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Note: The Trump Administration has begun dismantling the Consumer Financial Protection Bureau. It is unclear if this will affect the proposed rule to keep most medical debt off credit reports.
The Consumer Financial Protection Bureau (CFPB) is making waves with a bold move to change how medical debt impacts credit reports. The final rule is set for early 2025. It will bar lenders from considering medical debt when making credit decisions. It will also keep most medical debt information off consumer reports provided to creditors.
This is a major shake-up. Medical debt has followed consumers for years, tanking credit scores and limiting financial opportunities. Trade groups and debt collectors are already challenging the rule in court, trying to stop it before it takes effect.
Medical Debt Reporting Rules Are Changing
Credit decisions have long been tied to medical debt, but that’s about to end. The CFPB’s new rule removes the loophole that lets lenders use medical debt to decide if someone qualifies for credit. That means debts tied to medical services, devices, and treatments will no longer be part of creditworthiness assessments. Even if the debt has been assigned to a collection agency, it won’t count.
There are exceptions. If a consumer charges a medical expense to a credit card, that debt stays in play. If the medical debt directly impacts a person’s income or loan purpose, lenders might still use it. However, the days of medical debt worrying consumers because they needed healthcare are nearly over.
Consumer Reporting Agencies Face New Restrictions
This rule doesn’t just target lenders. It goes straight to the credit bureaus. Consumer reporting agencies (CRAs) will be banned from including medical debt in reports used for credit decisions. If a lender wants to see medical debt history, they won’t find it on reports from major credit bureaus.
There’s one gray area. CRAs can still include medical debt information if they have “reason to believe” it will be used for a legal, non-credit-related purpose. The rule doesn’t define what qualifies, leaving CRAs in uncertain territory. Yet, one thing is clear—medical debt is losing its grip on credit reports.
Lawsuits Are Already Challenging the Rule
A rule this significant was bound to face resistance. Shortly after its release, trade groups filed lawsuits challenging its legitimacy. A coalition of industry groups sued in Texas, arguing that the rule violates the Fair Credit Reporting Act and exceeds the CFPB’s authority. A separate group of debt collectors launched another legal challenge the next day.
They argue that the rule disrupts long-standing practices without sufficient justification. They claim the CFPB’s cost-benefit analysis is flawed and that the rule lacks a solid foundation. Legal challenges are escalating. The final outcome may be decided by the courts or congressional intervention.
What This Means for Consumers
If the rule survives, 15 million people will see $49 billion in medical debt wiped from credit reports. That’s a massive shift. People who struggled with credit denials over unpaid hospital bills will have new financial opportunities. Mortgages, car loans, and credit cards will no longer hinge on past medical emergencies.
Debt collectors will also face stricter rules. Under the Fair Debt Collection Practices Act (FDCPA), they can’t misrepresent medical debt, collect on settled accounts, or inflate what’s owed. Violations could lead to legal consequences, forcing collectors to rethink their strategies.
Fighting for Consumer Rights
Medical debt has held consumers hostage for too long. The upcoming rule changes could finally break that cycle, but legal battles are far from over. If trade groups succeed in court, the rule could be overturned before it takes effect.
At The Debt Defenders, we help consumers fight against unfair debt collection. If you’re facing aggressive collection tactics, explore our debt lawsuit defense. Need a strategy to deal with outstanding debts? Our debt resolution process is meant to protect your financial future.
If medical debt has impacted your credit or you’re dealing with debt collectors, contact us to discuss your options. We’re here to help you take control of your financial future.