New Proposed CFPB Rule Removes Medical Debt Credit Decisions

Key Points:

1. The CFPB has announced a NPRM (Notice of Proposed Rulemaking) with a focus on medical debt.

2. This rule would cause more upfront payments and higher medical costs, a negative impact on the overall credit landscape.

3. Comments on the NPRM are due August 12, 2024.

In a move that could rock your ability to collect the money owed to you for medical debt, the Consumer Financial Protection Bureau (CFPB) announced a Notice of Proposed Rulemaking (NPRM), which focuses on the Fair Credit Reporting Act and medical debt credit reporting. The new CFPB rule will have a broad negative impact on healthcare providers and patients with more up-front payments, increased medical costs for those who pay and more small claims/legal actions. In the overall credit landscape, the new CFPB rule will lead to higher interest rates and less credit for everyone.

The Proposal

The 182-page proposed rule removes lenders ability to use medical debt to make credit decisions. It still allows medical debt to be reported to the credit bureau. This creates a blind spot for all lenders to one asset class, medical debt.

The Impact

If the new CFPB rule were to become law, there would be instant impact on healthcare, and one of the first would be that health systems and physicians would start to require payment upfront. Outside of emergency room or medically necessary cases, there are already health systems taking this route, asking for credit card information before services are rendered. They are also having patients sign an agreement that their credit card will be processed for the remaining amount owed (up to a certain limit).

When people make the conscious decision to not pay their medical bills, someone has to make up the difference. That cost will be covered by increased costs for the people that understand the need to pay their medical bills. Companies that have pushed for high deductible health insurance plans may also find themselves paying higher premiums to help cover this. Often times legal actions/small claims are the last resort used in states where they are allowed. When one recovery method, such as credit reporting, is removed, healthcare providers and physicians will need to look elsewhere to recover the money they are owed.

Outside of healthcare, the credit system will be hit with higher interest rates and less available credit overall. Lenders will need to ensure repayment, and if medical debt is hidden, interest rates will have to increase to cover for this unseen risk.

What Can I Do?

You can make your voice heard! Right now, comments on the NPRM are due August 12, 2024. The CFPB has not posted the details on filing comments yet, but that information will be shared as soon as it is available. Until then it is critical that the CFPB and Congress hear directly from you, the people that will directly be impacted. Also, speak to your healthcare associations. They will have a vested interest in making sure that healthcare providers and physicians can keep delivering the compassionate care they give.

Just the Beginning

With this announcement, one of the biggest battles to recover the revenue you are owed has begun. Americollect will continue to share information on the new CFPB rule as it is released to help you fight for your right to the money you’ve earned.