By: Christopher Parrella, Esq., CPC, CHC, CPCO
Parrella Health Law, Boston, Ma.
A Health Care Provider Defense and Compliance Firm

In a groundbreaking move, the Biden administration has taken a bold step to protect American consumers burdened by medical debt. On January 7, 2025, just days before President Joe Biden leaves office, the Consumer Financial Protection Bureau (CFPB) finalized new regulations prohibiting medical debt from appearing on credit reports. This landmark decision aims to alleviate the financial strain on millions of Americans while reshaping how medical debt is handled by lenders and credit agencies.

Key Highlights of the New Regulations

1. Medical Debt Off Credit Reports:

   Credit agencies are now barred from including medical debts in consumer credit reports. This prevents unpaid medical bills from negatively impacting consumers’ credit scores.

2. Restrictions on Medical Information in Lending Decisions:

   Lenders can no longer consider medical information when evaluating borrowers, ensuring that access to loans is not hindered by health-related financial hardships.

3. Impact on Credit Scores:

   According to the CFPB, the new rules will result in an average increase of 20 points in the credit scores of consumers with medical debt. This could open doors to better housing, loans, and financial opportunities.

A Lifeline for 100 Million Americans

Medical debt has long been a heavy burden for millions of Americans. A KFF Health News analysis revealed that medical providers and debt collectors often use credit reporting as leverage to coerce patients into paying bills—many of which may not even be accurate.

For those with large health care debts, the fallout is severe. Depressed credit scores can lead to difficulties in securing housing, higher interest rates on loans, and even homelessness. By removing medical debt from credit reports, the Biden administration’s policy seeks to reduce these cascading financial hardships.

State Initiatives Paving the Way

States like Colorado, New York, and California have already implemented similar bans on medical debt in credit reports, paving the way for this national policy. While state-level reforms have been impactful, the CFPB’s new rule offers a uniform standard of protection across the country.

Challenges and Pushback

Not everyone is celebrating the new regulations. The collections industry has expressed strong opposition, labeling the changes as overreach. Congressional Republicans have also criticized the CFPB, with former House Financial Services Committee Chair Patrick McHenry calling the move “regulatory overreach.” Legal challenges are expected, and the incoming administration could attempt to reverse the policy.

A Bold Legacy and Uncertain Future

By finalizing these regulations, the Biden administration has dared the incoming Trump administration and its allies to undo a widely supported reform that promises financial relief for millions. While the future of the rule remains uncertain, its immediate impact is undeniable—providing much-needed relief to those disproportionately affected by medical debt.

The CFPB’s new regulations signal a shift in how medical debt will be handled, but compliance with these changes requires strategic planning for healthcare providers and debt collectors. At Parrella Health Law, we help healthcare organizations navigate regulatory challenges while safeguarding consumer trust and ensuring compliance with federal and state laws. For expert guidance on these and other legal developments in healthcare, contact Chris at **857.328.0382 or via email at cparrella@parrellahealthlaw.com.