ATLANTA — A federal rule to remove $49 billion in medical bills from American credit reports was finalized Tuesday.
The announcement from the Consumer Financial Protection Bureau comes just before the White House is set to change administrations, with President Joe Biden leaving office and President-elect Donald Trump returning to the White House for a second term.
The announcement from the CFPB finalized a rule proposed in June, following a strong push by lawmakers, including U.S. Senator from Georgia Rev. Raphael Warnock, to keep medical debts and bills out of credit reports to help consumers.
“This rule will literally change lives and it was long overdue, which is why I’ve been pushing to get it over the finish line since my early days in the Senate,” Warnock said in a statement.
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Previously, Warnock and his Senate colleagues had urged the federal government to act as a way to ensure Americans’ financial futures were free from medical debt preventing them from accessing mortgages and other loans.
“Finalizing the rule would protect families and keep them from being unjustly penalized for seeking medical care,” Warnock and several of his US Senate colleagues wrote in a letter to the CFPB in October. “This rule would provide vital protections: It would bar lenders from broadly using information about medical debt to make credit eligibility determinations, prohibit the inclusion of medical debt on credit reports, prohibit creditors from repossessing medical devices, and recognize the unique nature of medical debt and not penalize people for seeking treatment and care.”
The CFPB said about 15 million Americans could benefit from the rule once it takes effect, which is expected to happen in March, 60 days from its addition to the Federal Register. Officially, the rule will be in the Federal Register on Jan. 14, according to the federal agency.
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“The CFPB’s action will ban the inclusion of medical bills on credit reports used by lenders and prohibit lenders from using medical information in their lending decisions,” federal officials said. “The rule will increase privacy protections and prevent debt collectors from using the credit reporting system to coerce people to pay bills they don’t owe.”
The CFPB said their research into medical bills and credit reports showed it’s a poor predictor of whether or not someone is able to pay back a loan and the presence of medical debt contributed to “thousands of denied applications on mortgages that consumers would be able to repay.”
“People who get sick shouldn’t have their financial future upended,” CFPB Director Rohit Chopra said in a statement. “The CFPB’s final rule will close a special carveout that has allowed debt collectors to abuse the credit reporting system to coerce people into paying medical bills they may not even owe.”
Once the rule takes effect in March, lenders would be barred from considering medical information when making lending decisions and also bans medical bills showing up on credit reports.
CFPB said the rule Tuesday protects consumers in America from the harms of medical debt and coercive debt collection practices.
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