In a groundbreaking announcement on Tuesday, Jan. 07, 2025, Vice President Kamala Harris unveiled the Consumer Financial Protection Bureau’s (CFPB) finalized rule to ban medical debt from consumer credit reports.
This transformative measure is set to impact more than 15 million Americans, potentially raising credit scores by an average of 20 points and broadening access to critical financial tools like mortgages, car loans, and small-business loans.
A New Era of Consumer Protection
The move represents a significant victory in the Biden administration’s broader initiative to alleviate the financial strain caused by medical debt. By 2026, the administration aims to forgive $7 billion in medical debt, with $1 billion already erased for over 700,000 Americans through local and state initiatives supported by the American Rescue Plan.
“Today, we are building on this meaningful work by announcing an unprecedented final rule that will make it so medical debt is no longer included in your credit score,” said Vice President Harris. “This will be life-changing for millions of families, making it easier for them to be approved for a car loan, a home loan, or a small-business loan. Our historic rule will help more Americans save money, build wealth, and thrive.”
The Legal Landscape of Medical Debt
The CFPB’s rule follows a 2022 report revealing that medical bills accounted for $88 billion in reported debts on credit reports.
While the three largest credit reporting agencies—Equifax, Experian, and TransUnion—voluntarily enacted partial reforms, including the removal of paid medical debts and debts under $500, the new ruling goes further. It ensures that all outstanding medical debts, totaling $49 billion, will no longer appear on consumer reports, effectively erasing medical debt as a barrier to financial stability.
Legal Implications for Credit Reporting
This ruling marks a significant shift in the interpretation of consumer protection laws under the Fair Credit Reporting Act (FCRA).
By prohibiting the inclusion of medical debt on credit reports, the CFPB is setting a precedent for how certain categories of debt are treated in credit reporting—a move likely to spark debates within the financial and legal sectors.
Consumer Relief Amid Financial Challenges
For many legal professionals, this decision underscores the need to protect vulnerable populations from the cascading effects of medical debt.
Historically, unpaid medical bills have disproportionately impacted marginalized communities, perpetuating cycles of poverty and financial exclusion. The CFPB’s rule addresses this systemic issue, aligning with broader social justice and equity goals.
Looking Ahead: The Biden-Harris Legacy
The timing of this announcement, as the Biden administration approaches its final year, cements its legacy of prioritizing consumer protection and debt relief.
Harris initially previewed the CFPB’s plan in June 2024, emphasizing the administration’s commitment to reducing the financial burdens of healthcare on American families.
This legal milestone offers immediate financial relief but also sets a new standard for consumer rights in the United States.
By eliminating medical debt from credit reports, the CFPB is championing a more equitable financial system, reinforcing the principle that access to credit should not be undermined by healthcare expenses.
