CFPB’s New Rule Limits Medical Debt in Credit Reports – What Consumers Need to Know //

On January 7, 2025, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule under the Fair Credit Reporting Act (“FCRA”) that significantly restricts how medical debt information is used in credit decisions.

This CFPB Medical Debt Rule (“Prohibition on Creditors and Consumer Reporting Agencies Concerning Medical Information”) aims to prevent medical debt from unfairly impacting credit approvals and credit scores. The rule removes certain exceptions that previously allowed creditors and consumer reporting agencies (“CRAs”) to consider medical debt when determining credit eligibility.

Read the Executive Summary of the FCRA Medical Information Rule here.

Key Changes Under the Medical Debt Rule

The final rule introduces several major changes:

1. Creditors Are Prohibited from Using Medical Debt in Credit Decisions

The rule removes an existing exception that previously allowed creditors to obtain and use medical information—including medical debt details—when evaluating credit eligibility.

• Creditors can no longer factor in medical debt when determining whether to approve or deny credit.
• Medical devices cannot be used as collateral for loans.
• Lenders cannot request medical debt information from consumers on loan applications.
• These restrictions apply regardless of how the creditor learns about the medical debt—whether through credit reports, applications, or other means.

2. Consumer Reporting Agencies Face New Limits on Furnishing Medical Debt Information

Under the rule, CRAs—such as Equifax, Experian, and TransUnion—are restricted in how they report medical debt information to creditors.

• CRAs can no longer include medical debt information in credit reports unless they have reason to believe the creditor is legally permitted to use it.
• If state laws prohibit creditors from considering medical debt, CRAs must comply and not furnish that data.
• This restriction applies to medical bills, repayment terms, and collection actions related to medical debt.

3. New & Revised Exceptions for Credit Eligibility Considerations

While the rule broadly restricts medical debt use in credit decisions, there are limited exceptions:

• Consumer-Authorized Transactions: If a consumer explicitly authorizes access to medical expenses in their financial accounts (e.g., checking accounts, credit cards), creditors may use this data for cash-flow underwriting.
• Medical-Related Income & Benefits: Consumers can still report medical-related benefits as income for loan applications. This includes:
• Disability benefits
• Workers’ compensation payments
• Other medical-related financial benefits
• Legal Compliance: If a creditor is required by law (such as Regulation Z’s ability-to-repay requirements), they may use medical debt information to comply with those regulations.

Why This Rule Matters for Consumers

This CFPB Medical Debt Rule is designed to:

✅ Protect consumers from being unfairly denied credit due to medical debt.
✅ Ensure credit decisions are based on financial stability rather than unexpected medical expenses.
✅ Reduce the impact of inaccurate medical debt reporting on credit scores.
✅ Prevent lenders from using medical devices as collateral for loans.

Who Is Affected by the CFPB Medical Debt Rule?

The rule applies to:

• Creditors & lenders – Any institution using consumer credit reports for lending decisions.
• Consumer reporting agencies – Equifax, Experian, TransUnion, and any CRA furnishing credit reports to creditors.
• Consumers with medical debt – Individuals struggling with medical bills may now see less impact on their credit reports.

When Does the Rule Take Effect?

The final rule takes effect 60 days after publication in the Federal Register.

Final Thoughts

The CFPB Medical Debt Rule represents a major shift in credit reporting and lending practices. If a creditor or credit bureau violates these new medical debt protections, you may have legal recourse.

Feel free to send us a message or contact Michael Yarnoff, Esq., (215) 792-6676, Ext. 804, [email protected], [email protected], for a free, no-obligation evaluation of potential legal claims.

About Kehoe Law Firm, P.C.

Kehoe Law Firm, P.C. is a nationally recognized, plaintiff-side class action law firm dedicated to protecting investors and consumers from fraud and misconduct. Our attorneys have served as Lead or Co-Lead Counsel in major securities cases, recovering over $10 billion for institutional and individual investors. We litigate securities fraud, fiduciary breaches, unfair mergers and acquisitions, and antitrust violations, while also representing whistleblowers and advocating for victims of data breaches, consumer fraud, vehicle and product defects, employment law violations, retirement plan mismanagement, and other corporate and business misconduct. With a results-driven approach, we pursue justice and substantial recoveries for those we represent.

KLF’s class action legal services are provided on a contingency-fee basis, meaning clients are not responsible for any fees or litigation expenses. 

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