Unpaid medical bills will no longer show up on credit reports, where they can prevent people from getting mortgages, auto loans or small business loans, according to a final rule announced Tuesday by the Biden administration.
The Consumer Financial Protection Bureau’s rule will remove $49 billion in medical debt from the credit reports of more than 15 million Americans, according to the bureau, meaning lenders will no longer be able to take it into account when deciding whether to grant a loan.
The change is estimated to increase credit scores by 20 points on average and could lead to the approval of 22,000 additional mortgage loans each year, according to the bureau. Vice President Kamala Harris said in a statement announcing the rule that it would “change the lives” of millions of families.
“No one should be denied an economic opportunity because they became ill or suffered a medical emergency,” she said.
Harris also announced that state and local governments used a massive 2021 pandemic relief package to eliminate more than $1 billion in medical debt for more than 700,000 Americans.
The administration has announced its intention to implement this rule in fall 2023.
The CFPB has stated that medical debt is a poor indicator of an individual’s ability to repay a loan. Experian, Equifax and TransUnion, the three national credit reporting agencies, said last year they were removing medical debts under $500 from consumer credit reports in the United States.
The Biden administration’s new rule is expected to take care of unpaid bills showing up on credit reports.
NBC Chicago
