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Rule2024-30824

Prohibition on Creditors and Consumer Reporting Agencies Concerning Medical Information (Regulation V)

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Published

January 14, 2025

Effective

March 17, 2025

Issuing agencies

Consumer Financial Protection Bureau

Abstract

The Consumer Financial Protection Bureau (CFPB) is issuing a final rule amending Regulation V, which implements the Fair Credit Reporting Act (FCRA), concerning medical information. The FCRA prohibits creditors from considering medical information in credit eligibility determinations. The CFPB is removing a regulatory exception that had permitted creditors to obtain and use information on medical debts notwithstanding this statutory limitation. The final rule also provides that a consumer reporting agency generally may not furnish to a creditor a consumer report containing information on medical debt that the creditor is prohibited from using.

Full Text

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<title>Federal Register, Volume 90 Issue 8 (Tuesday, January 14, 2025)</title>
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[Federal Register Volume 90, Number 8 (Tuesday, January 14, 2025)]
[Rules and Regulations]
[Pages 3276-3374]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-30824]

[[Page 3275]]

Vol. 90

Tuesday,

No. 8

January 14, 2025

Part II

Consumer Financial Protection Bureau

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12 CFR Part 1022

Prohibition on Creditors and Consumer Reporting Agencies Concerning
Medical Information (Regulation V); Final Rule

Federal Register / Vol. 90 , No. 8 / Tuesday, January 14, 2025 /
Rules and Regulations

[[Page 3276]]

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CONSUMER FINANCIAL PROTECTION BUREAU

12 CFR Part 1022

[Docket No. CFPB-2024-0023]
RIN 3170-AA54

Prohibition on Creditors and Consumer Reporting Agencies
Concerning Medical Information (Regulation V)

AGENCY: Consumer Financial Protection Bureau.

ACTION: Final rule.

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SUMMARY: The Consumer Financial Protection Bureau (CFPB) is issuing a
final rule amending Regulation V, which implements the Fair Credit
Reporting Act (FCRA), concerning medical information. The FCRA
prohibits creditors from considering medical information in credit
eligibility determinations. The CFPB is removing a regulatory exception
that had permitted creditors to obtain and use information on medical
debts notwithstanding this statutory limitation. The final rule also
provides that a consumer reporting agency generally may not furnish to
a creditor a consumer report containing information on medical debt
that the creditor is prohibited from using.

DATES: This final rule is effective March 17, 2024.

FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory
Implementation & Guidance Program Analyst, Office of Regulations, at
202-435-7700 or <a href="https://reginquiries.consumerfinance.gov/">https://reginquiries.consumerfinance.gov/</a>. If you
require this document in an alternative electronic format, please
contact <a href="/cdn-cgi/l/email-protection#5714110715081634343224243e353e3b3e232e173431273579303821"><span class="__cf_email__" data-cfemail="98dbdec8dac7d9fbfbfdebebf1faf1f4f1ece1d8fbfee8fab6fff7ee">[email&#160;protected]</span></a>.

SUPPLEMENTARY INFORMATION:

