An effort to clear medical debt from people’s credit reports has lost its primary supporter, making the rule far more likely to be defanged or dropped altogether.
The rule was promulgated by the Consumer Financial Protection Bureau, a government agency that was largely disbanded by the Trump Administration and now opposes enforcement of the rule.
The rule was intended to protect people from having their credit scores hurt by outsized medical debt. If enacted, it would prohibit credit bureaus from including medical debt in consumer credit reports and also would prevent lenders from using medical debt in any of their decisions on whether to offer new debt or loans, according to Rich Daly, senior editor for the Healthcare Financial Management Association.
“But there are some big caveats with all of this,” Daly said. “Consumers should know that nonlenders can still see the medical debt if they check your credit reports,” he said.
Also, the rule expands on a previous, voluntary move by all three credit bureaus in 2023 to remove unpaid medical collections with an initial balance of less than $500 from the credit report.
A final rule was initially set to go into effect in March, but was delayed a couple times by a federal court at the urging of industry groups and now is slated to go into effect in July. Defense of the rule in court has been taken on by individuals and consumer groups.
Daly said that appeals could stretch the process out for years.