Breaking Free from Medical Debt: A New Era for Credit Reports
A groundbreaking rule change by the Consumer Financial Protection Bureau (CFPB) is set to remove a staggering $49 billion in medical debt from credit reports, affecting an estimated 15 million Americans. This move is expected to boost credit scores by an average of 20 points, paving the way for thousands of additional affordable mortgages every year.
The Burden of Medical Debt
Medical debt is the largest type of debt in collections, with over 100 million Americans struggling to pay their bills. Often, consumers are asked to cover balances that should be covered by health insurance or financial assistance programs, and inaccurate medical bills are a common complaint. The CFPB’s research has shown that medical bills on credit reports are not reliable indicators of a person’s ability to repay loans.
A Fresh Start for Consumers
Under the new rule, consumer reporting agencies will no longer include medical debt information in credit reports and credit scores sent to lenders. Creditors will also be prohibited from using certain medical information when making lending decisions. This change marks a significant shift in the way medical debt is treated, acknowledging that people who get sick should not have their financial future jeopardized.
A Step Towards Fairness
The CFPB’s move follows a 2022 report that found medical bills accounted for $88 billion of debts reported on credit reports. In response, the three major credit reporting agencies and credit scoring companies took steps to reduce the impact of medical debt on credit scores. Now, with the finalization of the CFPB rule, Vice President Kamala Harris has announced that over $1 billion in medical debt has been eliminated for more than 750,000 Americans in certain states, counties, and cities.
A Brighter Future Ahead
The American Rescue Plan Act is expected to eliminate up to $7 billion in medical debt for almost 3 million Americans by the end of 2026. This progress marks a significant step towards ensuring that no one is denied economic opportunities due to medical debt. As the CFPB and other organizations continue to work towards a fairer system, millions of Americans can look forward to a brighter financial future.
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