Vice President Kamala Harris recently announced an effort to ban medical debt from credit reports, which would ease a burden that disproportionately affects women and Black people. Here are the key points:
- Proposal Details:
- The Biden administration proposed a new rule through the Consumer Financial Protection Bureau (CFPB) to eliminate medical debt from credit reports.
- This rule would prohibit creditors from using medical bills to make underwriting decisions and ban collectors from using medical debt to pressure consumers for payments.
- It aims to narrow the 2005 exemption in the Fair Credit Reporting Act that allowed creditors to use medical debts in credit decisions.
- Creditors would still have limited access to medical debt information for evaluating loan applications related to medical services.
- Impact:
- Approximately 15 million Americans would benefit from this credit reporting change, with an average score increase of 20 points.
- For mortgages alone, it could lead to approximately 22,000 additional home loans each year.
- The goal is to reduce unnecessary costs associated with medical emergencies in America2.
- Other Efforts:
- The No Surprises Act, effective since July 2022, requires private health insurers to cover most emergency services and prohibits excessive billing by medical providers.
- Removing medical debt from credit reports could give lenders more accurate information about borrowers, potentially making it easier for people to borrow money.
While this proposal aims to alleviate the impact of medical debt, it’s essential to address the root issue: access to affordable healthcare.