Millions of Americans will see medical bills removed from their credit reports – eliminating an estimated $49 billion in debt.
The landmark move has been finalized by the Consumer Financial Protection Bureau (CFPB) and is estimated to positively impact the credit scores of approximately 15 million people.
It comes at a time when thousands of mortgage applications are being denied due to the presence of medical debts on a person’s record, despite research by the CFPB showing that medical debt is a poor predictor of a borrower’s ability to repay loans.
This new rule is projected to lead to the approval of approximately 22,000 additional affordable mortgages each year, a major win for consumers.
And Americans burdened with medical debt on their credit reports could see their scores increase by an average of 20 points.
Recommended Videos
CFPB Director Rohit Chopra said: “People who get sick shouldn’t have their financial future upended.
“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.”
The news comes hot on the tail of previous efforts by major credit reporting agencies and scoring companies to reduce the impact of medical debt. In 2022, Equifax, Experian, and TransUnion announced the removal of certain types of medical debt from credit reports, including collections under $500. FICO and VantageScore also adjusted their scoring models to lessen the weight of medical bills on consumer credit scores.
The new rule is set to take effect 60 days after its publication in the Federal Register.