CFPB Proposed Rule to Remove Medical Bills from Consumer Credit Reports

Earlier this month, the Consumer Financial Protection Bureau (“CFPB”) issued a proposed rule that, if finalized, would impact the credit reports of millions of Americans.

The proposed rule takes aim at unpaid medical bills that may appear on consumers’ credit reports and which, according to CFPB Director Rohit Chopra, are often inaccurate, are not predictive of a consumer’s ability to repay a loan, and are weaponized in order to coerce patients into paying medical bills they do not owe.

Of particular concern to the CFPB is the practice of “debt parking” used by some debt collectors in connection with medical debt. Debt parking is the practice of purchasing medical debt and then placing (parking) it on a consumer’s credit report without their knowledge. Consumers often only discover the existence of the debt when they attempt to apply for a loan and discover the medical costs are impacting their credit score. The consumers are then encouraged to pay off the medical debt, regardless of its validity, to improve their credit scores.

In order to address this and other coercive practices, the CFPB’s proposed rule would do the following:

• Remove the ability of lenders to obtain and use medical debt information to make credit eligibility determinations.
• Prohibit credit reporting companies from including medical debt on credit reports in situations where the creditors are prohibited from using such information.
• Prohibit the ability of lenders to take medical devices – wheelchairs, prosthetic limbs – as collateral for a loan.

If finalized, the CFPB anticipates that the proposed rule would, among other things, remove up to $49 billion from the credit reports of more than 15 million Americans.

The proposed rule has a comment period that expires on August 12, 2024.

You can find a copy of the CFPB’s proposed rule here.

You can find the CFPB’s press release announcing the proposed rule here.