Biden to ban medical debt from credit reports in latest attempt to boost election hopes

The Biden Administration will today announce a rule to get rid of medical debt from credit reports.

The rule could boost the chances of millions of Americans to buy a car and allow 22,000 more people to get approved for mortgages each year, the administration says.

It will be announced later today by Vice President Kamala Harris and Consumer Financial Protection Bureau Director Rohit Chopra.

Administration officials say the rule shows that they are lowering costs, but critics have warned that it may lead to more doctors requiring upfront payments for care.

Biden has previously been accused of attempting to 'buy' votes with debt forgiveness measures such as his student loan relief plan.

The proposal — in the works since September — was revealed by Chopra during an exclusive interview with ABC News.

It could go into effect sometime next year, he said — potentially making the rule dependent on Biden winning the election in November.

'Our research shows that medical bills on your credit report aren't even predictive of whether you'll repay another type of loan,' he said.

'That means people's credit scores are being unjustly and inappropriately harmed by this practice.'

A number of credit companies — including Equifax, TransUnion and Experian — have already stopped using medical debt to calculate credit scores.

But Biden administration officials say the rule would lead to other credit companies also removing medical debt from credit scores.

The rule change would also lead to credit scores not being affected by bills that are currently being disputed by patients, helping many to avoid taking a hit on their credit score. 

Research from the CFPB found the proposed rule change could help 15million Americans who have a combined total of $49billion in medical debt that is hampering their credit score.

More than two in five Americans are affected by medical debt, which totaled more than $220billion nationwide by the start of 2022.

If medical debts are left unpaid, they go to collections — which hits credit scores.

This makes large purchases, like cars or houses, harder because these are only offered with high interest rates.

Some experts have welcomed the rule change, pointing out that medical debt collection is already often unsuccessful — with only 24.5 percent of attempts resulting in payments.

But others warned it could lead to more Americans failing to pay off the debt, which may lead to hospitals demanding upfront payments for care.

Dr Ge Bai, an accounting health policy expert at Johns Hopkins University, made the warning — saying the move could leave low income patients worse off.

'I think in the short run, it will be great news for patients, and probably we'll see advocacy groups pushing it,' she said.

'However, I think in the long-run, when the long-term negative effects emerge, probably we're going to see more pushback.'