact, the CFPB’s analysis shows that medical debts penalize consumers by making underwriting decisions less accurate and leading to thousands of denied applications on mortgages that consumers would repay.”

Dr. Andrew Nigrinis, who previously worked as an enforcement economist at the CFPB, said more research was needed.

“From a provider perspective, the CFPB is irresponsibly proposing to regulate a significant portion of the health care industry’s revenue without a meaningful analysis of the effects on consumers, industry, health practitioners and patients,” he said.

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