Medical debt will be banned from credit reports, per a new Biden administration regulation

The news: The Consumer Financial Protection Bureau finalized a regulation that will prohibit medical debt from being included on consumer credit reports, while banning lenders from using a person’s medical information to assess loan decisions.

How we got here: The rule comes a few years after the three largest credit reporting agencies said they would no longer include paid medical debts, unpaid medical debts less than a year old, and medical debt under $500 from credit reporting. However, even with those voluntary changes, medical debt still appeared in the credit reporting system for millions of Americans.

Why it matters: Consumers with high rates of medical debt struggle to be approved for a loan or are subjected to higher interest rates. These financial barriers have trickle-down impacts on health and livelihood. For example, being denied a loan approval could threaten an individual's access to affordable housing—and in the most extreme cases, result in homelessness, per KFF Health News.

The federal action will also remove $49 billion in unpaid medical bills that are currently on the credit reports of 15 million Americans. This will raise their credit scores by an estimated average of 20 points and is expected to lead to the approval of approximately 22,000 additional mortgages every year.

Our take: Removing medical debt from credit reports is a worthy endeavor. But hospitals have been known to take aggressive action in their own efforts to chase down patients’ unpaid bills. Examples include suing them, placing liens on their homes, or denying them future care.

The good news is that public pressure has forced several health systems to reverse course and forgive medical debt for certain patients. True relief will be felt when many more of the 100 million Americans who are saddled with medical debt see their balances significantly slashed if not removed altogether.

This article is part of EMARKETER’s client-only subscription Briefings—daily newsletters authored by industry analysts who are experts in marketing, advertising, media, and tech trends. To help you finish 2024 strong, and start 2025 off on the right foot, articles like this one—delivering the latest news and insights—are completely free through January 31, 2025. If you want to learn how to get insights like these delivered to your inbox every day, and get access to our data-driven forecasts, reports, and industry benchmarks, schedule a demo with our sales team.