A report released in 2022 by the Consumer Financial Protection Bureau reveals that about one in five people in the U.S. have medical debts on their credit reports. Delinquent medical bills can make it difficult for Illinois consumers to qualify for mortgages, car loans and credit cards, which is a problem because the information provided to the three credit reporting agencies about these debts is often inaccurate. This is one of the reasons why the CFPB has proposed a rule that would remove medical debt information from consumer credit reports.
The CFPB proposed the new rule after engaging with the public about credit issues linked to medical debt. During a public hearing held in July 2023, people from around the country told CFPB officials about being hounded by debt collectors because their credit reports contained erroneous information. According to the CFPB, medical debt is often reported inaccurately because of complex health care billing practices and disputes over insurance coverage.
In addition to removing medical debts from consumer credit reports, the CFPB proposed rule changes would narrow an exemption to the Fair Credit Reporting Act that allows lenders to use information about medical collections to evaluate credit applications. If the CFPB proposals are adopted, this data will no longer be considered financial information. The public will be invited to submit comments when the proposed rule is published in the Federal Register. Once these comments have been received and reviewed, a final rule will be issued.
CFPB officials decided to take action after learning about the abusive practices of medical debt collection companies. If medical debt is removed from consumer credit reports, debt collectors would be prevented form using the credit reporting system to coerce consumers into paying money that they do not owe.