Earlier this month, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule to amend Regulation V, which implements the Fair Credit Reporting Act (FCRA), as to medical information and debt. This proposed rule follows Director Chopra’s remarks in March 2022, concerning a report on medical billing and collection practices authored by the CFPB. The report suggested that roughly 43 million people had medical bills on their credit report with the total outstanding amount around $88 billion. In those same remarks, Director Chopra noted that he was concerned that the credit reporting system was being “weaponized as a tool of coercion to get people to pay medical bills they may not even owe” and that the CFPB would be taking steps in response. He noted that the CFPB would be assessing whether it was appropriate for unpaid medical billing data to be included on credit reports altogether.
The proposed rule has three main components. First, the rule seeks to eliminate the special medical debt exception in Regulation V. Specifically, the proposed rule would remove the exception that broadly permits lenders to obtain and use information about medical debt to make credit eligibility determinations. Lenders would continue to be able to consider medical information related to disability income and similar benefits, as well as medical information relevant to the purpose of the loan, so long as certain conditions are met, including (i) that the medical information relates to “income, benefits, or the purpose of the loan, including the use of the proceeds,” (ii) that the lender uses the medical information in a manner and to an extent that is no less favorable that it would use comparable information that is not medical information and (iii) the lender does not take the consumer’s “physical, mental or behavioral health, condition or history, type of treatment, or prognosis into account as part of the determination” of the consumer’s eligibility for credit.
Second, the proposed rule would prohibit credit reporting agencies from including medical debt on credit reports if they have reason to believe that the creditor intends to use the medical debt information in violation of the proposed rule. Since March 2022, the three nationwide credit reporting conglomerates – Equifax, Experian and TransUnion – voluntarily stopped reporting some, but not all, medical bills on an individual’s credit report. However, the proposed rule would require them to stop reporting medical bills entirely.
Lastly, the proposed rule would prohibit lenders from taking medical devices as collateral for a loan and bans lenders from repossessing medical devices, like wheelchairs or prosthetic limbs, if people are unable to repay the loan.
Comments concerning the proposed rule must be received on or before August 12, 2024.
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