The Consumer Financial Protection Bureau (CFPB) released a proposed rule on June 11 that it says would remove $49 billion in medical debt from the credit reports of 15 million people. CFPB also released a fact sheet and an unofficial redline of the proposed regulations.
The proposed rule would end the exception that allows creditors to use medical debts in their credit decisions. The Fair and Accurate Credit Transactions Act of 2003 (FACT Act) restricts creditors from using medical information to determine credit eligibility. However, in 2005, a regulatory exception was created to allow creditors to use medical information under certain conditions, including when the information is the type that is routinely used in making credit eligibility determinations.
CFPB's proposed action would limit this exception (except in cases where the medical information relates to income, benefits, or the purpose of the loan—for instance, the eligibility for and dollar amount of disability income that is relied on as a source of repayment). Further, it would prohibit credit reporting agencies from including medical debt on credit reports sent to creditors when creditors are prohibited from considering it.
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