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The Biden Administration has announced a plan to ban medical debt from credit scores. Currently, having a low credit score can make it more difficult for a person to rent an apartment, get hired, or receive a loan. This change could impact tens of millions of Americans who currently have unpaid medical bills.
A Kaiser Family Foundation analysis found that credit reporting is the most common collection tactic used by hospitals to induce patients to pay their bills. However, researchers at the Consumer Financial Protection Bureau (CFPB) have found that medical debt is not a reliable predictor of creditworthiness. Despite this, medical bills account for about 58% of all uncollected debts reported to credit bureaus.
In 2022, the three largest credit agencies announced that they would no longer include some medical debt on credit reports, but this excluded patients with larger medical debts. This has prompted advocacy for further action by groups like the National Consumer Law Center and Community Catalyst. Opponents argue that regulations could prevent medical providers from getting their bills paid and could lead to upfront payment requirements for care. They also note that looser credit requirements could enable consumers with debt issues to get loans they can't repay.
The Biden Administration will develop this proposed regulation over the next year. It is likely to be challenged by industry opposition and make take awhile to enact new regulations. Download the bulletin for more details.