Medical debt to be banned from credit reports
WASHINGTON (NEXSTAR) – The Biden administration finalized a rule on Tuesday to prevent unpaid medical bills from showing up on credit reports.
The rule from the Consumer Financial Protection Bureau (CFPB) will remove $49 billion in medical debt for 15 million Americans, according to the White House.
“This will be lifechanging for millions of families, making it easier for them to be approved for a car loan, a home loan, or a small-business loan,” Vice President Kamala Harris said in a statement.
CFPB said that medical bills are poor predicators of a person’s ability to repay a loan. The agency expects the rule will raise credit scores by an average of 20 points and could lead to 22,000 additional mortgages being approved each year.
Vice President Harris also announced that states have eliminated over $1 billion in medical debt for 700,000 people through the American Rescue Plan.
“No one should be denied economic opportunity because they got sick or experienced a medical emergency,” Harris said.
The White House said more than 100 million Americans struggle with medical debt and it is the largest source of debt in collection.
The rule comes after Equifax, Experian and TransUnion announced they would take certain types of medical debt off of credit reports, including debt under $500
The rule could take effect as soon as March but could be delayed by legal challenges.
The Associated Press contributed to this report.