Biden administration proposes banning medical debt from credit reports

The Biden administration is taking a significant step to help Americans struggling with medical debt by proposing to ban such debt from credit reports. This move could benefit more than 15 million Americans, raising their credit scores by an average of 20 points and potentially leading to the approval of thousands more mortgages annually.

With 46 million people having medical debt listed on their credit reports in 2020, this proposed rule could have a major impact on the financial well-being of many individuals. In addition to removing medical debt from credit reports, the rule would also prevent lenders from using medical devices as collateral for loans and bar them from repossessing these devices if patients are unable to repay the loans.

Vice President Kamala Harris emphasized the unfairness of medical debt hindering Americans’ ability to secure loans for essential needs like cars, homes, and small businesses. The proposed rule, which could be finalized early next year, aims to alleviate this burden and provide relief to those struggling with medical bills.

Furthermore, the Consumer Financial Protection Bureau has been working on proposals to spare millions of Americans with unpaid medical bills from having that debt impact their credit reports. By focusing on nonmedical information for underwriting decisions, creditors can make more informed evaluations without penalizing individuals for medical debt.

Overall, this latest effort by the Biden administration reflects a broader commitment to addressing economic challenges faced by Americans. By eliminating medical debt from credit reports and implementing other measures to protect consumers, the administration is working towards a more equitable financial system for all.