The CFPB has released its Final Rule on removing medical debt from credit reports. RMAI is still reviewing the 345-page rule but has prepared the below summary.
The CFPB finalized its definition of medical debt information in § 1022.3(j) [located on page 340], as “medical information that pertains to a debt owed by a consumer to a person whose primary business is providing medical services, products, or devices, or to such person’s agent or assignee, for the provision of such medical services, products, or devices. Medical debt information includes but is not limited to medical bills that are not past due or that have been paid.”
The final definition is almost identical to the definition which was posted for comment last year. The definition makes it clear that medical debt is debt owed to a health care provider and not broad enough to include medical debt payments made via credit cards, bank loans, or other credit products. However, RMAI continues to have concerns related to the rule’s overall impact on a creditor’s ability to accurately determine a consumer’s capacity to repay a loan when extending credit, given the creditor’s blindness to medical debt liabilities.
The Final Rule states that creditors can no longer use medical debt information in credit eligibility determinations unless specific exceptions apply. Congress had previously limited the use of medical debt information by creditors through amendments in the Fair and Accurate Credit Transactions Act (FACT Act) of 2003. Despite these restrictions, a regulatory exception introduced in 2005 allowed creditors to use medical information under certain conditions.
Further, the Final Rule states that agencies can only include medical debt in consumer reports if they have reason to believe creditors will use it lawfully and not in violation of FCRA.
The Final Rule also requires compliance with other state and federal laws and makes note of updated examples on how creditors can comply with other regulations, such as Regulation Z, without violating the restrictions on medical information use.
The CFPB’s updated rules on the use of medical debt under the FCRA raise significant concerns. The elimination of the financial information exception drastically limits creditors’ ability to consider medical debt information when assessing credit eligibility, effectively removing a tool creditors have used to evaluate consumer obligations comprehensively.
RMAI provided written input to the CFPB during the ANPR comment period.
The Final Rule takes effect 60 days after publication in the Federal Register, which will put the effective date in March 2025. There remains an air of uncertainty with no final decision on the change in CFPB director, but following President-Elect Trump’s inauguration, his administration could delay the effective date of the rule through executive action or directing the CFPB to revisit the rule under the agency’s new leadership. Congress could also intervene by passing a joint resolution of disapproval under the Congressional Review Act.
RMAI will continue to review the Final Rule and collaborate with industry partners to determine the most effective strategy moving forward.
This Member Alert is intended for members of the Receivables Management Association International, is for informational purposes only, and is in no way intended to provide legal advice. Members are encouraged to consult with an attorney of their choice for legal advice concerning this matter.