Medical debt may affect credit of 100 million Americans if CFPB rule is scrapped

Just weeks before a new rule is due to come into force that would prohibit credit reporting firms from including medical debt in information provided to lenders, Congress is being asked to overturn it.

The Consumer Financial Protection Bureau rule means that millions of Americans with unpaid medical bills will not face adverse credit decisions as a result, but a bill introduced Wednesday by Senator Mike Rounds (R-SD) and Representative Ralph Norman (R-SC) is urging lawmakers to overturn it.

The rule is due to apply from March 27, although with the CFPB benched there is uncertainty as to how it would be enforced.

But in any case, a letter signed by 277 organizations is calling on Congress to vote down the bill, highlighting how “more than 100 million people owe at least $220 billion in medical debt and about 15 million people have medical debt on their credit reports.”

Recent reports highlighted how medical debt is now a major source of debt among Millennials and a key factor in rising credit card debt among older Americans.

“Being sick and having medical bills has little to do with whether people will pay their loan payments, but these members of Congress callously think it’s their job to allow medical debts to shut these folks out from access to credit or make credit more expensive for families struggling to make ends meet,” said Chi Chi Wu, senior attorney at the National Consumer Law Center.

The 15 million people with medical debts on their credit reports owe $49 billion according to CFPB data in 2024.

The NCLC says that those burdened by medical debt on their credit reports are more likely to live in the South and in predominantly Black and Latino/Hispanic neighborhoods, while those with disabilities are twice as likely to have past due medical bills as others, and veterans and servicemembers have as much as $6 billion in medical debt.

“Medical debt should not prevent people from getting a loan for a car, a house, or starting a new business,” said Mona Shah, senior director of policy and strategy at Community Catalyst, while Erika Sussma, executive director at the Center for Survivor Agency and Justice, said that “Survivors of domestic violence are saddled with medical debt, resulting directly from the abuse they suffered at the hands of their partner. When creditors unjustly report medical debt on credit reports, it compounds the economic and physical harms survivors have already experienced and exposes survivors to increased risk of future violence.”