Chopra Defends CFPB’s Medical Debt Proposed Rule

CFPB Director Rohit Chopra on Thursday defended his agency’s proposed rule to prohibit the listing of medical debt on credit reports, contending that such debts are not a fair indication of a person’s financial health.

“We’ve done extensive research on whether medical bills on credit reports are predictive of whether a consumer repays their other loans,” Chopra said on Reddit, where he took questions about the proposed rule. “What we’ve found is that the predictive power is really limited.”

Comments on the CFPB rule are due on Aug. 12. Opponents of the rule have said that medical debt should be listed on credit reports, contending that omitting them would not give a clear picture of someone’s debts. Chopra said that prohibiting the listing of medical debt on credit reports would not discourage people from paying their bills.

“Our observation is that consumers pay their bills,” he said. “Taking bills off credit reports is not likely to have a substantial impact on the health care industry for a variety of reasons, including that a lot of the incentives are driven by insurance and not by self-paid bills.”

He said that 15 million Americans have $49 billion in outstanding medical bills in collections appearing in the credit reporting system. “The complex nature of medical billing, insurance coverage and reimbursement, and collections means that medical debts that continue to be reported are often inaccurate or inflated,” he added.

He predicted that prohibiting the listing of medical debts on credit reports could lead to the approval of about 22,000 additional mortgages every year.

Chopra said the CFPB would be on firm legal ground if the agency issued a final rule governing medical debt. He said Congress placed restrictions on lenders using medical information in the Fair Credit Reporting Act, referring to Section 604(g)(5) of the FCRA. “After that, federal financial agencies created an exception for medical bills,” he said.  “The proposed rule would simply close that loophole, using explicit authority that Congress granted to the CFPB, so we are confident that we’re on solid legal ground in making sure that Americans aren’t punished for getting sick.”

Previewing what could be the agency’s next move on medical debt, Chopra said that while medical payment products can offer an enticing promise of cost savings, convenient payment plans and administrative ease for providers, CFPB research has found that patients who use such products “end up worse off.”

He said the CFPB is considering studying these products and is considering the bureau’s options in this area..