I. Overview

A. Summary of the Final Rule

Information about a person's medical history and health is
sacrosanct and among the most intimate and sensitive categories of
data. Recognizing the uniquely sensitive nature of such information,
Congress acted to limit the use and sharing of medical information in
the financial system by amending the Fair Credit Reporting Act (FCRA)
through the Fair and Accurate Credit Transactions Act of 2003 (FACT
Act).\1\ In doing so, Congress ``establish[ed] strong privacy
protections for consumers' sensitive medical information,'' \2\ in line
with the overarching privacy protection purpose of the FCRA.\3\ As part
of these protections, Congress generally limited a creditor's ability
to obtain or use a consumer's medical information in connection with
any determination of the consumer's eligibility, or continued
eligibility, for credit (creditor prohibition), subject to certain
exceptions.\4\ One of these exceptions required the Federal financial
banking agencies and the National Credit Union Administration
(Agencies) to prescribe regulations that permit transactions that are
determined to be necessary and appropriate to protect legitimate
operational, transactional, risk, consumer, and other needs (including
administrative verification purposes), consistent with congressional
intent to restrict the use of medical information for inappropriate
purposes.\5\
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\1\ Fair and Accurate Credit Transactions Act of 2003 (FACT
Act), Public Law 108-159, 117 Stat. 1952, 1999 (2003).
\2\ 149 Cong. Rec. H8122-02, H8122 (daily ed. Sept. 10, 2003)
(statement of Rep. Kanjorsky).
\3\ 15 U.S.C. 1681 et seq., 1681(a)(4).
\4\ 15 U.S.C. 1681b(g)(2).
\5\ 15 U.S.C. 1681b(g)(5).
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In 2005, the Agencies issued a regulatory exception (financial
information exception) to this statutory prohibition, permitting
consumers' medical financial information to be obtained and used by
creditors in connection with credit eligibility determinations if
certain conditions were met.\6\ Since the financial information
exception was created, a number of concerns have been raised about
whether a regulatory exception that permits creditors to consider
sensitive medical information about a consumer's debts and certain
other types of medical information is necessary and appropriate to
protect legitimate operational, transactional, risk, consumer, and
other needs, and consistent with the congressional intent to restrict
the use of medical information for inappropriate purposes.
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\6\ 70 FR 70664 (Nov. 22, 2005).
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First, when the Agencies issued the financial information exception
to the statutory prohibition, they did so without providing evidence or
reasoning to support their main conclusion that an exception from a
congressionally created legal requirement was warranted.
Second, research has shown that medical debt has limited predictive
value in predicting future default for credit underwriting purposes.
Questions about the reliability of information about medical debt, as
compared to information about other types of consumer debt, have been
raised based on research performed by the CFPB and others.\7\ Medical
debt may be less predictive of whether a consumer will pay a future
loan, because medical debts can occur and are collected through unique
circumstances and practices. For example, consumers often have limited
ability to control the timing and types of medical services that are
required.
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\7\ See, e.g., Kenneth P. Brevoort & Michelle Kambara, Consumer
Fin. Prot. Bureau, Data point: Medical debt and credit scores (May
2014), <a href="https://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit-scores.pdf">https://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit-scores.pdf</a>. See also Mark Rukavina,
Medical Debt and Its Relevance When Assessing Creditworthiness, 46
Suffolk U. L. Rev. 967 (2013), <a href="https://bpb-us-e1.wpmucdn.com/sites.suffolk.edu/dist/3/1172/files/2014/01/Rukavina_Lead.pdf">https://bpb-us-e1.wpmucdn.com/sites.suffolk.edu/dist/3/1172/files/2014/01/Rukavina_Lead.pdf</a>.
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Third, market participants, including in the consumer reporting
industry and those most financially incentivized to assess the
predictive value of medical debt, have reduced their reliance on
medical debt in recognition of its limited utility. Consumer reporting
agencies have removed certain medical debts from consumer reports.\8\
Major credit scoring companies have accorded less weight to, or
excluded entirely, medical debt information in their newer scoring
models.\9\ Similarly, some creditors have adjusted how their
underwriting standards treat medical debt information.\10\
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\8\ See, e.g., Bus. Wire, Equifax, Experian, and TransUnion
Support U.S. Consumers With Changes to Medical Collection Debt
Reporting (Mar. 18, 2022), <a href="https://www.businesswire.com/news/home/20220318005244/en/Equifax-Experian-and-TransUnion-Support-U.S.-Consumers-With-Changes-to-Medical-Collection-Debt-Reporting">https://www.businesswire.com/news/home/20220318005244/en/Equifax-Experian-and-TransUnion-Support-U.S.-Consumers-With-Changes-to-Medical-Collection-Debt-Reporting</a>.
\9\ See AnnaMaria Andriotis, Major Credit-Score Provider to
Exclude Medical Debts, Wall St. J. (Aug. 10, 2022), <a href="https://www.wsj.com/articles/major-credit-score-provider-to-exclude-medical-debts-11660102729">https://www.wsj.com/articles/major-credit-score-provider-to-exclude-medical-debts-11660102729</a> (VantageScore CEO quoted as saying that having
medical debt is not necessarily reflective of a consumer's ability
to pay back a loan); Ethan Dornhelm, The Impact of Medical Debt on
FICO Scores, FICO Blog (July 13, 2015), <a href="https://www.fico.com/blogs/impact-medical-debt-ficor-scores">https://www.fico.com/blogs/impact-medical-debt-ficor-scores</a>.
\10\ See, e.g., Fed. Nat'l Mortg. Ass'n, Single Family Selling
Guide, B3-2-03 (2021), <a href="https://selling-guide.fanniemae.com/#Public.20Records.2C.20Foreclosures.2C.20and.20Collection.20Accounts">https://selling-guide.fanniemae.com/#Public.20Records.2C.20Foreclosures.2C.20and.20Collection.20Accounts</a>
(noting that ``[c]ollection accounts reported as medical collections
are not used in the DU [Desk Underwriter] risk assessment''); Fed.
Home Loan Mortg. Corp., The Single-Family Seller/Servicer Guide,
5201.1 (2022), <a href="https://guide.freddiemac.com/app/guide/section/5201.1">https://guide.freddiemac.com/app/guide/section/5201.1</a>; U.S. Dep't of Hous. & Urban Dev., Single Family Housing
Policy Handbook, 4000.1 (2021), <a href="https://www.hud.gov/sites/dfiles/OCHCO/documents/4000.1hsgh-112021.pdf">https://www.hud.gov/sites/dfiles/OCHCO/documents/4000.1hsgh-112021.pdf</a>. See also The White House,
Fact Sheet: The Biden Administration Announces New Actions to Lessen
the Burden of Medical Debt and Increase Consumer Protection (Apr.
11, 2022), <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/04/11/fact-sheet-the-biden-administration-announces-new-actions-to-lessen-the-burden-of-medical-debt-and-increase-consumer-protection/">https://www.whitehouse.gov/briefing-room/statements-releases/2022/04/11/fact-sheet-the-biden-administration-announces-new-actions-to-lessen-the-burden-of-medical-debt-and-increase-consumer-protection/</a> (announcing changes to certain Federal
government underwriting standards to remove medical debt from
evaluations of whether a consumer will repay a loan, including those
for the U.S. Department of Agriculture's rural housing service loans
and the Small Business Administration's loan programs and the
Federal Housing Finance Authority's review of credit models).

