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U.S. consumers burdened by medical debt received significant relief Tuesday as the Biden administration finalized a rule that will remove medical debt from credit reports. Set to take effect in March, the change will erase $49 billion in medical bills, benefiting approximately 15 million Americans.
The rule, introduced by the Consumer Financial Protection Bureau (CFPB), also prohibits lenders from considering medical debt or related information in credit decisions. This move addresses the financial strain that medical debt places on individuals while improving access to loans for consumers previously penalized for unpaid medical bills.
“People who get sick shouldn’t have their financial future upended,” said CFPB Director Rohit Chopra. “The CFPB’s final rule will close a special carveout that has allowed debt collectors to abuse the credit reporting system to coerce people into paying medical bills they may not even owe.”
Addressing a National Problem
Medical debt affects millions of Americans. As of 2021, about 1 in 12 U.S. adults carried medical debt, according to research from KFF, a nonprofit health policy organization. Despite being a poor indicator of loan repayment, medical debt on credit reports has historically denied thousands of Americans access to mortgages and other financial opportunities.
The CFPB estimates the rule will enable 22,000 additional mortgage approvals annually. Moreover, those with medical debt on their credit reports may see their scores improve by an average of 20 points, boosting their financial standing.
This development builds on measures taken in 2023, when the three major U.S. credit bureaus—Equifax, Experian, and TransUnion—removed paid medical debts and debts under $500 from credit reports.
Biden Administration’s Legacy Efforts
With just weeks remaining in President Joe Biden’s term, the administration is working to solidify consumer protections and environmental safeguards. On Monday, the White House announced a ban on new offshore drilling across most of the U.S. coastline.
The CFPB’s move aims to safeguard progress in consumer finance, a field expected to face changes under the incoming administration of President-elect Donald Trump. Trump allies and GOP lawmakers, including Elon Musk, have criticized the CFPB and signaled potential rollbacks of its policies.
Consumer advocates view the medical debt rule as a critical step toward ensuring fairer financial practices. Chopra emphasized the rule’s long-term implications: “This reform will help millions of Americans focus on recovery and opportunity without the shadow of medical debt.”
