The Biden administration will propose a rule to ban medical debt from credit reports, in an effort to improve Americans’ ability to own a home or buy a car, according to a report from ABC News.
The rule is expected to be announced by Vice President Kamala Harris and Consumer Financial Protection Bureau Director Rohit Chopra, aiming to alleviate the financial burden on Americans.
The big picture: The proposed rule, in development since September, could potentially go into effect next year and is designed to prevent unjust and inappropriate harm to individuals’ credit scores due to medical debt.
- The rule is estimated to allow 22,000 more people annually to qualify for safe mortgages, potentially benefiting lenders as well by enabling them to approve more borrowers.
Driving the news: Despite efforts by some major credit report companies and scoring models to reduce the impact of medical debt, 15 million Americans still have $49 billion of medical debt affecting their credit scores.
- The extent of medical debt in the U.S. is significant, impacting two in every five Americans and contributing to financial barriers in seeking loans for essential needs such as cars and homes.
- The proposed rule also aims to address the issue of incorrect, confusing, and complicated medical bills, with the intention of preventing disputes that negatively impact credit reports.
- However, some experts caution that the reduced repayment rates for medical debt could pose challenges for hospitals and health care systems if the proposed rule leads to fewer people paying their bills.
