CFPB Issues Rule Prohibiting Unpaid Medical Debt on Credit Reports

Unpaid medical debt often hurts consumers’ credit scores and ability to get loans. After an illness or injury, even the most careful consumer has had to worry about the inability to pay high doctor bills and the potential adverse effects on credit reports. Well, the U.S. Consumer Financial Protection Bureau (CFPB) has put an end to the issue. The agency announced new guidelines that prohibit unpaid medical debt from being reported and forbid lending institutions from considering it when originating new loans.

Under the rule, an estimated $49 billion in medical debt will be essentially erased from 15 million credit reports. In addition, lenders cannot use medical devices like wheelchairs as collateral for a loan, eliminating the possibility of the equipment being repossessed in the event of nonpayment.

“People who get sick shouldn’t have their financial future upended,” said Rohit Chopra, the bureau’s director, in the announcement of the rule.

It’s estimated that consumers with medical debt currently on their reports will see a 20-point boost in score on average. The agency also projects an increase of 22,000 mortgage approvals annually as a result.

Opposition and Support for the CFPB’s Medical Debt Ruling

The consumer reporting industry as well as banks and collectors are likely to oppose the CFPB’s medical debt initiative. The industry sees the rule as an overstep of the agency’s authority, possibly leading to lawsuits to stop or at least slow implementation.

In August, Republican lawmakers caught wind of the proposed CFPB rule. Through a letter to Chopra, they expressed concern over the rule’s potential to reduce low-income borrowers’ access to credit and weaken the loan underwriting process.

Meanwhile, consumer advocates see the CFPB medical debt reporting guidance as a win. Ideally, consumers will no longer need to worry about unpaid medical bills preventing them from reaching their financial goals.

“Nobody, no matter where we live or how much money we have, should be forced to make the impossible choice between getting essential care and going into debt,” said Mona Shah, senior director of policy and strategy at Community Catalyst, per CNN. “And they should not have to worry that medical debt could prevent them from buying a house or securing an auto loan because of its impact on their credit.”

In another credit-related guidance announced in December 2024, the CFPB said it wanted to limit credit card late payments to $8 per incident. The move will save Americans billions of dollars if it survives litigation. Of course, some banks responded by jacking up credit card rates and creating new fees.