US bans medical debt from credit reports as Biden nears exit

Under changes that will make it simpler for millions of Americans to obtain loans, consumers in the United States will no longer have their medical debt appear on their credit reports.

According to the Consumer Financial Protection Bureau (CFPB), the new rule will prohibit lenders from using medical information in lending decisions on Tuesday.

Under the change, an estimated $49bn in medical debt will be struck from the credit reports of more than 15 million Americans, the CFPB said.

The consumer watchdog predicted that approximately 22, 000 additional mortgages will be approved annually as a result of its research showing that medical debt is a poor predictor of whether a loan will be repaid.

“People who get sick shouldn’t have their financial future upended”, CFPB Director Rohit Chopra said in a statement.

A special cavingout that allowed debt collectors to defraud the credit reporting system, according to the CFPB’s final rule, will be overturned by the agency.

US Vice President Kamala Harris said the rule “will help more Americans save money, build wealth, and thrive”.

Just two weeks before US President-elect Donald Trump is scheduled to formally retake control of the White House, the measure comes.

Under Trump, who has pledged to slash government regulations and reverse much of Biden’s agenda, it is unclear whether the 60-day rule will continue in its current form.

Republicans expressed concern that the proposed change would compromise credit reports’ accuracy.