(US Media Group) – The Biden administration is taking action to help millions of Americans by proposing a ban on medical debt from affecting credit reports.
On Tuesday, Vice President Kamala Harris and Consumer Financial Protection Bureau Director Rohit Chopra announced the plan, which aims to make access to purchasing a vehicle or home more attainable.
The proposed rule, first introduced in September, could have a significant impact on Americans’ credit scores. Currently, medical debt can lower a person’s credit score, making it more difficult to obtain loans or credit cards.
“Our research shows that medical bills on your credit report aren’t even predictive of whether you’ll repay another type of loan. That means people’s credit scores are being unjustly and inappropriately harmed by this practice,” Chopra told ABC News in an interview conducted last year.
According to data from the Consumer Financial Protection Bureau, approximately 43 million Americans have medical debt on their credit reports, with an average balance of $429. This can be especially damaging for lower-income individuals and families.
With the proposed ban, medical debt will no longer be factored into credit scores, giving individuals a fair chance at accessing credit and improving their financial standing. The rule is set to be put into effect in 2025.
This move by the Biden administration is part of their effort to protect consumer finances and promote fair lending practices. The proposal will also require credit reporting agencies to remove medical debt from credit reports within 45 days of it being paid off by insurance.
The announcement comes three years after President Joe Biden’s executive order promoting fair competition in the American economy, which highlighted the need for transparency and fairness in consumer credit reporting.
The proposed rule will go through a series of regulatory steps before being finalized, including a public comment period. However, it is expected to be met with support from consumer advocacy groups.
Overall, this change could have a significant impact on individuals struggling with medical debt, providing them with a fair chance to improve their credit and financial stability.