The Consumer Financial Protection Bureau (“CFPB”) is poised to take medical debt off the table for creditors when evaluating a consumer’s eligibility for credit. As it is currently enacted, Regulation V of the Fair Credit Reporting Act contains an exception permitting creditors to obtain and use information regarding medical debt when deciding to extend or continue credit. In the new proposed rule, released on June 11, 2024, the CFPB seeks to remove that exception, which would effectively prohibit creditors from accessing or considering medical debts when making a credit determination. The change would also generally ban consumer reporting agencies, such as Equifax, TransUnion, and Experian, from providing creditors with a consumer report containing medical debt information.

This federal action mirrors legislation targeting medical debt reporting that has been steadily taking hold across the U.S. at the state level. Colorado, Connecticut, New York, and Virginia have all passed laws banning medical debt from credit reports. Minnesota will soon join with its new law set to take effect October 1, 2024, prohibiting collectors from reporting medical debt to a credit reporting agency. Several other states, including California, Maine, New Jersey, and Rhode Island, are considering similar restrictions.

The public comment period for the CFPB’s proposed rule is open until August 12, 2024. Advocates for consumer rights hail the proposal as a victory to alleviate the negative (and some argue unfair) impact of medical bills on credit scores. The need for medical care can be urgent and unpredictable and the CFBP points out that “consumers often have limited ability to control the timing and types of medical services that are required.” See Footnote 1. Given the unique nature of medical expenses, the CFPB concludes in its analysis of nationwide consumer reporting agencies that medical debt is not necessarily a reliable indicator of a consumer’s likelihood to default on other non-medical debts. Id.

Healthcare providers and the debt collection industry have, on the other hand, expressed concern about the impact that eliminating all medical debt – past and present – from credit reports will have on the ability to obtain payment for care and services provided. While the debts themselves remain due and collectible, removing them from credit reports takes away an incentive for consumers to prioritize paying those bills. Healthcare providers could find themselves increasingly reliant upon debt collection services and the courts to recoup payment for services. Pursuing legal action to obtain payment of a debt can be time-consuming and expensive and may not prove cost-effective for some providers, particularly smaller providers or providers in rural areas, or when the bills in question are for smaller amounts. Public comments from healthcare professionals have also flagged concerns that placing more burden on the provider to obtain payment will escalate the cost of health care further, compounding the problem. Some states have already gone so far as to restrict the collection of medical debt itself. Both Maine and New Mexico have enacted legislation prohibiting providers from pursuing litigation against a consumer to recover a medical debt if the consumer’s income is below a certain level, effectively making the debt uncollectable. In states such as New Mexico, which already struggle to attract and keep quality healthcare providers, the loss of credit reporting as a tool to encourage patients to resolve their medical debts may hit harder than in other states where providers can still turn to the courts for relief.

1. Federal Register, Prohibition on Creditors and Consumer Reporting Agencies Concerning Medicaid Information (Regulation V), A Proposed Rule by the Consumer Financial Protection Bureau (June 18, 2024), available at: https://www.federalregister.gov/documents/2024/06/18/2024-13208/prohibition-on-creditors-and-consumer-reporting-agencies-concerning-medical-information-regulation-v.

2. Colo. Rev. Stat. section 5-18-109.

3. 2024 Conn. Act 24-6.

4. N.Y. Pub. Health Law art. 49-A.

5. 2024 Va. Acts ch. 751.

6. The full text of the Minnesota Debt Fairness Act is available through the Office of the Revisor of Statues at: https://www.revisor.mn.gov/bills/text.php?number=SF4097&version=latest&session=ls93&session_year=2024&session_number=0.

7. Federal Register, Prohibition on Creditors and Consumer Reporting Agencies Concerning Medicaid Information (Regulation V), A Proposed Rule by the Consumer Financial Protection Bureau (June 18, 2024), available at: https://www.federalregister.gov/documents/2024/06/18/2024-13208/prohibition-on-creditors-and-consumer-reporting-agencies-concerning-medical-information-regulation-v; (citing SB-1061(Cal. 2024), https://leginfo.legislature.ca.gov/​faces/​billTextClient.xhtml?​bill_​id=​202320240SB1061;​ Libby Palanza, Maine Lawmakers Consider Insulating Medical Debt from Credit Score Calculation, Interest Accumulation, and Legal Action, Maine Wire (Mar. 20, 2024), https://www.themainewire.com/​2024/​03/​maine-lawmakers-consider-insulating-medical-debt-from-credit-score-calculation-interest-accumulation-and-legal-action/​; Robert Walker, New Jersey Seeks to Ban Medical Debt Collectors from Credit Agency Reporting, Shore News Network (Mar. 21, 2024), https://www.shorenewsnetwork.com/​2024/​03/​21/​new-jersey-seeks-to-ban-medical-debt-collectors-from-credit-agency-reporting/​; RI H7103 (R.I. 2024), https://webserver.rilegislature.gov/​BillText24/​HouseText24/​H7103.pdf.

8. The full text of Maine’s An Act to Prohibit Unfair Practices Related to the Collection of Medical Debt is available at: https://legislature.maine.gov/backend/App/services/getDocument.aspx?documentId=107346.

9. The full text of New Mexico’s Patients’ Debt Collection Protection Act is available at: https://www.nmlegis.gov/Sessions/21%20Regular/final/SB0071.pdf