Biden Administration initiative to bar medical debt from credit scores

September 22, 2023

The Biden Administration on Thursday announced a major initiative to create rules barring unpaid medical bills from factoring into Americans’ credit scores. 

Vice President Harris noted during a teleconference Thursday that some 100 million Americans—one in three—struggle with unpaid medical bills. 

“For years, this medical debt has also harmed people’s credit scores,” said Harris. “And this is a point of emphasis: We know credit scores determine whether a person can have economic health and well-being, much less the ability to grow their wealth.  Because think about it: Credit scores determine whether a person can buy a home, whether they can buy a car, rent an apartment, or own a small business.”

According to an investigation undertaken by KFF (formerly Kaiser) News and NPR, tens of thousands of Americans have been forced by crippling medical debt to take on extra work, give up their homes, and ration food and other essentials. 

The new rules would represent one of the most significant federal actions to tackle medical debt. The initiative will fall under the Consumer Financial Protection Bureau, which is charged with developing the rules, though the White House concedes that the process could take months. CFPB Director Rohit Chopra joined the Vice President in making Thursday’s announcement. 

The CFPB has found that unlike other kinds of debt, medical debt does not accurately predict a consumer’s creditworthiness. 

The announcement come as the federal agency, which was formed during the Obama Administration in response to the 2008 financial crisis, is currently under legal fire from Conservatives.

The U.S. Supreme Court is set to take up the case after a federal appeals court ruled that the CFPB violates the Constitution due to its unique funding scheme, which allows it to receive money directly from the Federal Reserve rather than though normal Congressional appropriation. 

In the meantime, the move to eliminate medical debt from credit scores has drawn praise from consumer and patients’ groups.

“This is an important milestone in our collective efforts and will provide immediate relief to people that have unfairly had their credit impacted simply because they got sick,” said Emily Stewart, executive director of Community Catalyst, a Boston nonprofit.

The three major credit agencies—Equifax, Experian, and TransUnion —said they’ve stopped including some medical debt on credit reports as of last year, including paid-off bills and medical debt of less than $500.

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