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Key Changes
Given the developments over the past decade in its understanding of
how consumer medical debt differs from other types of consumer debt and
its uses in credit underwriting, the CFPB, now with primary regulatory
authority over the FCRA, is updating the non-statutory exceptions in
Regulation V to ensure the use of medical information is consistent
with the congressional intent to safeguard consumers' privacy and
restrict the use of medical information for inappropriate purposes. To
do so, the CFPB is finalizing changes to how creditors and consumer
reporting agencies treat medical information concerning a consumer's
medical debt in Sec. Sec. 1022.3, 1022.30, and 1022.38, as outlined
below and discussed in further detail in part IV, Discussion of the
Final Rule.
These amendments apply to any person that participates as a
creditor in a transaction, except for a person excluded from coverage
by section 1029 of the Consumer Financial Protection Act of 2010 (CFPA)
\11\ (i.e., certain auto dealers). According to existing Regulation V,
the term ``creditor'' has the same meaning as in section 702 of the
Equal Credit Opportunity Act (ECOA).\12\ The amendments also apply to a
consumer reporting agency as defined in section 603(f) of the FCRA.\13\
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\11\ Public Law 111-203, 124 Stat. 1955, 2004 (2010).
\12\ 12 CFR 1022.30(b)(2)(ii); see also 15 U.S.C. 1681a(r)(5).
ECOA is codified at 15 U.S.C. 1691 et seq.; ECOA section 702 is
codified at 15 U.S.C. 1691a(e). The term creditor means any person
who regularly extends, renews, or continues credit; any person who
regularly arranges for the extension, renewal, or continuation of
credit; or any assignee of an original creditor who participates in
the decision to extend, renew, or continue credit.
\13\ 15 U.S.C. 1681a(f). The term consumer reporting agency
means any person which, for monetary fees, dues, or on a cooperative
nonprofit basis, regularly engages in whole or in part in the
practice of assembling or evaluating consumer credit information or
other information on consumers for the purpose of furnishing
consumer reports to third parties, and which uses any means or
facility of interstate commerce for the purpose of preparing or
furnishing consumer reports.
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Removal of the Financial Information Exception
Under this final rule, a creditor will no longer be able to
consider medical information related to a consumer's medical debt in
connection with any determination of the consumer's eligibility, or
continued eligibility, for credit, unless one of the specific
exceptions in final Sec. 1022.30(e) applies. Specifically, the CFPB is
finalizing its interpretation as set forth in the proposed rule that
for information about a consumer's debt to be ``medical information''
under FCRA section 603(i), the information must relate to a debt the
consumer owes, or at one time owed, directly to a health care provider
or to the health care provider's agent or assignee for the provision of
the health care underlying the payment obligation.
As discussed in further detail in part IV.B.1, Medical Information
Related to Debts, the CFPB finalizes its definition of medical debt
information in final Sec. 1022.3(j), as medical information that
pertains to a debt owed by a consumer to a person whose primary
business is providing medical services, products, or devices (also
referred to herein as a health care provider), or to the person's agent
or assignee, for the provision of such medical services, products, or
devices. The definition also provides that medical debt information
includes, but is not limited to, medical bills that are not past due or
that have been paid.
The CFPB is removing the financial information exception to the
creditor prohibition in current Sec. 1022.30(d). This non-statutory
exception provides that a creditor may generally obtain and use medical
information pertaining to a consumer in connection with any
determination of the consumer's eligibility, or continued eligibility,
for credit subject to certain exceptions. With respect to information
concerning a consumer's medical debts, the CFPB has concluded that it
generally is neither ``necessary and appropriate to protect legitimate
operational, transactional, risk, consumer, and other needs,'' nor
consistent with Congress's intent ``to restrict the use of medical
information for inappropriate purposes,'' for creditors to consider
such sensitive financial information in underwriting. Because of the
CFPB's elimination of the financial information exception, the FCRA
will return to its original restrictions on creditors considering, in
connection with credit eligibility determinations, certain medical
information related to consumers' medical debts.
The final rule is also removing the financial information exception
for expenses, assets, and collateral and related examples at current
Sec. 1022.30(d). As discussed in more detail in part IV.B.2, Medical
Information Related to Expenses, Assets, and Collateral, the CFPB has
determined that the financial information exception for a creditor to
consider medical information relating to a consumer's expenses, assets,
and collateral is also not warranted to protect legitimate operational,
transactional, risk, or consumer needs and is not consistent with the
intent of the creditor prohibition to restrict the use of medical
information for inappropriate purposes as required under FCRA section
604(g)(5).
As discussed in more detail in part IV.B.3, Medical Information
Related to Income, Benefits, or the Purpose of the Loan, the CFPB is
retaining certain elements of the financial information exception
related to income, benefits, and the purpose of the loan in current
Sec. 1022.30(d) by moving relevant provisions to the list of specific
exceptions to the creditor prohibition at Sec. 1022.30(e)(1)(x), with
technical edits for renumbering, and is finalizing proposed Sec.
1022.30(e)(7) (Example 7) which is an example that illustrates a use of
medical information related to long-term disability income.
This final rule is also modifying the text of proposed Sec.
1022.30(e)(1)(x)(A) to add a new provision at final Sec.
1022.30(e)(1)(x)(A)(1), as to medical information included in the
transaction information of an account for a consumer financial product
or service described in 12 CFR 1033.111(b)(1) through (3), and accessed
with the consumer's authorization. As discussed in more detail in part
VI.A, Consumer-Authorized Transaction History, the CFPB has determined
that including medical information included in the transaction history
of a consumer's account in this exception is necessary and appropriate
to protect legitimate operational, transactional, risk, consumer, and
other needs, including permitting actions necessary for administrative
verification purposes, consistent with FCRA's intent to restrict the
use of medical information for inappropriate purposes.
Limits on a Consumer Reporting Agency's Disclosure of Medical Debt
Information
Under the final rule, new Sec. 1022.38 to subpart D addresses how
a consumer reporting agency's medical debt information reporting
responsibilities are impacted when creditors are prohibited from
obtaining or using medical debt information. As discussed in more
detail in part IV.C, Limits on a Consumer Reporting Agency's Disclosure
of Medical Debt Information, final Sec. 1022.38 provides that a
consumer reporting agency is permitted to include medical debt
information in a consumer report furnished to a creditor for credit
eligibility purposes only if the following criteria are met: (1) the
consumer reporting agency has reason to believe the creditor intends to
use the medical debt information in a manner not prohibited by Sec.
1022.30; and (2) the

