Consumer credit reports are a big deal. Lenders use the reports to help them decide if they will loan money and what interest rates they will offer. As we reported in March, the Consumer Financial Protection Bureau (CFPB) issued a report regarding the impacts of medical debt on consumers and, in response, the major credit bureaus instituted changes related to how medical debt will be reported.
On April 11th, the Biden Administration weighed in by announcing “new actions to protect consumers and lessen the burden of medical debt on American families.” The Biden Administration directed the Department of Health and Human Services (HHS) to evaluate how providers’ billing practices impact access and affordability of care and the accrual of medical debt. “HHS will request data from more than 2,000 providers on medical bill collection practices, lawsuits against patients, financial assistance, financial product offerings, and 3rd party contracting or debt buying practices.” The data collected will impact federal grant-making decisions and help to streamline enforcement of related statutory violations.
The Biden Administration also gave direction to the Consumer Financial Protection Bureau to investigate credit reporting companies and debt collectors that violate patient rights. It also stated that “[t]he CFPB will target coercive credit reporting and determine whether unpaid medical billing data should ever be included in credit reports.”
The Biden Administration went further, announcing that the FHA has eliminated medical debt from consideration when evaluating a borrower’s creditworthiness. This opens the door to Americans to apply for FHA-backed mortgages even if they have a derogatory mark on their credit report arising from medical debt. The FHA backs more than 12% of new home purchases. Americans with medical debt can also apply for USDA rural housing service loans.
The Department of Veterans Affairs finalized a rule “to virtually cease reporting of medical debt for veterans with bills from VA Care.”
According to the Biden Administration’s fact sheet:
Together, these actions will help:
- Hold medical providers and debt collectors accountable for harmful practices;
- Reduce the role that medical debt plays in determining whether Americans can access credit – which will open up new opportunities for people with medical debt to buy a home or get a small business loan;
- Help over half a million of low-income American veterans get their medical debt forgiven; and
- Inform consumers of their rights.
The Biden Administration, the CFPB, and the credit bureaus are all moving in the same direction — a direction that is likely to fully eliminate the reporting of medical debt in the near future. More to come…