The Biden administration finalized a rule Tuesday banning the inclusion of medical debt on credit reports, fulfilling a key priority of President Joe Biden in the waning days of his presidency.
But whether the incoming Trump administration or the Republican-controlled Congress will keep the rule is an open question.
The rule, finalized by the Consumer Financial Protection Bureau, would also prohibit lenders from using medical information in their lending decisions. The CFPB estimates $49 billion in medical bills will be removed from the credit reports of 15 million Americans as a result. Americans with medical debt on their credit reports could see their credit scores rise by an average of 20 points after the removal, the CFPB said.
“People who get sick shouldn’t have their financial future upended,” said CFPB Director Rohit Chopra.
The rule would also close a loophole in federal regulation that the CFPB said allowed debt collectors to access medical information to “coerce payments from patients for inaccurate or false medical bills.”
The CFPB argues medical debt provides little predictive value about a borrower’s ability to repay other debts. Consumers may also receive inaccurate bills or bills for services that should have been covered by insurance or financial assistance programs, the CFPB said.
The CFPB said the rule also means lenders couldn’t use information about medical devices, such as prosthetic limbs, that could be used to require the devices be used as collateral for a loan.
Three major credit reporting agencies — Equifax, Experian and TransUnion — announced in 2023 that medical debt in collections under $500 would be removed from credit reports.
Those changes did have an impact: 14 percent of Americans had unpaid medical bills on their credit reports as of March 2022, a figure that dropped to 5 percent in June 2023, two months after the changes took effect.
President-elect Donald Trump has not said whether he supports the Biden administration’s efforts to reduce the burden of medical debt.
On Tuesday, House Financial Services Chairman French Hill, R-Ark., called the rule an “eleventh-hour effort to appease the White House” noting he would work with the administration to “rectify this misguided action.”
“Instead of focusing on enhancing economic opportunity for all consumers, Chopra’s regulatory overreach will drive up costs to any American seeking medical care and have a devastating impact on consumers’ access to healthcare, particularly in rural areas,” Hill said.
Trump advisers like Elon Musk have also called on eliminating the CFPB, which was created by Congress in 2010 to enforce consumer financial protection laws.
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