CFPB Aims to End the Use of Medical Debt Information in Making Credit Determinations and in Credit Reporting

By: Andrew C. Glass, Gregory N. Blase, and Joshua L. Durham

On June 11, 2024, the Consumer Financial Protection Bureau (CFPB) published a Notice of Proposed Rulemaking (NPRM) to ban the inclusion of medical bills in consumer credit reports.

In 2003, Congress passed the Fair and Accurate Credit Transactions Act (FACTA), amending the Fair Credit Reporting Act (FCRA), to restrict lenders from obtaining or using medical debt in making credit decisions. Regulation V, which implements FCRA and FACTA, also restricts creditors from using such information in making credit decisions except under certain circumstances. Now, the CFPB’s NPRM would amend Regulation V to curtail those exceptions and prevent the disclosure of medical debt on consumer credit reports.

Specifically, the proposed rule would amend Regulation V to add a definition of “medical debt information,” remove or amend certain medical debt exceptions for creditors, and impose medical debt disclosure limitations on credit reporting agencies. The CFPB reasoned that medical debt has limited predictive value in credit underwriting because of the unique circumstances of such debt, such as the complexity of reimbursement and billing practices and the unknown upfront cost of essential care. 

The proposed rule would prevent creditors from using medical debt information for credit eligibility purposes. In terms of credit reporting, the proposed rule would generally prohibit a consumer reporting agency from furnishing to a creditor a consumer report containing medical debt information that the creditor is otherwise prohibited from using. To these ends, “medical debt information” is defined as “medical information that pertains to a debt owed by a consumer to a person whose primary business is providing medical services, products, or devices . . . for the provision of such medical services, products, or devices. . . . [including] medical bills that are not past due or that have been paid.” The CFPB notes that it intends the definition to help creditors know what types of information they must avoid in determining credit eligibility.

CFPB “Fast Facts” about the NPRM is found here, as well as an unofficial redline of the proposed changes to Regulation V.

Comments close on August 12, 2024. K&L Gates is closely monitoring the NPRM; please reach out for more information.