Biden Administration Bans Medical Debt in Credit Reports

(Reuters) – President Joe Biden’s outgoing administration announced on Tuesday a ban on medical debt in American consumers’ credit reports, fulfilling a campaign year promise less than two weeks before leaving office.

Officials stated that this new regulation, implemented despite pushback from the banking and consumer data industries, will remove $49 billion in medical bills from the credit reports of approximately 15 million Americans.

The U.S. Consumer Financial Protection Bureau (CFPB) made this announcement despite pressure from Congressional Republicans urging Biden’s financial regulators to halt new rules as President-elect Donald Trump prepares to take office on Jan. 20. There is concern that Trump or conservative lawmakers may attempt to reverse this change.

In a statement, Vice President Kamala Harris, who supported the initial policy proposal in June, stated that the ban will be “life-changing for millions of families”. She emphasized, “No one should be denied economic opportunity because they got sick or experienced a medical emergency.”

According to the CFPB, medical debt is not a reliable predictor of a borrower’s ability to repay loans. The change is expected to result in an additional 22,000 low-cost mortgages annually and improved credit scores for many.

The new rule will also prevent lenders from considering medical information when making lending decisions and will help protect consumers from debt collectors attempting to collect erroneous medical debts.

This policy change received backing from the American Medical Association. However, trade groups for banks and credit bureaus argue that the evidence does not support the CFPB’s decision, suggesting that it may prevent them from accessing crucial information regarding borrowers’ financial risks. The American Bankers Association warned that this could lead to fewer loans being offered by banks.