The Consumer Financial Protection Bureau (CFPB) has been shaking things up in medical debt reporting, and it’s got everyone talking. On January 7, 2025, the CFPB finalized a rule prohibiting data furnishers and credit bureaus from reporting on medical bills and debt. This change is expected to take place by June 2025. The act’s implementation will remove around $49 billion from the credit reports of about 15 million people, boosting their FICO scores by an average of 20 points.
But with all the buzz surrounding this rule, there’s also been a lot of confusion and debate. Some are hailing it as a major win for consumers, while others are worried about potential unintended consequences.
So, let’s take a closer look at what this rule does, how it fits into the bigger picture of medical debt reporting, and what it means for healthcare providers, patients, and debt collection agencies.
The Context of the Proposed Reforms in Medical Debt Reporting
First off, it’s important to understand that this rule is an amendment to Regulation V of the Fair Credit Reporting Act (FCRA).
The CFPB has been leading the charge in changing the FCRA to protect consumers from the negative effects of medical debt. In 2022, the CFPB proposed a rule that would make credit reporting agencies (CRAs) wait a whole year before putting medical debt on credit reports. This grace period would give patients more time to sort out billing issues, work with insurance companies, and set up payment plans with healthcare providers.
On top of that, the CFPB’s proposed rule would make CRAs remove paid medical debts from credit reports completely. This change recognizes that paid medical debts don’t always reflect a consumer’s ability to handle credit and shouldn’t keep hurting them after the debt is settled.
It’s worth noting that the three major credit bureaus—Experian, TransUnion, and Equifax—have already made moves to limit the impact of medical debt on credit reports. Between 2022 and 2023, they removed all paid medical debts, as well as debts with a starting balance of less than $500, or balances less than a year old. Credit score providers FICO and VantageScore have also updated their formulas to weigh medical debt lower than other items.
What Does the Rule Mean?
The FCRA means two main things:
- Prohibits lenders from considering medical information: Lenders cannot use medical information when deciding to grant loans. This means they can no longer look at how much you owe in medical bills or details about your health or medical devices.
- Bans medical bills on credit reports: Credit bureaus and credit score providers are also not allowed to include medical bills in credit scores. In the past, an unpaid medical bill over $500 that was one year old could lower your score, but that won’t happen anymore.
What’s the Current Status?
The CFPB’s proposed rule has faced legal issues, with two trade groups filing a complaint against the CFPB in January 2025. The CFPB has asked for a 90-day pause in the legal proceedings. This pause delays the rule’s start date to June 15, 2025, and puts the court case on hold until May 7, 2025.
While healthcare providers and patients wait for the final decision, it’s important to prepare for these new regulations—which may start as soon as June 2025.
The Potential Impact on Consumers and Healthcare Providers
If the CFPB’s proposed rule goes into effect, it could be a game-changer for consumers’ credit scores. Since patients get a one-year buffer before medical debt shows up on their credit reports, they’d have a better chance to tackle their medical bills without immediately taking a hit on their credit scores.
Plus, removing paid medical debts from credit reports would make sure consumers aren’t punished for past debts that have been taken care of.
Healthcare providers should be aware of these potential changes and inform their patients, too. During such times, it’s most important to educate patients about the importance of quickly paying medical bills, motivate them to prioritize payment arrangements and seek help when needed.
But even if the rule doesn’t go through, healthcare providers should still be proactive about helping patients manage their medical debt.
There are several things they can do to minimize delinquent accounts while also working with patients to ease their debt.
How Can Healthcare Providers Prepare?
No matter what happens with the CFPB’s proposed rule, healthcare providers can take steps now to keep delinquent accounts under control, support their patients’ financial well-being, and ensure fair reporting practices:
- Clear Communication: Clearly explain medical costs and payment expectations. Provide itemized bills and discuss financial obligations upfront to prevent misunderstandings.
- Flexible Payment Options: Offer payment plans and discounts for timely payments to help patients manage their bills. Make sure staff know about financial assistance programs for those who need help.
- Partner with Ethical Agencies: Work with reputable debt collection agencies that follow fair practices. Keep an eye on their actions and communicate openly to ensure patients are treated respectfully and that credit reporting is accurate.
- Team Training: Regularly train staff on medical debt reporting changes, fair debt collection practices, and compliance to effectively support patients’ financial health.
The Verdict Is Still Out: Preparing for Every Outcome
As the healthcare industry awaits the final decision on the CFPB’s proposed rule, one thing is clear: The conversation around medical debt and credit reporting is far from over.
Healthcare providers need to prepare for all possible outcomes. They should have strategies and processes in place to support their patients’ financial well-being and ensure fair reporting practices.
Looking for a fair debt collection agency to work alongside you during such ambiguous times? Talk to one of your experts today at 470-297-1120.