(The Center Square) – The Consumer Financial Protection Bureau finalized a rule that would remove medical bills from credit reports and prevent lenders from using medical information in lending decisions.
The federal agency said the rule would remove an estimated $49 billion in medical bills from the credit reports of about 15 million Americans.
CPFB said the rule will boost privacy protections and bar debt collectors from using the credit reporting system to coerce people to pay bills they don’t owe.
Days after the final rule was published, ACA International, which represents credit and collection professionals, filed suit. The suit alleges CPFB overstepped its authority.
“Americans are frustrated by medical bills. But frustration does not justify lawlessness,” according to the ACA International lawsuit. “Here, a federal agency with no health care experience is exploiting this frustration by making a politically motivated regulation that prevents credit reporting agencies from showing accurate medical debts on credit reports. No agency has the power to do that.”
ACA International also said was projected to hide from creditors more than $49 billion in reported funds owed to American doctors, nurses, nursing homes, hospitals, ambulance services, health clinics and other U.S. medical providers.
The CFPB found that medical debts provide little predictive value to lenders about borrowers’ ability to repay debts. Agency officials also said consumers frequently report getting inaccurate bills or being asked to pay bills that insurance or programs should have covered.
“People who get sick shouldn’t have their financial future upended,” CFPB Director Rohit Chopra said. “The CFPB’s final rule will close a special carveout that has allowed debt collectors to abuse the credit reporting system to coerce people into paying medical bills they may not even owe.”
CFPB officials expect the rule will lead to the approval of about 22,000 additional, affordable mortgages every year. Officials also said that Americans with medical debt on their credit reports could see their credit scores rise by an average of 20 points.
The final rule comes after Equifax, Experian and TransUnion – the three nationwide credit reporting conglomerates – announced they would remove certain types of medical debt from credit reports, including collections under $500.
Additionally, FICO and VantageScore, the two major credit scoring companies, announced they have decreased the degree to which medical bills impact a consumer’s score.
The CFPB raised concerns about medical debt credit reporting in early 2022.
U.S. Sen. Raphael Warnock, D-Georgia, said it was time.
“I’ve been pushing for months for @CFPB to issue this new rule because medical debt shouldn’t stop working people from getting ahead & pursuing their American dream,” he said. “Glad we finally got it done!”
Earlier this week, CFPB sued Experian for unlawfully failing to properly investigate consumer disputes. The CFPB alleged that Experian does not take sufficient steps to intake, process, investigate and notify consumers about consumer disputes, resulting in the inclusion of incorrect information on credit reports.
Inaccurate or false information on consumer reports can be a barrier to access to credit, employment and housing, according to CFPB.