Yesterday, the Consumer Financial Protection Bureau proposed a rule that would prohibit medical debts from being furnished on consumers’ credit reports. You can read more about the proposed rule here. You can sign up for a webinar on Thursday, June 13 to learn more about the proposed rule here. Given the widespread public attention that the proposal has received in the hours since it was announced, a number of different groups have shared their thoughts and statements. Here is what different individuals had to say:
Rep. Patrick McHenry [R-N.C.], Chair, House Financial Services Committee
“The CFPB pursuing a full prohibition of medical debt on credit reports will have a negative impact on our credit and healthcare systems. It is badly misguided to remove consequences for consumers who do not pay a debt by wiping out an entire category of debt from credit reports. The CFPB’s regulatory overreach will harm the very consumers the agency was created to protect.”
Sen. Sherrod Brown [D-Ohio], Chair, Senate Banking Committee
“Medical debt can happen to anyone, at any time, and does not reflect creditworthiness. No one should be forced to pay higher rates for a mortgage or a car loan or deal with aggressive debt collectors, just because their family member got sick or they had a medical emergency. By heeding our call to eliminate medical debt from consumers’ credit reports, the CFPB is protecting American’s credit scores if they get sick or get into an accident – it will save people money, and it’s just common sense. When CFPB finalizes this rule, all Americans will have medical debt removed from their credit reports.”
Scott Purcell, CEO, ACA International
“The CFPB’s proposal will have a broad negative impact on businesses, health care providers, patients and consumers because by suppressing information about a consumer’s debt, this will increase the cost of medical care and force more upfront payments.
The rule, if finalized, would fundamentally alter the U.S. credit-based economy as it is today in terms of reduced consequences for not paying your bills, which in turn will reduce access to credit and health care for those that need it most.”
Leah Dempsey, Shareholder, Brownstein Hyatt Farber Schreck LLP
“In its proposal, the CFPB attempts to rewrite the Fair Credit Reporting Act, which is an impermissible overreach since lawmaking is the job of Congress. The bureau is also blatantly ignoring, in an arbitrary and capricious way, an abundance of evidence provided to it by a variety of financial service providers that medical debt is predictive and needed information for lenders to understand a consumer’s ability to repay.”
Dr. Andrew Nigrinis, Ph.D., former enforcement economist, CFPB
“From a provider perspective, the CFPB is irresponsibly proposing to regulate a significant portion of the health care industry’s revenue without a meaningful analysis of the effects on consumers, industry, health practitioners and patients. It is a basic tenet of economics that one person’s debt represents another person’s income. This will affect the income of medical providers, and the CFPB has not bothered to quantify this real cost. From a credit granting perspective, the CFPB, by reducing the information value of credit reports and removing predictive medical debt tradelines, is contradicting its policy to require lenders to conduct an Ability to Repay analysis. Essentially, this rule is an information tax on responsible borrowers.”
Ted Rossman, Senior Industry Analyst, Bankrate
“As of April 2024, the CFPB said 15 million Americans had $49 billion in medical bills on credit reports. That’s about 6% of the U.S. adult population. So it’s not a huge deal in the grand scheme of things, but potentially very significant for those affected.
“If you have otherwise excellent credit, a medical collection (any sort of debt collection) could decimate your credit score. We’re talking a drop of 100+ points, potentially. Studies have shown medical debt isn’t as predictive as other types of debt. As in, your credit score is supposed to predict your likelihood of paying late. Medical bills can be life-or-death situations and one-time events that pop up out of nowhere. That’s different from forgetting to pay your credit card bill.”
Wall Street Journal Editorial
Removing a credit notice for not paying medical bills will result in more unpaid bills. It will also reduce the incentive to buy health insurance, which will undermine the Administration’s goal of increasing coverage.
Providers will raise prices charged to insurers to compensate for unpaid bills, which will push up premiums. Providers also say they’ll demand more upfront payments for care, which could reduce access for low-income patients. This is simple economics.
But this White House doesn’t believe in moral hazard or consider unintended consequences. The Administration has forgiven hundreds of billions of dollars in student debt, in part by capping payments at a nominal share of income. Even if you can afford to make your full payment, why would you?
Patricia Kelmar, Healthcare Campaigns Director, U.S. PIRG
“These newly proposed rules are an important step toward implementing a fair credit system that doesn’t penalize people for life events they can’t control, such as getting sick or injured.”
Chi Chi Wu, Senior Attorney, National Consumer Law Center
“This is a huge relief for the millions of people who’ve been severely harmed by the cascading effects of medical debt. For far too long, medical debt has devastated the credit history of too many consumers, harming their economic prospects. Yet, as the CFPB has found, medical debt has limited predictive value for creditworthiness compared to other types of debts.”
