In a move set to benefit millions of Americans, medical debt will no longer appear on credit reports following a new ruling that aims to make it easier for consumers to secure loans.
The updated rule, announced by the Consumer Financial Protection Bureau (CFPB) on Tuesday, prohibits lenders from considering medical debt in their credit assessments.
This change is expected to eliminate around $49 billion in medical debt from the credit reports of more than 15 million individuals, according to the CFPB. Research by the agency suggests that medical debt is a poor indicator of loan repayment capacity, and the revision could lead to the approval of approximately 22,000 additional mortgages each year.
CFPB Director Rohit Chopra stated, “People who get sick shouldn’t have their financial future upended.”
He further explained that the rule would close a loophole that allowed debt collectors to exploit the credit reporting system, pressuring individuals into paying medical bills they may not owe.
US Vice President Kamala Harris welcomed the change, asserting that it would help more Americans “save money, build wealth, and thrive.”
However, the timing of the measure, just days before President Joe Biden is set to hand over power to President-elect Donald Trump, raises questions about its future. While the rule takes 60 days to be implemented, it is uncertain whether it will remain in its current form under the incoming administration, given Trump’s pledge to reduce government regulations.
Some Republican figures have voiced concerns that the policy could undermine the accuracy of credit reports. The Consumer Data Industry Association, along with other financial industry groups, opposed the reform, while the American Medical Association expressed support.
Frances Ibiefo
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