Biden administration moves forward on banning medical debt from credit reports

The Biden administration announced Tuesday that it was moving forward on preventing medical debt from appearing on credit reports, and that its proposed rules on the matter will be open for public comment through August 12.

The administration announced through its Consumer Financial Protection Bureau (CFPB) in September that it was looking to ban the debt, because the data "is often plagued with inaccuracies and mistakes," according to The Hill. Medical debt is considered one of the most common forms of debt represented on credit reports.

Vice President Kamala Harris said during a press briefing that the administration was focused on making life easier for Americans, by relieving a burden that stops them from getting ahead in their finances.

“One of the most significant consequences of carrying medical debt is the harm it does to a person’s credit score,” Harris said. “Medical debt makes it more difficult for millions of Americans to be approved for a car loan, a home loan or a small business loans. All of which in turn makes it more difficult to just get by much less get ahead. And that is simply not fair.”

The new rule will go into effect retroactively on past medical bills. It is expected to raise people's credit scores by an average of 20 points, per NBC News.

“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 Consumer Data Industry Association, which represents the major credit bureaus, told the outlet that it was still reviewing the proposed rule, but that it has already extended the time before medical collections debt appears on credit reports, and deleted resolved debts and medical collection debts below $500. Its actions have resulted in the removal of nearly 70% of medical collection debt accounts.