The CFPB regulations do not affect medical credit card issuers and may not affect other types of medical credit providers. ACA International, a trade group for credit and collection professionals, predicts that the new regulations will cause doctors, dentists and hospitals to require more patients to pay for care before the care is provided.
“This means that those consumers who cannot afford the out-of-pocket costs for care will be forced to use high-cost financing methods like credit cards and payday loans,” Scott Purcell, the chief executive officer of ACA International, told the CFPB in a comment on a draft version of the regulations that was released in June.
What it means: The new regulations could lead to more employer and employee interest in health savings accounts, flexible spending accounts, health reimbursement arrangements, medical credit card programs and other health care finance benefits that can help employees and employees’ dependents pay for care when the care is delivered.
The nuts and bolts: The new final rule will update Regulation V, an existing regulation that implements part of the federal Fair Credit Reporting Act.
At press time, the final rule was not yet available through the Federal Register, the federal government’s official regulatory publication, but the CFPB had posted a preliminary version of the final rule on its own website.
The regulation is set to take effect 60 days after the official Federal Register publication date.
President-elect Donald Trump is preparing to return to the White House Jan. 20. One question is how the arrival of the new administration may affect implementation of a regulation completed under outgoing President Joe Biden.
The details: The new final regulations block credit reporting companies from including medical bill information in the reports sent to lenders.
The regulations also prohibit lenders from considering any medical bill information that still shows up in the medical records, and it may also discourage lenders from setting up financing arrangements for medical devices, such as artificial legs, in ways that could lead to the lenders repossessing the devices from borrowers who fail to pay their bills, officials say.
The thinking: The CFPB estimates that the new regulations will eliminate information on about $49 billion in medical bills from 15 million Americans’ credit reports.
The CFPB and many supporters, including the American Medical Association, believe that the move will have little effect on the value of consumer credit reports, because studies have shown that problems with paying medical debt have little correlation with a consumer’s ability to pay ordinary debts.
The AMA has also argued that letting medical debt linger on credit reporters may mire consumers in poverty, by reducing consumers’ ability to get jobs from employers that use credit reports in hiring or apartments from landlords that use credit reports when evaluating tenants.
But Kimberly Stone, business development director at KLS Financial Services, a debt collection agency in Morrisville, North Carolina, argues that the new regulations will lead to bad consumer behavior.
“When responsibility and accountability are removed, then lenders will find themselves in situations similar to the mortgage of car fallouts in 2006-2008,” Stone writes in a comment letter. “Will they run up a credit card and let it default?”
Credit reporting agencies have already responded to criticism by reducing inclusion of medical debt information, including information about medical debts with a balance under $500. Patients are already noticing that and taking advantage of that, Stone says. “More and more in the under $500 range are choosing on purpose not to pay,” she says.
If consumers get care, a plan fails to cover something and the consumers fail to pay their share of the bills, “suddenly everyone else is responsible for absorbing that cost,” Stone writes. “Larger balance accounts will start to get sued instead of credit reported, and then the lawyers benefit, but consumer becomes deeper in debt and may have assets seized or wages garnished, depending on what the states allow.”
