Medical Debt To Be Banned from Credit Reports: A New Biden Administration Rule Brings Relief

In a groundbreaking move to improve financial equity, the Biden administration has announced a final rule that will eliminate unpaid medical bills from credit reports. This decision, revealed Tuesday, marks a transformative shift in how medical debt is treated in the financial system and is expected to benefit millions of Americans struggling with the weight of unpaid healthcare expenses.

The Impact of the New Rule

The Consumer Financial Protection Bureau (CFPB) estimates that this rule will remove $49 billion in medical debt from the credit reports of over 15 million Americans. By doing so, it will raise credit scores by an average of 20 points, potentially unlocking new financial opportunities for families across the country.

The ripple effects of this change are immense:

• 22,000 additional mortgages are expected to be approved annually.
• More Americans will qualify for car loans, small business loans, and affordable credit terms.
• Families will face fewer barriers to achieving financial stability and building wealth.

Vice President Kamala Harris hailed the rule as “life changing,” emphasizing that it will empower families to thrive without being penalized for unforeseen medical emergencies. “No one should be denied economic opportunity because they got sick or experienced a medical emergency,” Harris stated.

A Problematic System Under Scrutiny

Medical debt has long been a contentious issue in the United States. The CFPB has argued that medical debt is a poor predictor of a person’s ability to repay loans. Unlike other types of debt, medical bills are often incurred unexpectedly and can result from complex billing practices or disputes over insurance coverage.

“Medical debt burdens millions of families across the country and can unfairly tarnish a person’s credit record, making it more difficult to qualify for an affordable loan, get a job, or even rent an apartment,” said Chuck Bell, Advocacy Program Director for Consumer Reports.

The rule builds on efforts already in motion. In 2022, major credit reporting agencies—Experian, Equifax, and TransUnion—announced they would remove medical collections debt under $500 from credit reports. The new regulation takes this one step further by addressing higher amounts and unpaid bills currently reflected on credit histories.

Political Pushback and Future Challenges

While the announcement has been widely celebrated, it faces potential political challenges. Critics, particularly from the Republican Party, have argued that the Biden administration should not enact significant new rules during the presidential transition period. Some have suggested that the incoming administration, led by President-elect Donald Trump, may attempt to reverse the ban.

However, analysts believe such a reversal is not guaranteed. According to Jaret Seiberg of TD Cowen Washington Research Group, “Trump 2.0 is more populist than in 2017,” which may deprioritize undoing consumer-focused protections like the medical debt ban.

A Broader Movement to Tackle Medical Debt

This new rule is part of a larger effort to address the systemic burden of medical debt in America. Harris also announced that state and local governments have used federal pandemic-era aid to eliminate over $1 billion in medical debt for more than 700,000 Americans. These efforts highlight a growing recognition of the need to reform how medical expenses impact financial stability.

What This Means for Consumers

For those burdened by medical debt, this rule is a game-changer. By removing unpaid medical bills from credit reports, millions will see immediate improvements in their credit scores, paving the way for better financial opportunities. The rule also underscores the importance of fair and accurate credit reporting, especially in a system where errors and disputes are common.

If you’ve been denied a loan or faced challenges due to medical debt on your credit report, this new rule offers hope for a more equitable financial future. Consumers are encouraged to monitor their credit reports closely and advocate for their rights as the rule takes effect.

When will this be taking effect?

Initial information shows it may be at least March 2025 before this takes effect, perhaps later. Now would be a good time to take note and continue researching these changes as well as your rights as a consumer.

It may be time to talk to an attorney

The team at Francis Mailman Soumilas, P.C. is ready to help with a Free Case Review and see if you are entitled to damages.