The following editorial was written by Bloomberg Opinion:
Paying for health care in America is a complicated business. In recent years, the government has taken valuable steps to reduce the harm that unexpected medical bills and unscrupulous debt collectors inflict on consumers. But a newly proposed rule, which would strip all health care bills from credit reports, is a step backward.
Research by the Consumer Financial Protection Bureau has shown that medical debts aren’t reliable indicators of a borrower’s credit worthiness. Still, in 2022 the agency estimated that medical bills amounted to $88 billion of the debt on credit reports. That same year, the three biggest credit-reporting companies and two main credit-scoring companies voluntarily reduced their use of health care debt.
That made a real difference. Within 15 months, the share of consumers with a credit record that included a medical collection fell to 5 percent from 14 percent. The remaining 15 million Americans, with a total of $49 billion in outstanding health care bills on credit reports, were disproportionately in low-income areas.
The CFPB’s new proposal would ban lenders from using information about medical debt to inform their credit decisions and prohibit credit-reporting companies from providing such data to lenders. By wiping away any record of these debts, the CFPB estimates that credit scores for those affected would rise by an average of 20 points, enabling lenders to approve about 22,000 additional mortgages every year.