Removing Medical Debt From Credit Reports Could Create More Bad Debt for Providers

Published on January 17, 2025

Now in its waning days, the Biden administration has finalized a regulation banning the inclusion of medical debt in American consumers’ credit reports. The rule would erase $49 billion in medical debts from the credit reports of about 15 million Americans, according to Reuters. The Consumer Data Industry Association and Cornerstone Credit Union League immediately filed a lawsuit against the Consumer Financial Protection Bureau (CFPB) to prevent the law from taking effect. While excluding medical debt might allow a consumer better access to home loans, for example, the lawsuit argues that the rule will reduce the amount of information lenders can use for their decisions, which may increase delinquency and default rates. They also say the rule is a regulatory overreach and violates the Fair Credit Reporting Act. The removed medical debt doesn’t go away, of course. Without the threat of a bad credit rating, some Americans may ignore medical bills, driving up bad debt for providers and causing added administrative issues to pursue legal action against patients who fail to pay.

Credit cards on file in urgent care: “I’m hearing from clients that ‘collections agencies are less effective’ since the CFPB prohibited reporting medical debt under $500,” says Alan Ayers, President of Urgent Care Consultants and Senior Editor of JUCM. “Increased consumer delinquencies without consequence serve to exacerbate an insurance environment of high-deductibles and anti-assignment behavior like sending insurance payments to patients. Just as many hospitals may now require patients pay their deductible in advance of scheduled surgeries, the only answer for urgent care is to preauthorize the patient’s credit card for any future residual financial responsibility.”