Biden Seeks to Shield Credit Scores from Medical Debt
The Biden administration unveiled a major initiative on Thursday to shield Americans from the repercussions of medical debt, laying out plans to craft federal regulations that prevent unpaid medical bills from impacting patients’ credit scores.
If put into effect, these rules could assist tens of millions who have medical debt listed on their credit reports, removing data that can lower consumers’ scores, complicating their ability to secure employment, rent homes, or obtain car loans.
These potential regulations mark one of the most substantial federal moves to address medical debt, an issue affecting around 100 million people.
Biden Administration Aims to Shield Credit Scores from Medical Debt
This burden often forces many to take on additional jobs, forfeit their homes, and ration essentials, as revealed by a KFF Health News-NPR investigation.
“No one in this country should have to go into debt to get the quality health care they need,” Vice President Kamala Harris stated, announcing the new measures alongside Rohit Chopra, the head of the Consumer Financial Protection Bureau (CFPB). This agency is tasked with formulating the new regulations.
“These measures will improve the credit scores of millions of Americans so that they will better be able to invest in their future,” Harris added.
The enactment of new regulations can be a prolonged endeavor. Administration officials indicated on Thursday that the new rules would be drafted next year.
Such a bold move to limit credit reporting and debt collection by hospitals and other medical providers will likely face industry pushback.
Meanwhile, the Consumer Financial Protection Bureau, established in the wake of the 2008 financial crisis, is under scrutiny from Republicans. Its future might be jeopardized by a case pending before the Supreme Court.
Initiative Targets Medical Debt’s Impact on Credit
Yet, the Biden administration’s move garnered commendation from patient and consumer groups, many of whom have lobbied for years for the federal government to bolster protections against medical debt.
“This is an important milestone in our collective efforts and will provide immediate relief to people that have unfairly had their credit impacted simply because they got sick,” expressed Emily Stewart, executive director of Community Catalyst.
Credit reporting, a tactic designed to coax patients into settling their bills, is the predominant collection strategy employed by hospitals.
“Negative credit reporting is one of the biggest pain points for patients with medical debt,” remarked Chi Chi Wu, a senior attorney at the National Consumer Law Center.
While a single negative mark on a credit score might not significantly impact some, the repercussions can be dire for those saddled with substantial unpaid medical bills.
Simultaneously, CFPB researchers have discerned that medical debt, unlike other debt types, doesn’t accurately predict a consumer’s creditworthiness.
The three leading credit agencies — Equifax, Experian, and TransUnion — announced they would cease including certain medical debts on credit reports as of the previous year.
Hospital leaders and representatives from the debt collection sector have cautioned that such curbs on medical providers’ billing capabilities might have unintended consequences.
“It is unfortunate that the CFPB and the White House are not considering the host of consequences that will result if medical providers are singled out in their billing,” voiced Scott Purcell, CEO of ACA International.
With information from CBS News
