The Consumer Financial Protection Bureau says the change will hit $49 billion in medical debt from credit reports.
Consumers in the United States will no longer have medical debt showing up on their credit reports under changes that will make it easier for millions of Americans to get loans.
The new rule means lenders will be barred from using medical data in their lending decisions, the Consumer Financial Protection Bureau (CFPB) said Tuesday.
Under the change, an estimated $49 billion in medical debt will be wiped from the credit reports of more than 15 million Americans, the CFPB said.
The consumer watchdog said its research showed that medical debt is a poor indicator of whether a loan will be repaid, and it expects the changes to result in approximately 22,000 additional mortgages being approved each year.
“People who get sick shouldn’t have their financial future at stake,” CFPB Director Rohit Chopra said in a statement.
“The CFPB’s final rule will close a special exemption that has allowed debt collectors to abuse the credit reporting system to force people to pay medical bills they may not even owe.”
US Vice President Kamala Harris said the rule “will help more Americans save money, build wealth and thrive.”
The move comes less than two weeks before US President Joe Biden is due to hand over control of the White House to US President-elect Donald Trump.
It is unclear whether the rule, which takes 60 days to take effect, will survive in its current form under Trump, who has promised to cut government regulations and undo much of Biden’s program.
A number of Republicans have expressed concern that the proposed change would weaken the accuracy of credit reports.
The Consumer Data Industry Association and other trade groups representing financial institutions opposed the change, while the American Medical Association supported the measure.
