Biden administration finalizes rule to strike medical debt from credit reports

U.S. consumers will no longer have medical debt appear on their credit reports under to a new rule the Biden administration finalized Tuesday.

The change, which administration officials had proposed over the summer and is set to take effect in March, means some $49 billion in medical bills will be struck from the credit reports of about 15 million Americans. The Consumer Financial Protection Bureau said lenders would also be prohibited from using medical information in their lending decisions.

“People who get sick shouldn’t have their financial future upended,” said CFPB Director Rohit Chopra in a statement. “The CFPB’s final rule will close a special carveout that has allowed debt collectors to abuse the credit reporting system to coerce people into paying medical bills they may not even owe.”

About 1 in 12 adults in the U.S. have medical debt, according to a 2024 poll from KFF, a nonprofit group that researches health policy issues. The CFPB determined that a medical bill on a person’s credit report was a poor predictor of whether they would repay a loan yet contributed to thousands of denied mortgage applications.

The agency expects the rule will lead to the approval of some 22,000 additional mortgages every year, and that Americans with medical debt on their credit reports could see their credit scores rise by an average of 20 points.

The three major U.S. credit bureaus already announced in 2023 that previously paid medical debts, or any medical debts under $500, would no longer appear on credit reports.

The move comes as Biden administration officials race to safeguard aspects of their work weeks before President-elect Donald Trump retakes office. The White House on Monday, for example, announced a ban on new offshore oil and gas drilling along most of the U.S. coastline. When it comes to consumer finance, advocates are preparing for an expected rollback of certain safeguards imposed in the last four years by the CFPB, a high-profile target of some GOP lawmakers and Trump allies including Elon Musk.