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consumer reporting agency has reason to believe the creditor is not
otherwise legally prohibited from obtaining or using the medical debt
information, including by a State law that prohibits a creditor from
obtaining or using medical debt information. The CFPB has determined
that a creditor who is prohibited from obtaining or using medical debt
information does not have a permissible purpose for a consumer report
containing medical debt information. The CFPB has also determined that
limiting the circumstances under which consumer reporting agencies may
furnish medical debt information is necessary or appropriate to
administer and carry out the purposes and objectives of the FCRA to
protect consumers' privacy, and to prevent evasions or to facilitate
compliance.
Example To Comply With Applicable Requirements of Local, State, or
Federal Laws
The CFPB is finalizing a specific example for obtaining and using
medical information as proposed in new Sec. 1022.30(e)(6) (Example 6)
concerning the ability-to-repay or pay requirements in Regulation Z
with respect to mortgages and credit card accounts, with one
clarification as discussed below. The CFPB has determined that Example
6 does not conflict with the ability-to-repay or pay requirements in
Regulation Z and provides sufficient information for how creditors may
comply with both the ability-to-repay or pay requirements in Regulation
Z and the changes in this final rule with respect to use of medical
information. The CFPB has determined it would not be necessary or
appropriate to protect legitimate operational, transactional, risk,
consumer, and other needs, including permitting actions necessary for
administrative verification purposes, nor consistent with Congress's
intent to restrict the use of medical information for inappropriate
purposes, for a creditor or card issuer under Sec. 1022.30(e)(1)(ii)
to use medical information contained in a consumer report in order to
comply with the applicable laws because a creditor or card issuer can
comply with the applicable laws using the information provided by the
consumer, including any medical information received from the consumer
on the application in response to a general inquiry about debts or
obligations.
The final rule revises Example 6 from the proposal, however, to
make clear that this example only relates to the exception under Sec.
1022.30(e)(1)(ii), and a creditor or card issuer may obtain and use
medical information for purposes of Regulation Z's ability-to-repay or
pay determinations pursuant to other exceptions in Sec. 1022.30(e), as
applicable. With respect to the ability-to-repay requirements in
Regulation Z Sec. 1026.43(c), final Example 6 also contains additional
information on the interplay between the ability-to-repay requirement
in Regulation Z Sec. 1026.43(c) and final Sec. 1022.30(e)(1)(ii).
Effective Date
The final rule will take effect sixty days after the date the rule
is published in the Federal Register.

