Consumer Agency Moves to Push Medical Debt Off Credit Reports

CFPB officials question whether late medical bill payments have much to do with how well people pay their other bills.

The Consumer Financial Protection Bureau building in Washington. Credit: Diego M. Radzinschi/ALM

The Consumer Financial Protection Bureau has posted draft regulations that could stop health care providers from reporting most medical debt to credit bureaus.

The new regulations would update an existing regulation, Regulation V, which implements the federal Fair Credit Reporting Act.

Today, Regulation V includes a medical information protection exception for credit bureaus. The provision lets creditors use information about medical debts when deciding whether to offer consumers credit.

The proposed regulations would eliminate that exception.

Another provision would prohibit lenders from using wheelchairs, prosthetic limbs or other medical devices as loan collateral or repossessing medical devices when people are unable to repay their loans.

Comments on the proposed regulations are due Aug. 12.

The backdrop

The regulations are the product of a project announced in September.

Health care providers and collection agencies have argued that the threat of seeing medical debt listed in credit reports may cause some consumers to pay their bills.

The CFPB is skeptical.

“The CFPB is proposing this rule to address concerns that information about medical debt is not necessary and appropriate for credit underwriting and, as a result, does not warrant an exception to the medical information privacy protections established by Congress,” bureau officials say in the draft regulation packet.

“Research has shown that medical debt has limited predictive value for credit underwriting purposes,” officials add. “Medical debt may be less predictive of whether a consumer will pay a future loan, because medical debts can occur and are collected through unique circumstances and practices.”

A 30-state settlement reduced the flow of medical debt information to credit bureaus in 2015, and the three biggest credit bureaus, Equifax, Experian and TransUnion, voluntarily agreed to strike many medical bills off credit reports starting in 2022.

In spite of the changes, 15 million U.S. residents have about $49 billion in late medical debt payments showing up in their credit reports, officials say.

In many cases, the figures shown in the reports are probably inaccurate or inflated, officials add.

The Consumer Financial Protection Bureau building in Washington. Credit: Diego M. Radzinschi/ALM