The Consumer Financial Protection Bureau’s (CFPB) final rule prohibiting lenders from considering medical debt and medical bills in consumer crediting decisions is the subject of a Congressional Review Act (CRA) resolution seeking to nullify the rule.
The rule, which was finalized in early January, also prohibits medical expense line items from being included on consumer credit reports through amendments to Regulation V, the implementing rule for the Fair Credit Reporting Act (FCRA).
Sen. Mike Rounds (R-S.D.) introduced the CRA resolution with backing from several Republican cosponsors, including Sens. Tim Scott (R-S.C.), Mike Crapo (R-Idaho), Bill Hagerty (R-Tenn.) and Cynthia Lummis (R-Wyo.).
“The CFPB going beyond their statutory authority to eliminate all medical debt from credit reports is irresponsible and a clear example of regulatory overreach,” Rounds said in a statement. “This rule gives credit card companies a less clear credit picture of who they’re lending money to, which could lead to banks limiting access to capital for consumers. In addition, this rule goes beyond the CFPB’s rulemaking authority by banning practices that were expressly permitted by Congress in the Fair Credit Reporting Act.”
Scott acknowledged that “medical debt is a serious challenge for many Americans” but argued the CFPB’s rule “will do nothing to address the underlying issues.”
“Instead, it will reduce access to credit and important health care services for those most in need,” Scott said in a statement. “I’m focused on working with President Trump and my colleagues on serious solutions to reverse the damage caused by the Biden administration and to provide relief to American families.”
Trade organizations representing the financial services sector expressed support for overturning the controversial rule.
“The CFPB’s final rule . . . disregards creditors’ legitimate needs for medical debt information and the effect suppressing this information would have on banks’ lending risk, consumers’ default risk, and the availability of credit,” the American Bankers Association (ABA) said in a statement. “[P]rohibiting consideration of medical debt in credit underwriting would reduce lenders’ ability to understand consumers’ credit risk and ability to repay. As a result, it is likely to cause significant adverse consequences to banks and consumers, including causing tightened credit standards.”
ABA pointed out that the CFPB’s analysis was based on a study of medical and non-medical collections from December 2014, arguing that relying on research that is more than 10 years old did not account for anomalous consumer experiences from the pandemic. The ABA further contended the bureau’s own data “shows that medical debt has predictive value” and “market participants have already adjusted how they consider medical debt” to weight it appropriately in credit score models.
By contrast, the final rule has been championed by Democrats in Congress, as well as consumer advocacy groups, such as the Consumer Federation of America and the Center for Responsible Lending (CRL), which has asserted there is “strong, bipartisan support” for the CFPB’s rules on medical debt reporting, overdraft fees and small business lending.
A report published by Lake Research Partners pointed to research published in February indicating the rule would benefit consumers.
“Research has found that medical debt is often reported inaccurately, reflecting mistakes made by billing departments and insurance companies, and that having medical debt does not reliably reflect whether someone pays other bills on time,” the report stated. “Medical debt on a credit report can hurt people’s ability to get a loan or even rent an apartment or get a job.”