New rule removes unpaid medical bills from credit reports

The Biden administration has moved to ban unpaid medical bills from appearing on credit reports, making it easier for people to borrow money for mortgages, car loans or small business loans. 

The Consumer Financial Protection Bureau rule, announced Tuesday, will remove $49 billion in medical debt from the credit reports of more than 15 million Americans, The Associated Press reports. Lenders will no longer be able to take the debt into consideration when deciding to issue a loan.

The CFPB says the change will raise credit scores by an average of 20 points and lead to 22,000 additional mortgages every year. Vice President Kamala Harris said it would be "lifechanging" for millions of families.

"No one should be denied economic opportunity because they got sick or experienced a medical emergency," she said in a statement announcing the rule. 

Harris also announced that states and local governments have used pandemic-related federal aid to eliminate more than $1 billion in medical debt for more than 700,000 Americans. 

Medical bills accounted for more than half of debt collection on consumers' credit records, according to a 2022 report from the CFPB, USA Today reports.

After that report, the three national credit reporting agencies — Experian, Equifax and TransUnion — said last year they were removing medical collections debt under $500 from U.S. consumer credit reports. 

The new CFPB rule goes further and blocks all medical debt from credit reports.