New federal rule erases medical debt from 690K Michiganders’ credit reports

MICHIGAN—Unpaid medical bills will no longer appear on Michiganders’ credit reports, where they can block people from obtaining mortgages, car loans, and small business loans, according to a final rule announced this week by the Consumer Financial Protection Bureau.

The new rule from the Biden-Harris administration will remove $49 billion in medical debt from the credit reports of more than 15 million people—including about 690,000 Michiganders. And that means lenders can no longer consider that debt when deciding whether to issue loans.

Vice President Kamala Harris said the new federal rule will be “lifechanging” for millions of families nationwide who have been struggling to dig themselves out of medical debt.

“No one should be denied economic opportunity because they got sick or experienced a medical emergency,” Harris said in a statement announcing the new rule on Tuesday.

Harris also announced that states and local governments have used a sweeping 2021 pandemic-era aid package to eliminate more than $1 billion in medical debt for more than 700,000 Americans—a move which is estimated to raise credit scores by an average of 20 points and lead to 22,000 additional mortgages being approved every year, officials said.

The Biden administration first announced plans for the rule in fall 2023—namely based on the philosophy that medical debt is a poor predictor of an individual’s ability to repay a loan.

Since then, Experian, Equifax, and TransUnion, the three national credit reporting agencies, have already removed medical collections debt under $500 from US consumer credit reports.

The new rule from the Biden administration goes a step further by banning all outstanding medical bills from appearing on credit reports and prohibiting lenders from using the information.

The changes were also drafted to increase consumer privacy protections and to help keep debt collectors from using the credit reporting system to coerce people into paying bills they don’t owe. The CFPB has found that patients frequently receive inaccurate bills or are asked to pay bills that should have been covered by insurance or financial assistance programs.

Under the rule, lenders will also be barred from using information about medical devices, such as prosthetic limbs, to make them serve as collateral for a loan and subject to repossession. 

Abhi Rahman, deputy director at the Democratic National Committee, said the new federal rule marks a “historic step forward” for millions of Michiganders—but he also voiced some concern that President-elect Donald Trump’s administration could soon take action to reverse it.

“For too long, credit scores impacted by medical debt have forced Michiganders to make sacrifices—like forgoing home ownership, starting a business, or continuing their education,” Rahman said in a statement. “Unlike [President-elect] Donald Trump and his ultra-wealthy allies who want to gut the Consumer Financial Protection Bureau, the Biden-Harris administration and Democrats are fighting to ensure Michiganders aren’t penalized for medical emergencies.”

The Associated Press contributed to this report. 

READ MORE: Thousands of Oakland County residents receive medical debt relief 

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