CFPB Rulemaking Aims to Remove Medical Debt from Credit Reports
- James Heinz
- 17 hours ago
- 10 min read
Introduction
For a long time, medical debt has been a problem for many Americans. It has hurt their finances and credit scores. If you don't pay even small hospital bills, they can stay on your credit report for years. This can make it harder to get a loan, rent an apartment, or even get a job.
The Consumer Financial Protection Bureau (CFPB) is now working on new rules to make things fairer. With these changes, medical debt would no longer show up on credit reports at all. The goal is for your credit score to reflect how well you manage debt, not how you handle medical bills that arise unexpectedly.
As of August 2024, about 4.1 % of consumers, that is, roughly 9.7 million people, had medical debt in collections on their credit reports.
We'll talk about what the CFPB wants to do, why it's essential, the CFPB medical debt rulemaking, and how it might affect you if you have medical debt right now in this blog.
Key Takeaways
Medical debt is different from other debts. It’s often unexpected, confusing, and caused by emergencies.
The CFPB wants to protect consumers. Their proposal would stop medical debt from appearing on credit reports, making sure people aren’t punished for unavoidable medical bills.
The CFPB is pushing to stop banks and credit card companies from considering medical bills when making lending decisions.
You still have to pay your medical bills. The rule doesn’t erase your debt. It only changes how it’s reported to credit agencies.
Shepherd Outsourcing is ready to help. They offer personalized, legal, and ethical support for managing and settling medical debt, even as the laws evolve.
What is CFPB Medical Debt Rulemaking?
The Consumer Financial Protection Bureau (CFPB) of the U.S. government keeps people safe when they use loans, credit reports, and debt collection services.
The CFPB started a new way to make rules in 2024. These rules mainly were about medical debt. Why? Lots of people in the U.S. have medical bills on their credit reports, even if they didn't choose the treatment, didn't fully understand how much it would cost, or are still dealing with insurance claims. It might become harder for them to get loans for things like school, cars, or homes if they do this.
So, the CFPB stepped in to make things fairer. Their goal is to get medical debt off of people's credit reports or at least lessen the damage it does.
Here's what the CFPB wants to alter:
Stop medical debt from showing up on your credit report if it doesn't show that you can pay back other loans.
Don't let lenders use your medical debt as an excuse to turn you down for a loan or charge you more in interest.
When they deal with medical bills, make sure that debt collectors and credit agencies follow fair rules.
The Consumer Financial Protection Bureau (CFPB) is working to make sure that unplanned medical costs don't hurt your credit. They want the system to pay more attention to whether you can really pay back a loan instead of whether you couldn't pay for an emergency room visit.
On the other hand, why is medical debt treated differently than other types of debt, like personal loans debt? Let's find out what's totally different about this.
Why Medical Debt is Being Treated Differently?
Medical debt comes from emergencies, accidents, or necessary treatments that people have little control over. Financial regulators, such as the Consumer Financial Protection Bureau (CFPB), think it shouldn't be handled the same way as card debt or loans that haven't been paid back.
Here are a few key reasons why medical debt stands apart:
1. It’s Often Unexpected and Involuntary
Most people don’t go into debt willingly for medical care. Big bills can come up quickly after getting sick, hurt, or having surgery, even if you have insurance. That’s very different from taking out a loan to buy something.
2. It’s Confusing and Hard to Understand
Medical bills are often complicated. People may not even know what they owe or if they really do owe it because of insurance claims, out-of-network charges, and billing mistakes at the hospital. This confusion can delay payments and wrongly affect their credit.
3. It Doesn’t Accurately Predict Financial Behavior
Studies have shown that people with medical debt aren’t necessarily “bad borrowers.” In fact, medical debt isn’t a good indicator of whether someone will default on a mortgage. Yet it still lowers credit scores unfairly.
4. It Can Trap People in a Cycle of Poor Credit
When medical debt appears on a credit report, it can damage someone’s credit score. That could mean higher interest rates, being turned down for loans, or having trouble renting a home, all because of a health problem they couldn't avoid.
5. It Disproportionately Affects Vulnerable Groups
Low-income families, seniors, and people with chronic illnesses are more likely to carry medical debt. Treating it the same as luxury or lifestyle debt only increases the pressure on already vulnerable groups.
The CFPB is planning to change how medical debt is reported because of these differences. But what exactly are they planning to change? Let’s break down the proposed updates.
