Friday, June 21, 2024

Biden administration takes steps to prohibit medical debt from appearing on credit reports

Biden Administration Moves to Ban Medical Debt from Credit Reports

The Biden administration is making a significant move to help millions of Americans by proposing a rule to ban medical debt from credit reports. This decision, led by Vice President Kamala Harris through the Consumer Financial Protection Bureau, aims to eliminate the burden of medical debt on individuals’ credit scores.

In a recent press call, Harris emphasized the importance of this rule in improving the financial health and wellbeing of Americans. She highlighted how medical debt can hinder individuals from progressing financially, stating that it is simply unfair. The administration estimates that implementing this rule could increase affected individuals’ credit scores by an average of 20 points and potentially lead to the approval of thousands of additional mortgages each year.

According to a recent study, one in five U.S. households has medical debt, even those with health insurance. On average, a typical American household owes around $4,600 in medical debts. The proposed rule seeks to end the practice of using credit reports to pressure patients into paying medical bills that may be inaccurate or unjust.

CFPB Director Rohit Chopra emphasized the need to stop the weaponization of the credit reporting system in coercing individuals to pay medical bills they do not owe. He highlighted that medical bills on credit reports are often inaccurate and do not accurately predict an individual’s ability to repay other loans.

In addition to the proposed rule, Harris called on states, local governments, and healthcare providers to use federal funds, such as those from the American Rescue Plan, to purchase and eliminate medical debt, prevent further accumulation of debt, and protect patients from aggressive debt collectors.

While the rule is open for comments until August 12, 2024, the earliest it could take effect is next year. The Consumer Data Industry Association, representing major credit bureaus, is reviewing the proposal and has already taken steps to remove a significant portion of medical collection debt accounts. They have also extended the time before medical collections debt appears on credit reports and deleted resolved debts and medical collection debts below $500.

Overall, the Biden administration’s move to ban medical debt from credit reports is a significant step towards alleviating the financial burden on millions of Americans and promoting fairer credit reporting practices.

Disclaimer: The information provided in this article is for informational purposes only and should not be considered as financial advice. The content is based on general research and may not be accurate, reliable, or up-to-date. Before making any financial decisions, it is recommended to consult with a professional financial advisor or conduct thorough research to verify the accuracy of the information presented. The author and publisher disclaim any liability for any financial losses or damages incurred as a result of relying on the information provided in this article. Readers are encouraged to independently verify the facts and information before making any financial decisions.

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