Bureau prohibits medical debt on credit reports

ADA expresses concern about rule

The Consumer Financial Protection Bureau issued a final rule Jan. 7 eliminating an exemption that allows third-party debt collectors to place medical debt on credit reports. The final rule prohibits creditors from considering medical debt in credit eligibility determinations.

Specifically, the rule stops credit bureaus from including “medical debt information” on consumer credit reports and prohibits lenders from using medical information in their lending decisions. The rule defines “medical debt information” as medical information that pertains to a debt owed by a consumer to a health care provider or to the provider’s assignee.

Prior to its passage, the ADA expressed concern that the rule would prohibit credit reporting agencies from including medical debt when running credit checks. 

“The proposed rule may inadvertently reduce the incentive for patients to prioritize the payment of their dental bills, knowing that nonpayment will not affect their credit scores,” the ADA said in an August 2024 letter. 

While the Consumer Financial Protection Bureau said the prohibition would ensure sensitive health information remains protected, the ADA said the rule would compromise the bargaining position of creditors attempting to collect legitimate medical debt. 

The ADA instead recommended implementing a phase-in period to allow dental practices to adjust their billing systems; making threshold adjustments for medical debt reporting that exempt smaller debts; engaging in stakeholder collaboration to gather data on the practical implications of the rule; and providing financial education to consumers.

The rule is slated to become effective 60 days after it is published in the Federal Register, but medical and credit reporting industries will likely sue to block the rule.