B. Market Background

Unique Characteristics of Medical Debt in the United States
A significant number of Americans have medical debt.\14\ According
to one nationally representative survey, in 2022 around 41 percent of
adults stated that they had some kind of medical debt, including debt
that they were unable to pay, that was on credit cards, that was being
paid over time, directly to a provider, or that they owed to family
members, or to a bank, collection agency, or other lender.\15\
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\14\ For more information about medical debt in the United
States, including population disparities, impacts on consumers, and
COVID-19 impacts, see Consumer Fin. Prot. Bureau, Medical Debt
Burden in the United States (Feb. 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf">https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf</a>.
\15\ Lunna Lopes et al., Kaiser Fam. Found., Health Care Debt In
The U.S.: The Broad Consequences Of Medical And Dental Bills (June
16, 2022), <a href="https://www.kff.org/report-section/kff-health-care-debt-survey-main-findings/">https://www.kff.org/report-section/kff-health-care-debt-survey-main-findings/</a> (reporting results of 2022 Kaiser Family
Foundation Health Care Debt Survey, which polled 2,375 adults).
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Several characteristics of medical debt pose special risks to
consumers and distinguish it from other types of debt.\16\ The need for
medical care can be unexpected,\17\ and medical debt often results from
bills for a one-time or short-term medical expense due to an unforeseen
event such as an accident or sudden illness.\18\ Consumers are rarely
informed of the costs of medical treatment in advance, and because of
price opacity and an often immediate need for medical care, consumers
have little or no ability to ``shop around.'' \19\ Americans that live
in rural communities may also experience limited choices when trying to
access health care,\20\ which may impact the amount of their medical
debt in ways that are not reflective of their other debts.
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\16\ See generally Consumer Fin. Prot. Bureau, Bulletin 2022-01:
Medical Debt Collection and Consumer Reporting Requirements in
Connection with the No Surprises Act, 87 FR 3025 (Jan. 20, 2022),
<a href="https://www.govinfo.gov/content/pkg/FR-2022-01-20/pdf/2022-01012.pdf">https://www.govinfo.gov/content/pkg/FR-2022-01-20/pdf/2022-01012.pdf</a>; Consumer Fin. Prot. Bureau, Consumer credit reports: A
study of medical and non-medical collections, at 15-16, 38-42 (Dec.
2014), <a href="https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf">https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf</a>.
\17\ See Consumer Fin. Prot. Bureau, Complaint Bulletin: Medical
billing and collection issues described in consumer complaints, at 7
(Apr. 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_complaint-bulletin-medical-billing_report_2022-04.pdf">https://files.consumerfinance.gov/f/documents/cfpb_complaint-bulletin-medical-billing_report_2022-04.pdf</a>
(describing consumer complaints received by the CFPB about
unexpected medical care).
\18\ See Lunna Lopes et al., Kaiser Fam. Found., Health Care
Debt in the U.S.: The Broad Consequences of Medical and Dental Bills
(June 16, 2022), <a href="https://www.kff.org/report-section/kff-health-care-debt-survey-main-findings/">https://www.kff.org/report-section/kff-health-care-debt-survey-main-findings/</a> (reporting survey results that 7 in 10
adults with health care debt say the debt arose from bills for a
one-time or short-term medical expense). But see Sara R. Collins et
al., Commonwealth Fund, Paying for It: How Health Care Costs and
Medical Debt Are Making Americans Sicker and Poorer--Findings from
the Commonwealth Fund 2023 Health Care Affordability Survey (Oct.
2023), <a href="https://www.commonwealthfund.org/publications/surveys/2023/oct/paying-for-it-costs-debt-americans-sicker-poorer-2023-affordability-survey">https://www.commonwealthfund.org/publications/surveys/2023/oct/paying-for-it-costs-debt-americans-sicker-poorer-2023-affordability-survey</a> (about half of adults with medical debt say it
is from treatment received for an ongoing condition).
\19\ Consumer Fin. Prot. Bureau, Bulletin 2022-01: Medical Debt
Collection and Consumer Reporting Requirements in Connection with
the No Surprises Act, 87 FR 3025 (Jan. 20, 2022), <a href="https://www.govinfo.gov/content/pkg/FR-2022-01-20/pdf/2022-01012.pdf">https://www.govinfo.gov/content/pkg/FR-2022-01-20/pdf/2022-01012.pdf</a>. See
also Consumer Fin. Prot. Bureau, Complaint Bulletin: Medical billing
and collection issues described in consumer complaints, at 7-8 (Apr.
20, 2022), <a href="https://www.consumerfinance.gov/data-research/research-reports/complaint-bulletin-medical-billing-and-collection-issues-described-in-consumer-complaints/">https://www.consumerfinance.gov/data-research/research-reports/complaint-bulletin-medical-billing-and-collection-issues-described-in-consumer-complaints/</a> (detailing consumer complaints
received by the CFPB).
\20\ See, e.g., U.S. Gov't Acct. Off., Health Care Capsule:
Accessing Health Care in Rural America (May 2023), <a href="https://www.gao.gov/assets/gao-23-106651.pdf">https://www.gao.gov/assets/gao-23-106651.pdf</a> (generally describing health
care access challenges for rural populations).
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There are significant concerns with the accuracy of medical bills.
For example, 43 percent of all adults and 53 percent of adults with
medical debt in a nationally representative survey believed they had
received a medical or dental bill that included an error.\21\ While the
survey found that most of these adults had taken some action to dispute
the mistake, 51 percent reported that they either did not dispute the
bill or were unable to successfully resolve their dispute. This may be
because medical billing and collections can be complicated and
confusing since a consumer may have difficulty determining whether the
amount is covered by insurance or a hospital's financial assistance
program (if

