Lenders will no longer be able to include medical bills on credit reports that they use to make lending decisions, the Consumer Financial Protection Bureau (CFPB) said Tuesday.
The CFPB's decision removes about $49 billion in medical bills from consideration for about 15 million Americans. The agency predicts that its final rule will facilitate boosting consumers' credit scores by about 22 points on average. It could also lead to the approval of about 22,000 additional—and affordable—mortgages annually that consumers can repay along with other bills.
"Medical debts provide little predictive value to lender about borrowers' ability to repay other debts," according to a statement from the agency, adding that the practice "contributes to thousands of denied applications on mortgages that consumers would be able to repay."
CFPB added that consumers often said they received inaccurate medical bills, or "were being asked to pay bills that should have been covered by insurance or financial assistance programs."
The final rule aligns with Congress' decision to safeguard consumers' privacy by restricting lenders from obtaining or using medical information about medical bills and other personal healthcare information. It also ends an exception that previously allowed debt collectors to use the credit reporting system to coerce payments from patients.
Lenders were even allowed to consider whether a borrower uses certain devices, like prosthetic limbs. Those devices would then be used as debt collateral and considered for repossession, the agency said.
