In a significant move aimed at easing the financial burdens of millions of Americans, the Biden administration has announced a proposed rule to exclude medical debt from credit reports. This initiative is intended to prevent medical debt from influencing decisions related to renting apartments, purchasing cars, or obtaining mortgages.
The Consumer Financial Protection Bureau (CFPB) revealed plans for this rule, which seeks to eliminate medical bills from credit reports and prohibit lenders from factoring in medical debt when assessing creditworthiness. Additionally, the rule aims to protect individuals from having essential medical devices, such as wheelchairs, repossessed due to unpaid loans.
During a recent conference call, Vice President Kamala Harris emphasized the importance of this proposed rule, stating, "No one should be denied access to economic opportunity simply because they experienced a medical emergency."
Initially announced in September, the administration expects to finalize this rule early next year, according to a senior official. The CFPB has highlighted that medical debt is often an unreliable indicator of a person’s ability to repay loans, as these expenses are typically unforeseen and beyond the control of patients facing serious illnesses.
CFPB Director Rohit Chopra pointed out that billing errors frequently appear on credit reports, further complicating the financial situation for many. He remarked that the new rule would prevent debt collectors from leveraging credit reports to coerce payments for potentially erroneous bills.
Last year, the three major national credit reporting agencies - Experian, Equifax, and TransUnion - announced they would remove medical collections debt under $500 from credit reports. Despite this, the CFPB reported that around 15 million Americans still have $49 billion in medical debt in collections.
The CFPB will be accepting comments and feedback on this proposed rule until August 12, allowing the public and stakeholders to voice their opinions and concerns.
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