A new federal rule announced by the Consumer Financial Protection Bureau (CFPB) aims to remove medical debt from credit reports, potentially boosting credit scores and increasing mortgage approval rates. The rule, which takes effect in 60 days, is welcomed by consumer advocates who argue that medical debt is not a reliable indicator of a consumer's ability to repay loans. However, the Consumer Data Industry Association (CDIA) representing credit reporting agencies, contends that the CFPB lacks legal authority to implement this change.
If you have problems with medical bills piling up on your credit report, a new federal rule could help you eliminate future medical debt from your credit reports.The Consumer Financial Protection Bureau, or CFPB, announced the rule today, but there’s still some work to go. 'I'm very pleased with that ruling,' said Chris Hoyt from Madison giving his initial reaction to banning medical debt from credit reports.
We did a story last year with Hoyt when he had problems with medical billing and was told that if he didn't pay a bill, it would go on his credit report. He was troubled but not surprised by the threat.RELATED: Big medical bill + no real answers=1 huge headache for former school bus driver 'As a retired banker, I used to review credit all the time and medical bills were not uncommon,' said Hoyt. HOW WOULD THIS HELP? The CFPB reported that removing medical debt could boost people's credit scores by 20 points on average and lead to about 22,000 more people getting approved for mortgages. 'We think this is a great day for patients and their families,' said Chuck Bell, a Financial Policy Advocate with Consumer Reports. He said while medical debt is the leading cause of bankruptcy and the most common source of debt, there’s something interesting about that debt. 'What the CFPB has found is that medical debt is really not predictive of a consumer's ability to repay loans for a car or a house, for example,' said Bell. The rule is set to go into effect in 60 days. HOW DOES THE CREDIT REPORTING ASSOCIATION SEE THIS? We reached out to the Consumer Data Industry Association or CDIA which represents consumer reporting agencies. In a statement, it said in part, '...the CFPB lacks the legal authority to prohibit creditors from considering medical debt… Congress established a detailed framework governing the content of credit reports….” Bell said Congress has six months to overturn the rule, but he hopes it does not
MEDICAL DEBT CREDIT REPORTS CONSUMER PROTECTION FINANCE CREDIT SCORES
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