The Consumer Financial Protection Bureau’s (CFPB) new rule banning medical debt from credit reports could see a delay and further reconsideration. The rule was published Jan. 14 in the Federal Register and had been set to take effect March 17.
As of Jan. 20, however, following his inauguration, President Trump signed an executive order placing a “regulatory freeze pending review” on all executive departments and agencies.
Specifically, the order calls for agencies to “consider postponing for 60 days from the date of this memorandum the effective date for any rules that have been published in the Federal Register, or any rules that have been issued in any manner but have not taken effect.” During those 60 days, agencies are to consider opening new comment periods and, if necessary for further review, to delay rules beyond the 60-day period.
Some welcomed the potential delay and reconsideration, including Capio, a health care receivables purchaser, which noted the CFPB’s final rule could have “significant unintended consequences.”
“Capio is deeply concerned about the potential implications of the CFPB’s final rule to prohibit the inclusion of medical debt on consumer credit reports,” said Mark Detrick, Capio’s CEO. “In the interests of patients and providers, we believe this rule could have significant unintended consequences that extend beyond its goals.”
What consequences, exactly? Detrick noted the removal of medical debt from credit reports "risks creating a fragmented credit reporting system that reduces transparency and complicates lenders’ ability to assess creditworthiness" and could discourage consumers from paying medical debts, "increasing financial strain on health care providers and driving them toward litigation to recover unpaid bills.”
Those concerns have been echoed by others in the tens of thousands of comments the CFPB received during the rulemaking process.
Still, the CFPB said it found that medical bills on a person’s credit report are “a poor predictor of whether they will repay a loan, and contribute to thousands of denied applications on mortgages that consumers would be able to repay.”
The consumer watchdog stated specifically that it expected the rule to result in an additional 22,000 mortgages annually.
The CFPB also claimed the rule would remove some $49 billion in medical bills from credit reporting for 15 million Americans, and that those with medical debt on their credit reports could see their credit scores rise by an average of 20 points.
