The Biden administration has announced a new rule, issued by the Consumer Financial Protection Bureau (CFPB), that will completely remove medical debts from credit reports. The rule, affecting approximately 15 million Americans, also prohibits creditors from using medical information when making lending decisions.
According to the CFPB, medical debts are one of the leading causes of financial hardship and bankruptcy in the United States. Eliminating this information from credit reports could raise credit scores by about 20 points and enable the approval of thousands more mortgages each year. The rule aims to prevent the credit reporting system from being used to pressure consumers into paying bills that may not even be owed, often because they are already covered by health insurance.
While many consumer rights organizations have welcomed the measure, some financial institutions have expressed concerns, fearing it could increase the risk of defaults.
