Medical debt will be banned from credit reports in Joe Biden and Kamala Harris’ farewell address. Could this new policy be reversed by President Trump?
Juana Summers, host:
Medical debt will soon be wiped from the credit reports of millions of Americans. This is due to new rules announced today by the Consumer Financial Protection Bureau. Approximately 100 million people in this country have medical debt. NPR is reporting on this in our “Diagnosis: Debt” series with our partners at KFF Health News. And KFF’s Noam Levey is here to talk about these new rules. Hi.
Norm Levy: Hello.
Summers: Norm, if you can, start by identifying the problem. Why do we need this new policy?
Levy: Well, as many of our listeners know, medical debt is a big issue. Approximately four in 10 adults have some form of medical debt, a finding that places a truly dire burden on patients and their families. People are being forced to work extra jobs, dip into their savings, and even sell their homes, all because of high medical bills they can’t afford.
Now, one of the most harmful ways medical debt can be damaging is by lowering your credit score. I have an unpaid bill. It will be reported to the credit reporting agency. Then suddenly you find it harder to get a car loan, rent an apartment, find a job, or have to pay higher interest rates because of bad credit. That’s part of the reason why many patient and consumer advocates have been pushing for these new rules, and why the Biden administration has worked to expand protections for people with medical debt.
Summers: So tell me about this new policy. What exactly does it say and when does it start?
Levy: So this registration was issued by the Consumer Financial Protection Bureau. That’s the watchdog that was established after the 2009 financial crisis. And the agency began investigating medical debt several years ago and has been working on this regulation for some time. And it does two important things. The first prohibits credit agencies from including medical debt on consumers’ credit reports, saying lenders cannot consider medical information and debt when evaluating borrowers. Well, it was just published. It has to be filed in the Federal Register and then it goes into effect within 60 days, which I think will be mid-March, March 17th.
Summers: So, in a practical sense, given how many people in this country are affected by medical debt, how do you think this is going to impact people’s lives?
Levy: So that could actually mean a lot. Now, with all the recent attention to medical debt, it must be said that the major credit bureaus have already begun removing some medical debts from consumer reports, and this includes small debts of less than $500. It doesn’t have to be. But millions of people across the country still have medical debt on their credit reports, and the CFPB estimates that about 15 million people with about $49 billion in medical debt could benefit from this. I’m guessing. This could improve people’s scores and make it easier for them to get a mortgage or rent a home.
Summers: Norm, we have a new administration here in Washington in a few days. Will the incoming Trump administration be able to reverse this?
Levy: Well, that’s a bit of a complicated question. Typically, when a new administration takes office, the president blocks all federal agencies from issuing new rules, even those in development. President Trump first did this in 2017, in what is now known as the final rule. And that means that to repeal it, the Trump administration would have to start an entirely new rulemaking process, which typically takes months, even years, and involves a lot of administrative work. A hurdle is necessary. Now, if Trump and his Republican allies really want to repeal this, Congress could vote to repeal this regulation, which would likely result in significantly more widespread consumer protections. Many Republicans would have to go on record to oppose it.
But there is another way President Trump can prevent this. It seems clear that the collecting industry intends to sue, or challenge this in court. And when that happens, the administration will usually defend the rules. But Trump probably won’t do that, and it’ll almost be doomed.
SUMMERS: Well, the Consumer Financial Protection Bureau is something that Elon Musk, a prominent ally of President Trump, has said he wants to abolish. Wouldn’t that mean a change in this policy?
Levy: Well, probably not. I mean, that’s right. Musk even posted on X that he wanted to “eliminate” the CFPB, and listeners may remember that Trump asked Musk to lead a government efficiency effort. But abolishing federal agencies is not easy, and completely abolishing the CFPB would likely require an act of Congress. And as you know, the Republican majority on Capitol Hill is pretty thin, so that seems unlikely at this point.
SUMMERS: Noam Levey is a correspondent for our partner KFF Health News. Thank you very much.
Levy: Thank you.
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