Unreimbursed medical bills will no longer appear on credit reports, preventing people from getting mortgages, auto loans and small business loans, according to a final rule released by the Biden administration on Tuesday.
According to the bureau, Consumer Financial Protection Bureau rules will remove $49 billion in medical debt from the credit reports of more than 15 million Americans, and lenders will consider it when deciding to issue loans. This means that it cannot be considered.
The change is estimated to increase credit scores by an average of 20 points and could result in 22,000 additional mortgages being approved each year, the bureau said. Vice President Kamala Harris said in a statement announcing the rule that it would be “life-changing” for millions of families.
“No one should be denied economic opportunity because they get sick or experience a medical emergency,” she said.
Harris also announced that state and local governments leveraged sweeping pandemic-era relief measures in 2021 to eliminate more than $1 billion in medical debt for more than 700,000 Americans.
The administration announced plans for this rule in fall 2023.
The CFPB said medical debt is a poor predictor of an individual’s ability to repay a loan. Three national credit reporting agencies, Experian, Equifax and TransUnion, announced last year that they would remove medical collection debts under $500 from U.S. consumer credit reports.
The Biden administration’s new rules will target unpaid bills that appear on credit reports.
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