A federal judge in Texas has vacated a Biden-era Consumer Financial Protection Bureau rule that removed medical debt from Americans’ credit reports.
CHRISTINE CHEN ZIMMER; contact [email protected]
Chen Zimmer is the senior consumer financial justice policy counsel at Americans for Financial Reform.
EVA STAHL; contact [email protected]
Stahl is the vice president for public policy and program management at Undue Medical Debt.
Chen Zimmer told the Institute for Public Accuracy: “We were really disappointed to see this struck down. In the previous administration, the Consumer Finance Protection Bureau issued and finalized rules that would have helped everyday people. There has been a pattern of CFPB rules that would have helped millions of people in the U.S. being struck down in Texas and the Fifth Circuit. This rule would have helped 15 million people with unjustly lowered credit scores and would have relieved pressure for these people to pay wrongful bills. We were hopeful it would be enacted into law and allowed to go forward.
“Medical debt is often involuntary and unpredictable. Studies continue to show that medical debt is not an accurate predictor of whether someone will repay their loans. Someone with great insurance can still be left with unpaid medical bills that affect their credit score, and the credit score is a gatekeeper to participation in our economy. Someone with a surprise medical event can find themselves with years of more expensive loans if medical debt harms their credit score or unjustly lowers it. Credit reports and scores allow access to mortgages, small business loans, and affordably priced credit cards. When the CFPB issued this rule, they reported that people who had medical debts completely removed had a 20+ point increase in their credit score––significant enough to elevate those people into a higher tier and qualify for more affordable loans.
“This rule would also have reduced the impact of decades of structurally racist policies and practices that exacerbate debt loads. It would have lessened the impacts of ongoing prejudicial practices across housing, employment, education, and healthcare, which have left communities with less income and wealth, higher uninsurance rates, less robust insurance for those with coverage, and less access to affordable and quality health care, all of which result in higher levels of medical debt.
“This is a moment, after Congress passed the big, brutal bill, when many millions may lose health insurance. The big brutal bill is expected to slash Medicaid by $800 billion and leave almost 11 million people without health insurance. For those millions who may lose insurance, CFPB’s medical debt rule would have been helpful to make sure they don’t suffer twice. Losing health care is now going to be compounded by several years of more expensive loans due to that debt hitting their reports.
“This rule would also have helped alleviate pressure for people to pay off wrongful medical debts. Medical debt is some of the most disputed forms of debt. Without this rule at the federal level, consumers applying for loans and mortgages might feel pressure to pay off those wrongful bills to minimize credit impact.
“The good news is that the states have really stepped it up when it comes to medical debt and are backfilling the void left at the federal level. Fifteen states have passed state-based versions of the CFPB’s medical debt rule. But you have to be lucky enough to live in one of these 15 states to get protection. The rules are especially important in states that haven’t expanded Medicaid coverage, leaving residents with more medical debt and hurting their ability to fully participate in our economy.
“This would be the time to call state lawmakers and ask for this rule to be part of the statute in your state if your state hasn’t passed it already. The idea of taking medical debt off credit reports is popular across the political spectrum. Sixty-six percent of Americans support the medical debt rule. Virginia’s governor, Glenn Youngkin, is not exactly progressive, but he signed it into law.”
Stahl echoed that states are taking meaningful action to protect patients, and added: “This reversal is a devastating stepback for 15 million Americans. On the heels of the recently passed legislation from Congress, it’s a double whammy for patients. What we worry about is that people will defer or avoid healthcare––that they will wait for care and show up in the emergency room presenting with something that could have been avoided had they sought care earlier. People are already fearful about not having coverage. It’s going to put a lot of pressure on the healthcare system.”