JUANA SUMMERS, HOST:
Medical debt will soon be wiped off the credit reports of millions of Americans. That is according to new rules announced today by the Consumer Financial Protection Bureau. Health care debt burdens about 100 million people in this country - something that NPR has been reporting on in our Diagnosis: Debt series with our partners at KFF Health News. And KFF's Noam Levey is here to talk about these new rules. Hi, there.
NOAM LEVEY: Hi.
SUMMERS: Noam, if you can, just start by laying out the problem. Why is this new policy necessary?
LEVEY: Well, so as many of your listeners no doubt know, medical debt is a huge problem. About 4 in 10 adults have some form of health care debt, we found, and it's taking a really grim toll on patients and their families. People are forced to work extra jobs, to drain their savings, even give up their homes - and all because of big medical bills they can't pay.
Now, one of the most pernicious ways that medical debt can hurt is by dragging down your credit score. You have an unpaid bill. It gets reported to a credit agency. And all of a sudden, it's harder to get a car loan, to rent an apartment, get a job, or you have to pay a higher interest rate because you have bad credit. So that's part of the reason why a lot of patient and consumer advocates have pushed for these new rules, and it's why the Biden administration worked to expand protections for people with medical debt.
SUMMERS: So tell us about this new policy. What exactly does it say, and when does it kick in?
LEVEY: So this reg was issued by the Consumer Financial Protection Bureau. That's the watchdog agency that was set up after the 2009 financial crisis. And the agency began kind of digging into medical debt a few years ago, and it's been working on this regulation for a while. And it does kind of two important things. One - it bans credit agencies from including medical debt on consumers' credit reports, and it says that lenders can't consider medical information and debt as they assess borrowers. Now, it was just issued. It has to go to the federal register, and then it will be effective in 60 days, which works out to, I think, the middle of March - like, March 17.
SUMMERS: I mean, just in a practical sense, what kind of impact do we think this will have on people's lives, given how many people are affected by medical debt in this country?
LEVEY: I mean, it could mean a lot, actually. Now, we should say that kind of as attention has focused on medical debt recently, the major credit bureaus have already started removing some medical debt from consumer reports, and this included smaller debts under $500. But millions of people around the country still have medical debt on their credit reports, and CFPB has estimated that about 15 million people who owe about $49 billion in medical debts could benefit from this. So that should boost people's scores, and it may make it easier to get a mortgage or rent a home.
SUMMERS: Noam, here in Washington in just a matter of days, there will be a new administration in power. Can the incoming Trump administration undo this?
LEVEY: Well, it's kind of a complicated question. Typically, when a new administration comes in, the president stops all federal agencies from issuing new rules, including ones that are under development. Trump did this the first time around, in 2017. But this is now what's called a final rule. And that means that, to undo it, the Trump administration would have to start a whole new rule-making process, which typically takes months, even years, and it requires a lot of administrative hurdles. Now, if Trump and his GOP allies really want to scrap this, Congress could vote to rescind the regulation, but then a whole lot of Republicans would have to go on the record against what is probably going to be a pretty popular consumer protection.
There is one more way, though, that Trump could hobble this. It seems pretty clear that the collections industry is going to sue - to challenge this in court. And if that happens, typically, the administration would defend the rule. But maybe Trump won't do that, and that would pretty much doom it.
SUMMERS: Now, the Consumer Financial Protection Bureau is something that Elon Musk, a prominent Trump ally, has said that he wants to get rid of. Couldn't that mean a change to this policy?
LEVEY: Well, probably not. I mean, you're right - Musk has even posted on X that he wants to, quote-unquote, "delete" the CFPB, and listeners may recall that Trump asked Musk to head up his government efficiency effort. But getting rid of a federal agency is not easy, and scrapping the CFPB entirely would probably need an act of Congress. And as you know, Republicans have a pretty thin majority on Capitol Hill, so that seems kind of unlikely at this point.
SUMMERS: Noam Levey is a correspondent with our partner, KFF Health News. Thank you so much.
LEVEY: Thank you. Transcript provided by NPR, Copyright NPR.
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