Medical Debt will be off credit reports thanks to newly-finalized CFPB rule

January 7, 2025

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About four in 10 Mainers have taken on medical debt in the past five years

The Consumer Financial Protection Bureau (CFPB) finalized a rule on Tuesday to stop the harmful impact of medical debt on consumers’ credit scores. The rule will stop credit reporting companies from sharing medical debts with lenders and prohibit lenders from making lending decisions based on existing medical debt. 

About four in ten Mainers say they’ve taken on medical debt in the past five years and three out of four of those people still have that debt. Nora Flaherty-Stanford of Maine People’s Alliance says finalizing the rule is “a big win for Mainers and people all over the country. This will help 15 million people whose credit scores should not have suffered, because of charges they couldn’t avoid that they perhaps should not even be responsible for in the first place.”

This rule is part of a larger initiative by the CFPB to address hidden junk fees charged by banks and financial companies that disproportionately impact low-income consumers. Since its formation, the CFPB has obtained over $21 billion in relief for over 205 million people. 

Despite its success and its popularity with the public, the agency’s future is at risk. Most recently, advisors to the President-elect have called for the CFPB to be shuttered. The medical debt credit reporting rule itself could also be overturned by Congress using the Congressional Review Act (CRA), which allows Congress, with the President’s signature, to overturn new regulations.

Flaherty-Stanford adds that “as we celebrate this good news, we’re also calling on our members of Congress to stand strong in supporting this rule and the CFPB.”

Even though medical debt has minimal predictive value in forecasting about whether people will pay their loan payments, vast amounts of medical debt information remain in the credit reporting system. Medical debt unjustly damages the credit scores of millions, limiting their ability to obtain affordable credit, rent safe housing, or even get a job. It also assists debt collectors in seeking to coerce payments, including for inaccurate or false medical bills.

The big three credit reporting agencies (Equifax, Transunion, Experian) voluntarily removed some medical collections information starting in 2022, but in 2024 the CFPB found that 15 million Americans still had more than $49 billion in outstanding medical debt on their credit reports. Consumers left behind by industry efforts were more likely to live in the South and in predominantly Black or Latino neighborhoods.

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Maine People’s Alliance (MPA) was founded in Lewiston in 1982 and has grown to be the largest community organization in Maine, and one of the largest in the country. MPA is a powerful grassroots network of more than 32,000 members who work together on issues that include but are not limited to climate change, toxics use reduction, health care access, affordable housing, racial justice, and immigrant rights.

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Contact: Nora Flaherty-Stanford, [email protected], (207) 370-8314