CFPB’s Final Rule to Remove Medical Bills from U.S. Credit Reports

In recent years, allowing medical debt in consumer reports has been under scrutiny, weighing relevant value in comparison to potential discrimination when used for lending and hiring decisions. Multiple states, such as California, Colorado, New York, and Minnesota have already removed medical bills from consumer reports. In May 2024, the Illinois legislature approved an amendment to the Illinois Consumer Fraud and Deceptive Business Practices Act to restrict reporting agencies from including information related to medical debt in reports. Shortly after, on September 21, 2023, the Consumer Protective Financial Bureau (CFPB) proposed a rule to remove medical bills from credit reports across the United States. 

On January 7, 2025, the CFPB finalized the rule to eliminate medical bills from credit reports. The rule was officially published in the Federal Register on January 14, 2025, and is set to take effect on March 17, 2025. This article overviews the ruling and its implications for employers and HR professionals. 

Changes to Regulation V

The CFPB’s new rule amends Regulation V, which implements the Fair Credit Reporting Act (FCRA), to end the exceptions allowing medical bills on credit reports. The rule ends a special regulatory carveout that previously allowed creditors to use certain medical information in making lending decisions. This means lenders will also be barred from using information about medical devices, such as prosthetic limbs, which could be used to require that the devices serve as collateral for a loan for the purposes of repossession. The CFPB will oversee compliance with the new regulation, monitoring both consumer reporting agencies and lenders.  

Business guidelines and reasoning behind the rule

The CFPB’s final rule to ban the inclusion of medical bills on credit reports is primarily based on the value the inclusion of medical bills brings compared to the impact it has on consumers. According to the CFPB: 

“The CFPB has found that medical debts provide little predictive value to lenders about borrowers’ ability to repay other debts, and consumers frequently report receiving inaccurate bills or being asked to pay bills that should have been covered by insurance or financial assistance programs.” 

The CFPB’s action aims to increase privacy protections and prevent the use of medical debt as a barrier to financial opportunities, ensuring that consumers are not unfairly penalized in lending and employment for medical-related expenses.  

Restrictions and consumer protections 

The goals of the final rule will be accomplished, in part, by implementing the following restrictions on businesses: 

• Inclusion of medical bills on future credit reports will no longer be permitted for reporting agencies that compile and distribute credit reports 
• Current consumers whose credit reports previously included medical debt cannot be used by: 
  • Lenders and financial institutions that utilize credit reports for evaluating consumers.  
  • Debt collectors to use credit reporting to encourage individuals to pay bills. 

Impact on U.S. employment and hiring practices 

The CFPB rule will be effective on March 17, 2025, removing an estimated $49 billion in medical bills from the credit reports of approximately 15 million Americans across the United States. Excluding medical debt from consumer reports helps ensure that it does not unfairly impact employee financial health and opportunities. Additionally, eliminating medical debt history considerations during hiring can also help HR and hiring professionals better support their workforce by contributing to fairer and more objective hiring practices.  

Non-compliance may result in regulatory actions, monetary penalties, and corrective directives to ensure adherence. For more detailed information, please refer to the official CFPB rule here. Before acting, employers with questions on how this ruling affects hiring and employment should meet with their legal counsel. 

This article is for informational purposes only and does not constitute legal advice or official predictions of future laws and regulations. Hiring professionals, HR professionals, and administrators should consult their legal counsel to ensure all actions comply with the law.