Maryland Legal Alert for Financial Services

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CFPB Announces Proposed Rule to Ban Use of Consumer Medical Debt

The Consumer Financial Protection Bureau (CFPB) released a proposed new rule to change Regulation V. The proposed rule aims to prevent medical debt from being used as a factor in determining credit eligibility. Specifically, the proposed rule suggests removing the financial information exception that allows creditors to use a consumer's medical financial information for credit decisions and preventing consumer reporting agencies from furnishing a consumer's medical information to creditors. These changes would apply to most creditors, except for those excluded from coverage under Section 1029 of the Consumer Financial Protection Act (CFPA). The proposed rule still allows creditors to consider a consumer's medical information related to income, benefits, or loan purpose, but creditors must treat this information no less favorably than nonmedical information and creditors cannot consider a consumer's health condition, history, treatment, or prognosis when making credit decisions. 

Furthermore, the CFPB is proposing to redefine the term "medical information" as it pertains to debt. The new definition would include only medical debt that a consumer owes, or previously owed, to a health care provider or its agent, relating to services provided to a human being. This would cover medical debt that has been sold or resold, debt assigned to a debt collector, civil judgments arising from debt collection actions, and debt related to cosmetic surgeries or elective medical procedures. However, medical debt owed to a third-party lender (including a medical credit card issuer) and debt related to veterinary care would be excluded from this definition. Additionally, the CFPB's proposed rule adds a definition of medical debt information to clarify which types of medical debts creditors would be prohibited from considering, and which information consumer reporting agencies would be precluded from listing on a consumer's credit report. Medical debt information would be defined as "medical information pertaining to a debt owed by a consumer to a person whose primary business is providing medical services, products, or devices (e.g., a medical or health care provider), or to the person's agent or assignee, for the provision of such medical services, products, or devices." The CFPB believes that these changes would help creditors and credit furnishers better understand how medical debt information can be used and would assist with compliance with the proposed rule. 

The CFPB comment period closes on August 12, 2024.

For more information, contact Christopher R. Rahl or Tamia J. Morris.

Contact Christopher R. Rahl | 410-576-4222

Contact Tamia J. Morris | 410-576-4021