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applicable) and, if so, whether and to what extent the amount was
already paid or reduced.\22\ Also some health care providers and debt
collectors exploit these complications and charge inflated or unearned
bills.\23\
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\21\ See, e.g., Karen Pollitz & Kaye Pestaina, Kaiser Fam.
Found., Could Consumer Assistance Be Helpful to People Facing
Medical Debt? (July 14, 2022), <a href="https://www.kff.org/policy-watch/could-consumer-assistance-be-helpful-to-people-facing-medical-debt/">https://www.kff.org/policy-watch/could-consumer-assistance-be-helpful-to-people-facing-medical-debt/</a>
(analyzing results of 2022 Kaiser Family Foundation Health Care Debt
Survey).
\22\ See, e.g., Consumer Fin. Prot. Bureau, Medical Debt Burden
in the United States, at 9-14 (Feb. 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf">https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf</a> (describing issues with medical
billing and collections practices); Consumer Fin. Prot. Bureau,
Complaint Bulletin: Medical billing and collection issues described
in consumer complaints (Apr. 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_complaint-bulletin-medical-billing_report_2022-04.pdf">https://files.consumerfinance.gov/f/documents/cfpb_complaint-bulletin-medical-billing_report_2022-04.pdf</a>.
\23\ Press Release, U.S. Dep't of Just., Hospital Chain Will Pay
Over $260 Million to Resolve False Billing and Kickback Allegations;
One Subsidiary Agrees to Plead Guilty (Sept. 25, 2018), <a href="https://www.justice.gov/opa/pr/hospital-chain-will-pay-over-260-million-resolve-false-billing-and-kickback-allegations-one">https://www.justice.gov/opa/pr/hospital-chain-will-pay-over-260-million-resolve-false-billing-and-kickback-allegations-one</a>; Press Release,
U.S. Atty's Off. for C.D. Cal., Prime Healthcare Services and its
CEO Agree to Pay $65 Million to Settle Medicare Overbilling
Allegations at 14 California Hospitals (Aug. 3, 2018), <a href="https://www.justice.gov/usao-cdca/pr/prime-healthcare-services-and-its-ceo-agree-pay-65-million-settle-medicare-overbilling">https://www.justice.gov/usao-cdca/pr/prime-healthcare-services-and-its-ceo-agree-pay-65-million-settle-medicare-overbilling</a>; Press Release,
Off. of Pub. Affairs, U.S. Dep't of Just., Clinical Laboratory and
Its Owner Agree to Pay an Additional $5.7 Million to Resolve
Outstanding Judgement for Billing Medicare for Inflated Mileage-
Based Lab Technician Travel Allowance Fees (Aug. 1, 2023), <a href="https://www.justice.gov/opa/pr/clinical-laboratory-and-its-owner-agree-pay-additional-57-million-resolve-outstanding">https://www.justice.gov/opa/pr/clinical-laboratory-and-its-owner-agree-pay-additional-57-million-resolve-outstanding</a>; Press Release, Off. of
Pub. Affairs, U.S. Dep't of Just., Physician Partners of America to
Pay $24.5 Million to Settle Allegations of Unnecessary Testing,
Improper Remuneration to Physicians and a False Statement in
Connection with COVID-19 Relief Funds (Apr. 12, 2022), <a href="https://www.justice.gov/opa/pr/physician-partners-america-pay-245-million-settle-allegations-unnecessary-testing-improper">https://www.justice.gov/opa/pr/physician-partners-america-pay-245-million-settle-allegations-unnecessary-testing-improper</a>; Erica Zucco,
Providence will refund medical bills for thousands of patients after
agreement with attorney general, King 5 News (Feb. 1, 2024), <a href="https://www.king5.com/article/news/health/providence-forgive-137-million-medical-payments-refund-20m-patients-after-agreement/281-3063dd66-ab54-413a-893a-73463f213a5b">https://www.king5.com/article/news/health/providence-forgive-137-million-medical-payments-refund-20m-patients-after-agreement/281-3063dd66-ab54-413a-893a-73463f213a5b</a>; Off. of the Att'y Gen. of Va., Common
Health Care Fraud Schemes, <a href="https://www.oag.state.va.us/contact-us/frequently-asked-questions?id=511">https://www.oag.state.va.us/contact-us/frequently-asked-questions?id=511</a> (last visited Dec. 2, 2024).
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Medical Debt and Consumer Reporting
Information about medical debt is used in different ways in the
financial system. Consumer reporting agencies play a key role in
assembling and evaluating consumer credit and other information on
consumers \24\--including information about a consumer's medical debt--
and in providing consumer reports to other companies for employment,
housing, insurance, and other decisions.\25\ Medical debt information
on a consumer report can increase the cost and reduce the availability
of credit, and can even reduce access to employment and housing.\26\
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\24\ See 15 U.S.C. 1681(a)(3).
\25\ See Consumer Fin. Prot. Bureau, Medical Debt Burden in the
United States, at 26 n.117 (Feb. 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf">https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf</a>.
\26\ See Consumer Fin. Prot. Bureau, Data Point: Consumer Credit
and the Removal of Medical Collections from Credit Reports, at 2
(Apr. 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-removal-medical-collections-from-credit-reports_2023-04.pdf">https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-removal-medical-collections-from-credit-reports_2023-04.pdf</a>.
