Biden administration bans unpaid medical bills from appearing on credit reports

Unpaid medical bills no longer appear on credit reports, where they can block people from mortgages, car loans or small business loans

Unpaid medical bills will no longer appear on credit reports, where they can block people from mortgages, car loans or small business loans, according to a final rule announced by the Biden administration on Tuesday.

The Consumer Financial Protection Bureau’s rule will remove $49 billion in medical debt from the credit reports of more than 15 million Americans, according to the agency, meaning lenders will no longer be able to take that into account when deciding whether to grant a loan.

According to the agency, the change is estimated to increase credit scores by an average of 20 points and could result in an additional 22,000 mortgages being approved each year. Vice President Kamala Harris said in a statement announcing the rule that it would be “life-changing” for millions of families.

“No one should be denied economic opportunity because he or she has become ill or experienced a medical emergency,” she said.

Harris also announced that states and local governments have taken advantage of one sweeping 2021 pandemic relief package to eliminate more than $1 billion in medical debt for more than 700,000 Americans.

The government announced plans for the rule in the fall of 2023.

The CFPB said medical debt is a poor predictor of an individual’s ability to repay a loan. Experian, Equifax and TransUnion, the three national credit reporting agencies, said last year they were removing medical collection debts of less than $500 from U.S. consumer credit reports.

The Biden administration’s new rule will cover outstanding accounts that appear on credit reports.