Last week, the Consumer Financial Protection Bureau rolled out an exciting announcement: It will be banning medical debt from Americans’ credit reports. The new rule is a win for consumers, and a small but significant step forward for fixing the backward way we think about health care in this country.
In 2022, the CFPB published a report highlighting the huge burden of medical debt on Americans, after which credit reporting companies voluntarily removed medical debt under $500 from their credit reports. Now this new rule, which the Biden administration proposed last summer, will remove all outstanding bills higher than that amount from credit reports. That will come out to around $50 billion in medical bills wiped from the credit reports of some 15 million Americans, according to the CFPB.
Removing medical debt from credit reports is not only a just policy, it also better understands people’s financial behavior.
The point of credit reports is to summarize a person’s “creditworthiness,” assigning them a score based on qualities such as the status and history of their credit accounts and loan repayments. Those credit scores help determine people’s eligibility for credit cards and mortgages, and the interest rates they’re offered. Since nearly 1 in 5 American households are burdened with medical debt, the CFPB estimates the move will “lead to the approval of approximately 22,000 additional, affordable mortgages every year,” and could raise credit scores by an average of 20 points.
On a conceptual level, this new rule underscores how medical debt is different from most other kinds of debt that make up credit reports. It’s not a reflection of how someone wants to spend their money, but of decisions between seeking care or potentially enduring a painful or life-threatening hardship. Medical debt is an outgrowth of our broken health insurance system, which leaves tens of millions without coverage and still costs way too much money even for people with ostensibly “good” coverage. In addition, a lot of medical collections are the result of surprise medical bills that emerge even after people think they’ve done everything in their power to avoid incurring medical debt.
It should come as no surprise, then, that the CFPB’s research shows that medical debt is a “poor predictor” of whether someone will pay back a loan. In other words, removing medical debt from credit reports is not only a just policy, it also better understands people’s financial behavior. That medical debt can hurt your creditworthiness is an insult atop a more serious injustice: the very idea of forcing people to choose between physical health and serious debt is cruel. Worse, it’s entirely unnecessary — the U.S. could adopt one of the government-backed health insurance systems of one of its peer nations and virtually eliminate the problem of medical debt. A Medicare-for-all system would eliminate the dystopian way in which Americans’ health problems become games of financial Russian roulette. In the short term, Americans just have to hope the new Trump administration won’t reverse this small but important reform. In the long term, though, the CFPB’s new rule should be just the first step toward ending the scourge of crushing medical debt.
Zeeshan Aleem is a writer and editor for MS NOW. Previously, he worked at Vox, HuffPost and Politico, and he has also been published in, among other places, The New York Times, The Atlantic, The Nation, and The Intercept. You can sign up for his free politics newsletter by clicking the link at the top of this bio. 