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Generally, information about a medical debt on a consumer report
appears as a collection tradeline. After a medical debt has been placed
by the creditor in collections status because the debt has been unpaid
for a period of time, the medical debt may be furnished as a
collections tradeline to consumer reporting agencies by a debt
collector, including a debt collector who collects on behalf of the
original creditor for a fee, as well as a debt collector who purchases
overdue accounts outright from the original creditor (also known as a
debt buyer).\27\ Such tradelines are referred to as medical collections
or medical collections tradelines. Research by the CFPB has found that
nearly all medical collections furnishing is performed by debt
collectors, rather than by health care providers (as original
creditors) themselves.\28\ However, a debt collector may have limited
access to an original creditor's system of records, which may
contribute to higher dispute rates for collections tradelines compared
to other components of consumer reports.\29\ When debt collectors
furnish to consumer reporting agencies, they generally report to one or
more of the three largest nationwide consumer reporting agencies
(NCRAs). Debt collections tradelines may persist on consumer reports
for up to seven years; \30\ however, many collections tradelines are
removed well in advance of seven years.\31\
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\27\ Payments made to medical balances not yet sent to
collections generally are not furnished to consumer reporting
agencies.
\28\ Consumer Fin. Prot. Bureau, Market Snapshot: An Update on
Third Party Debt Collections Tradelines Reporting, at 5 (Feb. 2023),
<a href="https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf">https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf</a>.
\29\ Id.
\30\ 15 U.S.C. 1681c(a)(4).
\31\ Consumer Fin. Prot. Bureau, Consumer credit reports: A
study of medical and non-medical collections, at 27 (Dec. 2014),
<a href="https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf">https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf</a>.
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Historically, medical debts have been the most common type of debt
on consumer reports at both the consumer-report and individual
collections tradeline level. The CFPB estimated that medical
collections accounted for 57 percent of all collections tradelines in
Q1 2022 and 58 percent in Q2 2018.\32\ When debt collectors acting as
agents or assignees of health care providers furnish information about
medical collections, they must notify the consumer reporting agency
that they are furnishing medical information.\33\ The FCRA generally
prohibits consumer reporting agencies from reporting to third parties
the name, address, and telephone number of the health care provider for
any account identified as from a medical information furnisher that has
notified the consumer reporting agency of its status, unless that
information is restricted or coded such that persons other than the
consumer cannot identify or infer the specific provider or the nature
of the medical services provided.\34\ Nevertheless, despite the coding
of information on the consumer reports, a consumer report user could
infer from the coding that certain debts relate to the provision of
health care. Like with medical bills, consumers often find errors with
medical collections tradeline information on their consumer reports. A
CFPB analysis found that almost 6 percent of medical collections in its
data were flagged as having been disputed at some point, almost three
times higher than the rate of dispute flags on credit cards and seven
times the rate of dispute flags on student loans.\35\
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\32\ Consumer Fin. Prot. Bureau, Market Snapshot: An Update on
Third Party Debt Collections Tradelines Reporting, at 16-17 (Feb.
2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf">https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf</a>.
\33\ See 15 U.S.C. 1681s-2(a)(9).
\34\ 15 U.S.C. 1681c(a)(6); see 15 U.S.C. 1681s-2(a)(9)
(requiring medical information furnishers to notify consumer
reporting agencies of such status).
\35\ Consumer Fin. Prot. Bureau, Paid and Low-Balance Medical
Collections on Consumer Credit Reports (July 27, 2022), <a href="https://www.consumerfinance.gov/data-research/research-reports/paid-and-low-balance-medical-collections-on-consumer-credit-reports/">https://www.consumerfinance.gov/data-research/research-reports/paid-and-low-balance-medical-collections-on-consumer-credit-reports/</a>.
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A 2022 review of consumer complaints submitted to the CFPB found
that many consumers complaining of disputed debt collection attempts
reported first learning of the debt from viewing their consumer report.
Consumers expressed concern with inaccurate information leading to a
decrease in their credit score. Some consumers reported paying debt
they did not believe they owed in order to have the tradeline removed
from their consumer report.\36\ A 2024 review of consumer complaints
found that consumers complain that debt collectors

