New Rule (Now on Hold) Would Remove $49 B in Medical Debts from Reports

In January 2025, the CFPB finalized a sweeping rule to block medical debt from consumer credit reports – a move with far-reaching implications for lenders and collectors. The rule prohibits credit bureaus from including medical bill information on reports used for lending decisions, and bars lenders from considering medical debts in credit underwriting.

CFPB Director Rohit Chopra said this would prevent debt collectors from “weaponizing” credit reports to coerce payments for often erroneous or insurance-covered bills. An estimated $49 billion of medical debt would be erased from reports, potentially boosting credit scores by ~20 points for affected consumers. For credit unions, which generally do relatively little medical debt collection, the immediate operational impact is more about credit scoring and lending.

Members with medical collections would suddenly look less risky on paper, possibly qualifying for loans they couldn’t before. However, collections managers note a subtler effect: losing the leverage of credit reporting on any medical-related delinquencies (such as health care loans or credit card charges from medical expenses). The rule was set to take effect in 2025, but with the change in administration, it’s been caught in the regulatory freeze (and even the CFPB itself has signaled openness to reconsidering it under industry pressure).

As of now, the rule’s future is uncertain – but its intent aligns with a trend of de-emphasizing medical debt in financial assessments. Takeaway: If it proceeds, the medical debt rule would mark a paradigm shift where health-related debts no longer haunt borrowers’ credit profiles.

Collections teams might need to adjust strategies, knowing that credit reporting may no longer be a tool in those cases, and focus instead on payment plans or working with hospitals’ financial assistance, while lenders recalibrate credit models sans medical data.