NEW YORK — In a significant development, the Consumer Financial Protection Bureau (CFPB) has finalized a rule that prohibits lenders in the U.S. from factoring in unpaid medical bills when assessing potential borrowers for mortgages, car loans, or business loans. This change is expected to positively impact millions of families by boosting their credit scores by an average of 20 points, according to the bureau. Research conducted by the CFPB has indicated that unpaid medical debts do not accurately reflect a person’s ability to repay a loan, yet they have often contributed to mortgage application denials.
Last year, the three major credit reporting agencies—Experian, Equifax, and TransUnion—announced their decision to exclude medical collection accounts under $500 from consumer credit reports. However, the new rule by the CFPB takes this further by ensuring that all outstanding medical debts are omitted from credit reports and that lenders cannot use this information in calculating creditworthiness.
The regulations will come into effect 60 days after they are published in the Federal Register, even as political changes loom with President-elect Donald Trump proposing broader revisions to the CFPB’s authority.
**Impact on Consumers**
The CFPB estimates that this new rule will result in the removal of $49 million in medical debt from the credit histories of around 15 million Americans. Current statistics show that approximately one in five Americans have at least one medical debt collection account reflected on their credit reports, and over 50% of collection entries are attributed to medical debts. The issue is particularly prevalent among minorities, as the CFPB has identified that 28% of Black individuals and 22% of Latino individuals in the U.S. carry medical debt, compared to only 17% of white individuals. Despite the national agencies’ voluntary agreement to disregard medical debt below $500, many consumers still carry higher amounts of debt on their reports.
The CFPB emphasizes that this policy change is expected to expand access to loans for millions, with approximately 22,000 additional mortgage approvals anticipated each year. Individuals with outstanding medical bills may see a boost in their credit scores, thanks to the rule. Furthermore, part of this new policy aims to enhance privacy protections and prevent debt collectors from misusing the credit reporting system to coerce payments for disputed bills. The agency revealed that consumers frequently receive erroneous invoices or are asked to pay for items that should have been covered by insurance or other financial assistance.
Additionally, lenders will be restricted from using information related to medical equipment, such as prosthetic limbs, as collateral for loans that could lead to repossession, as outlined in the CFPB announcement.
**Responses from Advocates**
Advocates and nonprofits in the healthcare sector have expressed satisfaction with the rule. “This decision is great news for everyday Americans,” remarked Carrie Joy Grimes, founder of the personal finance organization WorkMoney. “Medical debt does not reflect poor financial management—illness and injury can strike anyone. This new measure allows Americans to shift their focus from medical debt burdens to rebuilding their lives.”
Patricia Kelmar, director of health care campaigns at the U.S. Public Interest Research Group, highlighted that the new rule will aid many financially responsible families who find themselves in debt due to unforeseen health challenges, high costs, and insurance coverage disputes.
**Dealing with High Medical Bills**
While encountering unexpectedly high medical bills is common in the U.S., including among insured individuals, there are ways to manage and seek relief from these costs. First, it is advisable to check if you qualify for charity care, as federal regulations mandate that nonprofit hospitals adjust or eliminate fees based on household income. To find out if you are eligible, search online for the healthcare provider and terms like “charity care” or “financial assistance policy.” The organization Dollar For offers a user-friendly online tool to assist patients.
Second, consider appealing under the No Surprises Act, a federal regulation that compels insurance companies to cover out-of-network services for emergencies and some non-emergency situations reasonably. If you receive a charge exceeding your expectations for in-network services, this might be an improper bill.
It’s also wise to request an itemized bill. Due to the complex nature of medical billing, inaccuracies are common. An itemized bill lists all the services provided along with their associated codes. If discrepancies arise between these codes and the care received, disputing the bill may yield a resolution.
Another useful strategy is comparing your bill with estimates from insurance companies regarding customary charges for services. If charges reflect amounts exceeding average costs, you may successfully negotiate a reduction. You could even consider taking legal action through small claims court over significant discrepancies or inform the provider of your discussion.
Finally, always reconcile your insurance company’s “explanation of benefits” with the billing statement from the healthcare provider to ensure consistency. Any inconsistencies strengthen your case for contesting the bill and requesting further engagement with your insurer.
Should these steps not suffice, patients have the option to appeal health claims to their insurance providers and may contact their state insurance commissioner for additional assistance.
