Lenders will no longer be able to see whether American borrowers have unpaid medical debt in their credit history, according to a new rule from the outgoing Biden administration.
The vice-president, Kamala Harris, announced early on Tuesday that the Consumer Financial Protection Bureau (CFPB) was removing $49bn of existing unpaid medical bills from the credit reports of 15 million Americans and will ban the inclusion of medical debt on credit reports.
“No one should be denied economic opportunity because they got sick or experienced a medical emergency,” Harris said in a statement. “This will be life changing for millions of families, making it easier for them to be approved for a car loan, a home loan or a small-business loan.”
The CFPB said consumers frequently report having inaccurate medical bills or bills that should be covered by insurance on their credit reports. The agency said that having medical debt was a poor predictor of whether a borrower is able to pay off other kinds of loans, and the new rule will prevent debt collectors from coercing borrowers to pay medical bills they do not owe. The agency first proposed the rule in June 2024.
The new rule could allow as many as 22,000 new mortgage approvals every year and would see the credit scores of Americans with medical debt rise by an average of 20 points.
Medical debt is already treated differently than other kinds of debt on credit reports. In March 2022, the three major credit reporting agencies – Equifax, Experian and TransUnion – announced they would not include medical debt more than a year old or under $500 on their credit reports. Meanwhile, Fico and VantageScore, the major credit scoring companies, said they had decreased the weight medical debt has on borrowers’ credit scores.
The rule comes in the final days of the Biden administration. When Donald Trump takes office on 20 January, his administration can remove the rule with his new executive authority.
Trump has yet to appoint his own head for the CFPB, though reports have suggested Republicans want to curtail the power of the agency, which they say is over-regulatory.
“There will be a pretty significant change from the direction the agency has been going in, and I think in a positive way,” Kathy Kraninger, Trump’s CFPB director during his first term, told the Washington Post in November.
