About 15 Million People Will Likely Have Better Credit Scores Under This New Rule | Global News Avenue

Government consumer watchdogs have finalized a rule that would ban medical debt from being included in credit reports, a move that could boost the credit scores of about 15 million people.

The Consumer Financial Protection Bureau (CFPB) on Tuesday finalized a previously announced rule, advancing an initiative by President Joe Biden’s administration to reduce the impact of medical debt on household finances. The rule prohibits medical debt from being included on credit reports and prohibits lenders from including medical debt in their lending decisions.

“People who are sick should not have their financial future ruined,” CFPB Director Rohit Chopra said in a press release. The CFPB’s final rule would eliminate a special exemption that allowed collection of Debtors abuse the credit reporting system and force people into the credit reporting system. Pay medical bills they may not even owe. “

If it were to take effect in its current form, the major credit reporting agencies (Experian, TransUnion and Equifax) may not include information about medical debt on consumer credit reports. This could improve FICO credit scores based on those credit reports and make it easier for people with medical debt to get mortgages and other loans, or even jobs for employers who look at credit scores when hiring.

The CFPB estimates that borrowers with medical debt will see an average improvement of 20 points in their credit scores, which typically range from 300 to 850. For example, the bureau said the increases could result in an additional 22,000 people being approved for mortgages each year.

The Bureau believes that medical debt does not truly reflect a borrower’s ability or willingness to repay because consumers often unintentionally get into medical debt and because of the complexities of medical billing and insurance, debt records are often mistakenly added to credit reports .

Will this rule ever see the light of day?

However, the future of the new rule is unclear as it will take at least 60 days to take effect, by which time President-elect Donald Trump will be in the White House. The bill may also face legal challenges from financial companies.

“As long as the debt record does not disclose the existence of the provider or the nature of the services provided, the CFPB does not have the legal authority to bar creditors from considering medical debt,” said Dan Smith, CEO of the Consumer Data Industry Association, a trade group representing the three major credit bureaus. said in a statement. “The CFPB also does not have the authority to dictate what can and cannot be included in a credit report.”

Americans’ credit reports are already undergoing changes as a result of the bureau’s actions under the Biden administration. In 2022, under the supervision of the bureau, the three major bureaus Eliminated medical debt under $500 The number of debtors on credit reports has dropped by two-thirds.

This is the latest rule in a series of moves

The finalization of the medical debt rule adds to a flurry of new regulations and lawsuits the agency is rolling out in the final days of the new administration. Since the election, the Bureau has Limit bank overdraft feesasking payment app companies Get checked like a bank and launched consumer protection lawsuits against large companies such as Zelle, Walmart and Experian.

Financial companies have push back The court rejected the CFPB’s latest wave of rules and blocked, at least temporarily, an $8 cap on credit card late fees from taking effect.

The bureau faces an uncertain future under the Trump administration and a Republican-controlled administration. Many Republicans have historically been hostile to the agency Created in 2010 Sen. Elizabeth Warren, D-Mass., proposed the idea in the wake of the financial crisis. Elon Musk, the billionaire and close adviser to Trump, recently suggested that the agency should be “deleted.”