A new rule was put into place by the Consumer Financial Protection Bureau (CFPB) that would remove medical debt from credit reports. The CFPB is a federal agency that “implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive.” This agency is supposed to be pro-consumer. Coincidentally, like the Department of Education, it is one of the agencies that the new administration has threatened to remove.
Removing medical debt from credit reports is significant for several reasons. Primarily the history of how medical debt disproportionately affects the Black community and the benefits this will bring to access to wealth.
To set the stage, the U.S. spends more per person on healthcare than any other country. Not only that, the U.S. has more bankruptcies due to medical debt than any other country. So, this medical debt issue is a pervasive problem that this rule aims to fix for many Americans.
Studies have shown that African Americans are more likely to have medical debt than their white counterparts. This may be because of health status, lack of income, lack of insurance, or a combination of all of the above. As of 2022, 56% of Black adults owed money for a medical or dental bill as compared to 37% of white adults. Years of systemic issues have led to this, and it will only take years of policies and an unraveling of social norms to undue certain disparities.
For decades these debts have impacted credit reports. As we know credit reports being negatively impacted can cause someone to not be able to take out a mortgage, have access to higher credit limits, have access to personal loans, and use a plethora of other financial mechanisms to build wealth. This rule would remove an estimated $49 billion in medical bills from the credit reports of millions of Americans. People whose credit reports are positively impacted by this will have an opportunity to leverage improved credit scores to build wealth.
This policy has the potential of being used as an example to address other issues that are financially crippling many Americans and more than likely disproportionately crippling Black Americans. From a policy perspective, there are still issues with the overall cost of healthcare, cost of insurance, and access to quality healthcare. Although this rule deals with one part of the overall problem with healthcare in America, there are still more mountains to climb. We still have access, cost, and debt problems that need to be solved. But this is a step in the proper direction.