Medical debt will no longer appear on credit reports due to a new rule finalized by the Consumer Financial Protection Bureau.
The Consumer Financial Protection Bureau is removing $49 billion in debt due to unpaid medical bills rom the credit reports of more than 15 million Americans. The move will raise their credit scores by an estimated average of 20 points. Medical debt no longer will hinder people applying for small business, home or car loans and should lead to an additional approval of 22,000 mortgages a year, according to the White House.
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More than 100 million Americans have some kind of medical debt, which often results from medical emergencies, unavoidable complications or errors in medical billing. It is the largest source of debt in collections, according to the White House. A 2023 national survey found that 69% of respondents had trouble paying medical bills at least some of the time.
"No one should be denied economic opportunity because they got sick or experienced a medical emergency," Vice President Kamala Harris said in a statement. Harris announced the rule proposal in June alongside CFPB Director Rohit Chopra.
With the help of the American Rescue Plan, President Joe Biden's COVID-19 pandemic aid package to revive the economy, state and local governments already have eliminated an estimated $1 billion in medical debt for more than 750,000 Americans.
New Jersey has eliminated $220,000 million in medical debt for more than 120,000 people.
A Pennsylvania bill that would have used $4 million to ease $400 million in medical debt for low-income state residents, stalled in the state senate last spring. Hospital systems and health care providers sell medical debt for pennies on the dollar.