Confused about how the CFPB rule might affect your financial future? Book a free consultation today and get clarity on your next steps.
Key Changes Proposed by the CFPB
The Consumer Financial Protection Bureau (CFPB) is making significant changes to protect people from how medical debt can hurt their credit scores in the long run.
The goal of these changes is to keep medical bills from ruining people's financial future, mainly when they are caused by emergencies that were not planned for or delays in insurance payments.
Here’s a breakdown of the major changes:
1. Medical Bills Will No Longer Appear on Credit Reports
The CFPB wants credit bureaus (like Equifax, Experian, and TransUnion) to stop including medical debt in credit reports. That means that if you apply for a loan or a mortgage and have hospital or doctor bills that aren't paid, they won't show up.
The reason? Medical debt doesn't show how good a person is at managing their money; it usually happens because of an emergency, a billing mistake, or problems with insurance.
2. Lenders Won’t Be Allowed to Use Medical Debt When Making Loan Decisions
Right now, some lenders look at medical debt when deciding whether to approve your loan or what interest rate to offer. The CFPB plans to block this.
If this rule takes full effect, banks and lenders won’t be allowed to consider your medical bills when judging your creditworthiness. This could help millions of people qualify for better loans or lower interest rates.
3. Closing the Loophole That Let Some Medical Info Be Used
Although some protections already exist under the Fair Credit Reporting Act (FCRA), there was a legal exception that still allowed particular medical debt to be reported and used.
The CFPB’s proposal would shut that loophole, making the rule stronger and more consistent across all lenders and reporting agencies.
4. Stronger Accuracy and Privacy Rules for Medical Bills
Another goal of the CFPB is to make sure that consumers aren’t harmed by incorrect or outdated medical debt information.
This includes better protections to keep your medical information private and to ensure that debt collectors and credit bureaus don’t list incorrect amounts or bills that were already paid or disputed.
5. This Could Raise Credit Scores for Millions
For more than 15 million Americans, the CFPB thinks that getting rid of medical debt from their credit reports could raise their scores, sometimes by 20 points or more.
For people who were stuck with big bills through no fault of their own, this change could make it easier for them to rent apartments, buy cars, or get loans with lower interest rates.
It's essential to think about how these proposed changes might affect the businesses and people who help people deal with and settle their debts.
What this Means for Debt Settlement Services?
The rule changes from the Consumer Financial Protection Bureau (CFPB) around medical debt bring both opportunities and shifts for firms that provide debt settlement or debt‑management help.
While they don’t always change the core of what debt settlement services do, they do change how some parts of the process may work, what strategies may become more or less effective, and how to communicate with clients.
1. Fewer Medical Debt Items on Credit Reports
If medical bills are taken off of credit reports or only show up on them in tiny amounts, debt settlement companies may see fewer cases where bad credit from medical bills is the "main hurdle" for their clients.
So, when the client comes in for help, the main issue might be different. There might be more focus on unpaid medical bills that haven't been sent to collections yet, or on other unsecured debts that aren't medical.
It also means the settlement service will need to understand whether a debt is reporting or non‑reporting, and how that affects negotiation strategy.
2. Changing Negotiation Leverage
When a debt isn’t showing up on a credit report (or can’t be used by lenders against the client), one of the pressure points in negotiations shifts.
Debt settlement services might need to emphasise other factors: affordability, client hardship, provider willingness to settle. The diminished risk of “credit reporting damage” might reduce urgency from the debtor's side, which could slow negotiations or require more work to motivate action.
On the flip side, it may reduce opposition from the creditor side if they know the debt isn’t doing as much damage to the client’s financial profile.
3. More Need for Accurate Documentation and Strategy
Since medical debt often involves billing errors, disputes, insurance fight‑outs, etc., settlement firms must stay sharp on verifying details, validating the debt’s legitimacy, and advising clients on rights.
With the CFPB emphasizing that medical debt often shouldn’t have been on credit reports, settlement services have a stronger rationale to review medical bills carefully. This means more time spent on validation and possibly more upfront investigation.
4. Adjusting Client Expectations
People who come to us for help may expect promises like "wipe it off my credit report." With these new rules, settlement firms have to be clear about what kind of help they offer:
If the debt isn’t on a credit report or is about to be removed, then settling may focus on avoiding lawsuits, wage garnishments, or further collection efforts rather than credit score repair.
