The Biden-Harris administration has announced a new initiative aimed at reducing the impact of medical debt on individuals and helping them recover from the immense expenses. The administration is exploring the possibility of removing medical debt from consumer credit reports to alleviate the burden of unexpected medical costs.
In a press release, the Consumer Financial Protection Bureau (CFPB) revealed that this proposal would not only prevent debt collectors from pressuring individuals to pay bills that may not be valid but also ensure that creditors do not rely on inaccurate and flawed data.
Collection agencies, known for purchasing debt at significantly reduced prices, have often been accused of using aggressive tactics and even taking legal action against patients. In some cases, individuals being contacted by these agencies may not have any outstanding fees.
The CFPB’s report from last year revealed that medical debt is the most frequently found collection type on credit reports, surpassing other forms of debt by a significant margin.
“Despite medical bills having little predictive value in credit decisions, millions of American households face the challenge of medical debt on their credit reports,” stated CFPB Director Rohit Chopra.
He added, “When someone falls ill, their focus should be on recovery rather than battling debt collectors attempting to extort payment for bills they may not even owe.”
While the Fair Credit Reporting Act of 1970 imposes restrictions on the sharing of medical information, exemptions granted in the early 2000s allowed creditors to obtain medical information for credit eligibility assessments.
The proposed initiative aims to prohibit consumer reporting companies from considering medical debts and collection information in consumer reports. Additionally, creditors would be barred from utilizing medical debt in underwriting decisions, and debt collectors would be prevented from engaging in coercive collection practices, as identified by the CFPB.
In a press briefing, Vice President Harris highlighted the fact that over one-third of U.S. adults struggle with medical debt, with communities of color disproportionately affected. Harris emphasized that this initiative would expand access to loans for individuals looking to purchase cars or homes, as well as qualify for rental agreements.
Senior administration officials confirmed that they will seek input from small businesses that may be impacted by the proposed rule. The administration aims to move forward with the rule swiftly and plans to submit it for consideration next year.
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