U.S. Bans Medical Debt from Credit Reports

The U.S. government on Tuesday issued new rules to remove roughly $49 billion in unpaid medical debts from Americans’ credit reports, even as debt collectors and incoming Republican leaders have signaled they might try to overturn the policy entering the Trump administration.The new prohibition targets credit-reporting companies, including Equifax, Experian and TransUnion, which assemble detailed dossiers about consumers that they furnish to banks, employers and landlords so that they can evaluate a person’s finances.

Under the new policy, these credit reports can no longer include past-due medical bills, and companies that obtain a person’s credit history cannot evaluate their application based on outstanding medical debts.

The regulation from the Consumer Financial Protection Bureau does not forgive any health-related debts.

The agency estimated Tuesday that its rules would help about 15 million Americans, some of whom have been unable to obtain jobs, apartments, credit cards or mortgages if unavoidable medical debts appear as glaring, derogatory marks on their credit histories, lowering their scores.

Many of these people carry medical debt despite having some form of health insurance. The CFPB said some of the past-due balances are actually erroneous, reflecting amounts already paid or greatly overstated totals compared to what a person actually owes.

“People who get sick shouldn’t have their financial future upended,” Rohit Chopra, the agency’s director, said in a statement.

“The CFPB’s final rule will close a special carveout that has allowed debt collectors to abuse the credit reporting system to coerce people into paying medical bills they may not even owe.”

The CFPB rules are likely to draw sharp opposition from credit-reporting agencies and debt collectors, which blasted the agency last year when it first proposed the idea.