14 January 2025
/ Justin C. Conner
CFPB Issues Final Rule on Creditor Use and Consumer Reporting of Medical Information
On January 7, 2025, the Consumer Financial Protection Bureau (CFPB) finalized amendments to Regulation V, which implements the Fair Credit Reporting Act (FCRA), titled Prohibition on Creditors and Consumer Reporting Agencies Concerning Medical Information. The new rules broadly restrict how creditors can use medical debt information to determine borrower eligibility and broadly restrict what consumer reporting agencies can report about medical debt information to creditors.
Entities Affected:
- Creditors: The rule applies to creditors as defined in Regulation V, excluding certain auto dealers.
- Consumer Reporting Agencies: Agencies providing consumer reports fall under the provisions below restricting medical debt reporting.
Key Provisions of the Final Rule:
1. Scope of Covered Medical Debt Information:
- The rule defines medical debt information as debt owed to health care providers for services, products, or devices. Medical debt information covers details such as the amount owed, repayment terms, repayment history, and the health care provider involved. It includes debts from medical services, whether necessary or elective, and medical debts reflected in previous credit scores or legal judgments. This also includes medical debts assigned to third-party collectors but excludes debts incurred via third-party credit (e.g., credit cards not originally owed directly to the health care provider).
2. Removal of Exception for Medical Information Use:
- Creditors are now broadly prohibited from obtaining or using medical information, including medical debt, for credit eligibility determinations. This change eliminates a previous regulatory exception that allowed such practices.
3. Restrictions on Consumer Reporting Agencies:
- Consumer reporting agencies are now broadly prohibited from reporting medical debt information to creditors. This applies unless the consumer reporting agency believes the creditor intends to use the medical debt information in a manner not prohibited by these rules or any other law.
- NOTE: the rule does not restrict creditors from furnishing medical debt information to consumer reporting agencies.
Exceptions:
1. Medical Information Related to Income, Benefits, or the Purpose of the Loan:
- Medical information related to income, benefits, or the purpose of loans remains usable under specific conditions. For example, creditors can consider disability income provided to it or confirm a loan is for medical procedures.
2. Transaction History Use:
- Medical expenses reflected in transaction histories of credit card or checking accounts can be considered if the consumer authorizes it and the creditor treats it no less favorably than non-medical information and does not factor any physical, mental, or behavioral health condition, history, treatment type, or prognosis into account for the eligibility.
3. Legal Compliance:
- Creditors can use medical information if necessary to meet local, state, or federal legal requirements, such as ability-to-repay assessments.
Effective Date: The final rule takes effect 60 days after publication in the Federal Register. The CFPB’s Executive Summary can be found here.
The final rule is already being challenged on the grounds that “it is black letter law that an agency cannot prohibit through regulations what Congress has expressly permitted by statute.” Cornerstone Credit Union League et al v. Consumer Financial Protection Bureau et al, No. 4:25-cv-00016, (E.D. Tex. Jan. 7, 2025).
These blogs are not a solicitation for business and are not intended to constitute legal advice on specific matters, create an attorney-client relationship, or be legally binding in any way.
