Proposed Federal Rule Would Remove Medical Debt From Credit Reports

Arkansans may soon have medical debt information eliminated from their credit reports under a proposed rule by the Consumer Financial Protection Bureau (CFPB) issued Tuesday, June 11.

The CFPB’s action follows a 2022 report which found that about 20% of Americans had medical debt, and about 58% of bills that were in collections and shown on credit reports were medical bills. The proposed rule also follows a compliance bulletin issued by the CFPB reminding debt collectors and credit bureaus of their obligations under the No Surprises Act, which shields patients from surprise medical bills from certain out-of-network providers.

If finalized, the proposed rule would:

• Prohibit credit reporting companies from including medical debt on credit reports.
• Remove any existing medical debt from credit reports.
• Eliminate the regulatory exception that allows lenders to use medical debt to make credit eligibility determinations.
• Ban collateralization and repossession of medical devices, such as wheelchairs and prosthetics, by lenders.

Notably, the rule defines medical debt information as information about debt incurred for services, products, and devices owed directly to a healthcare provider but not debt for medical care charged to a credit card.

The rule would broaden voluntary protections announced by credit reporting companies following the CFPB’s 2022 report. On July 1, 2022, the three largest credit reporting companies — TransUnion, Experian, and Equifax — stopped reporting medical debts that were in collections less than a year, and in 2023 they stopped reporting medical debts under $500, regardless of the length of time in collections.

Recognizing the impact of medical debt on Arkansans, a group of community organizations paid off more than $35 million in medical debt for nearly 24,000 Arkansans across the state in January 2022. A 2023 report by The Commonwealth Fund examining medical debt collection policies across the U.S. found that Arkansas had none of the protections examined, such as requirements to offer payment plans, preconditions before sending a bill to collections, and limits on interest, liens and foreclosures, and wage garnishment.

The CFPB’s proposed rule is open for comment until Aug. 12, but it is not likely to become effective until 2025.