Final rule limiting use of medical information by creditors, including eligibility for credit, given green light

A regulatory exception that previously permitted a creditor to obtain or use medical information, including medical debt information, is removed under a new rule on medical debt collection issued Tuesday by the federal consumer financial protection agency.

The Consumer Financial Protection Bureau (CFPB) said its rule, which removes the exception under Regulation V (implementing the Fair Credit Reporting Act, FCRA), also amends existing exceptions for using medical information related to credit eligibility determinations.

The final rule also limits the circumstances under which consumer reporting agencies are permitted to furnish medical debt information to creditors in connection with credit eligibility determinations.

According to the agency, the final rule generally prohibits consumer reporting agencies from including medical debt information in consumer reports to creditors making credit determinations. When the rule was proposed in June, the CFPB said it would remove the estimated $49 billion in medical debts still reflected across the credit reports of about 15 million consumers and result in an average 20-point improvement in those consumers’ credit scores.

The bureau asserts that it has researched the issue of unpaid medical debt in consumer credit reports for years, finding in 2014 that medical debts provide less predictive value to lenders than other debts on credit reports.

The agency has noted that in a March 2022 report, which found that medical bills made up $88 billion of reported debts on credit reports, it said that it would assess whether credit reports should include data on unpaid medical bills.

Since that report, the CFPB said, the three nationwide credit reporting firms Equifax, Experian, and TransUnion announced that they would take many of those bills off credit reports, and FICO and VantageScore, the two major credit scoring companies, have decreased the degree to which medical bills impact a consumer’s score.

The new rule takes effect 60 days after publication in the Federal Register.

 Executive Summary of the FCRA Medical Information Rule