this American Bankers Association (ABA) last week Consumer Financial Protection Bureau (CFPB), in which it expressed “serious concerns” about a proposed rule that would ban medical debt from appearing on consumer credit reports.
The proposal would prohibit credit institutions from sharing such debt with mortgage lenders, and mortgage lenders would be prohibited from making lending decisions based on how such debt affects an applicant’s financial situation.
The ABA agreed with one narrow element of the proposal — excluding credit issued by third-party lenders from the term “health information.” But the rest of the proposal raises serious concerns, including possible violations of the Administrative Procedure Act (APA), “because the CFPB is setting itself up to [powers] When lawmakers enacted the bill, Congress did not intend [Fair Credit Reporting Act (FCRA)]”, wrote the ABA.
The CFPB asserts that medical debt does not “adequately predict credit risk,” the ABA wrote. This is the core idea of the proposal, not to prevent the inappropriate use of medical information.
“However, nothing in the FCRA allows the CFPB to suppress information based on its predictive nature, making the proposed rule inconsistent with the sound decision-making required by the APA and relying on factors that Congress did not intend to consider,” the ABA said in the letter. “Furthermore, the proposal appears to be motivated by a desire to influence health care policy, something the CFPB may not be able to do through FCRA.”
The ABA argued that the proposal was not “evidence-based because it relied on outdated research and non-representative data” and that the CFPB did not adequately demonstrate that medical debt does not predict credit risk.
“If lenders fail to consider medical debt in credit underwriting, consumer delinquencies and defaults will increase, impacting the safety and soundness of banks and consumers’ access to credit,” the letter reads. “If lenders know that credit scores have improved , but believe that the risk has not been reduced, they will offset the increase in credit scores by further tightening lending standards.”
Announcing the proposal, CFPB Director Rohit Chopra said the credit reporting system is often “weaponized” to “force patients to pay medical bills they don’t owe.” “Medical bills on credit reports are often inaccurate and have little predictive value when it comes to repaying other loans.”
Last month, the bureau also proposed new servicing rules focused on providing more robust foreclosure assistance. ABA and Mortgage Bankers Association (MBA) supports the proposal.
