Medical debt could be barred from ruining your credit score soon

The Biden administration has announced plans to formulate federal rules to prevent unpaid medical bills from impacting patients’ credit scores, possibly benefiting tens of millions of Americans.

Driving the news: Regulations to bar unpaid medical bills from affecting credit scores were announced on Thursday, with the creation of these regulations due to begin next year.
* Vice President Kamala Harris and Rohit Chopra, head of the Consumer Financial Protection Bureau (CFPB), stated that these measures would improve the credit scores of millions of Americans.
* This step, expected to face industry opposition, represents significant federal action to combat medical debt that burdens about 100 million people.

What this means: The regulations target medical debt, which often forces individuals into difficult circumstances and does not accurately reflect a borrower’s creditworthiness.
* According to a KFF Health News-NPR investigation, medical debt causes many to take on extra work, relinquish their homes, and restrict food and other essentials.
* CFPB researchers have found that medical debt does not predict creditworthiness effectively, casting doubts on its relevance on a credit report.

Yes but: Some warn the ban could have assorted unintended consequences.
* Hospital leaders and representatives of the debt collection industry warn that such restrictions may lead more hospitals and physicians to demand upfront payment before delivering care.
* Critics caution that looser credit requirements might enable consumers who are ill-equipped to manage more debt to obtain loans they may struggle to repay.

Reactions: While many patients’ and consumer groups praise the move, it is likely to spark industry opposition.
* Emily Stewart, executive director of Community Catalyst, hailed the decision as a significant milestone in collective efforts that would provide immediate relief to those unfairly impacted by medical debt.
* However, others such as Scott Purcell, chief executive of ACA International, criticize the decision, arguing there could be numerous repercussions if medical providers are singled out in their billing.

View original article on NPR

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