The firm should explain realistic outcomes: the debt still exists, must be managed/settled/paid, even if it’s less harmful in terms of credit. This builds trust and avoids unmet expectations.
5. Business Opportunity and Differentiation
For a firm like Shepherd Outsourcing, this rule change can be framed as part of its value proposition:
“We stay ahead of how regulations change, we specialise in non‑credit‑card debt (including medical debt), and we help you adapt.”
That gives a chance to stand out: unlike services that only target generic debt consolidation or credit‑card debt, you can emphasise expertise in medical debt settlement, which is becoming more complex due to policy changes.
6. Monitor Legal & Regulatory Status
Even though the CFPB proposed significant changes, there may be delays, legal challenges, or state‑by‑state variation. Debt settlement firms must keep monitoring the actual in‑force rules, interpret them correctly, and adjust their operation accordingly.
Clients may ask “Is this rule already working for me?” The firm must explain what applies today and what is still pending.
As the debt landscape evolves, debt relief providers need to adapt. Here's how Shepherd Outsourcing is stepping up to support clients during this transition.
Shepherd Outsourcing can help you manage and settle medical debt more easily. book your free demo now.
How Shepherd Outsourcing Supports Medical Debt Relief?
With the CFPB's recent rulemaking efforts to remove medical debt from credit reports, the way debt is handled is changing, and we’re helping clients stay ahead of these shifts.
1. Tailored Medical Debt Settlement Plans
We work directly with clients to evaluate their outstanding medical debt and negotiate with healthcare providers or collections agencies. Unlike card debt, medical debt often involves billing disputes or surprise charges.
Our team looks through a lot of paperwork to see if the debt is real, inflated, or able to be lowered. For each case, we make a custom plan.
2. Emphasis on Legal and Regulatory Compliance
The rules about how to report medical debt are always changing, but our services are still made to follow the most recent CFPB rules.
You don't have to worry about being behind on rule changes because we keep your strategy up to date.
3. Protection from Aggressive Collection Practices
We help prevent wage garnishments and lawsuits by intervening early in the debt cycle. Our strategies focus on negotiating reasonable settlement terms that align with a client’s income and ability to repay, all while shielding them from unnecessary legal stress.
4. Transparent, Ethical Service
We believe in fair, transparent, and customized debt relief. There are no hidden surprises or one-size-fits-all templates.
Our mission is to support clients through their debt recovery journey with dignity and clarity, offering professional help that aligns with their financial situation.
Conclusion
Medical debt has long been a silent burden, damaging credit scores and adding financial strain to those already facing health challenges. The Consumer Financial Protection Bureau (CFPB) wants to change the rules on how medical debt is handled. This will help make credit reporting more fair and lessen the long-term financial effects on regular Americans.
As this regulatory change happens, it's even more critical to work with professionals you can trust who know how to handle changing debt situations.
At Shepherd Outsourcing, we specialize in providing personalized debt settlement services that go beyond short-term fixes. We are here to help you in an ethical, legal, and effective way, whether you need help with old medical bills or want a structured way to get out of debt.
Get in touch with us right away to find out how we can help you get out of debt. No one should have to choose between their health and their financial peace.
FAQs
1. What is the CFPB medical debt rulemaking all about?
The Consumer Financial Protection Bureau (CFPB) is proposing a new rule to stop credit reporting agencies from including unpaid medical bills on credit reports. This is meant to protect consumers from credit damage caused by medical expenses they often had little control over.
2. Why is medical debt being treated differently than other types of debt?
Medical debt is often unplanned, confusing, and can involve billing mistakes or insurance delays. Unlike other debts, it doesn’t always reflect a person’s ability or willingness to pay. That’s why the CFPB wants to treat it more fairly in credit reporting.
3. Will this rule remove all medical debt from credit reports?
If the rule is finalized, most unpaid and paid medical bills would no longer appear on credit reports. However, other types of debt would still be reported as usual.
4. How could this rule affect my credit score?
For many people, removing medical debt could improve their credit score, making it easier to get loans, housing, or better interest rates in the future.
5. When will the CFPB medical debt rule take effect?
As of now, the rule is still in the proposal stage. The CFPB will review public comments before finalizing it. A specific start date has not been confirmed yet.
6. Does this mean I don’t have to pay my medical bills anymore?
No. You are still legally responsible for paying your medical debt. The rule only affects how the debt is reported to credit bureaus, not whether it must be paid.
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