[[Page 3280]]

continue to collect on and report medical bills to credit reporting
agencies even after the consumer has shown that they do not owe the
amount.\37\
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\36\ Consumer Fin. Prot. Bureau, Complaint Bulletin: Medical
billing and collection issues described in consumer complaints (Apr.
2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_complaint-bulletin-medical-billing_report_2022-04.pdf">https://files.consumerfinance.gov/f/documents/cfpb_complaint-bulletin-medical-billing_report_2022-04.pdf</a>.
\37\ Consumer Fin. Prot. Bureau, Fair Debt Collection Practices
Act: CFPB Annual Report 2024 (Sept. 2024), <a href="https://files.consumerfinance.gov/f/documents/cfpb_fdcpa-2024-annual-report_2024-09.pdf">https://files.consumerfinance.gov/f/documents/cfpb_fdcpa-2024-annual-report_2024-09.pdf</a>.
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Some of the errors in medical collections tradelines could be due
to debt collection furnishing practices. Some medical debt collectors
previously used debt collection furnishing to engage in a practice
known as ``debt parking,'' or ``passive collection.'' Debt collectors
would report a debt to a consumer reporting agency, then wait for the
consumer to notice the tradeline when, for example, applying for
credit. The consumer may then pay the debt, possibly without raising
any dispute as to any errors in order to access needed credit. The CFPB
issued final rules on debt collection, which took effect November 30,
2021, that addressed this practice by requiring a debt collector to
take certain actions intended to convey information about the debt to
the consumer before furnishing information on that debt to a consumer
reporting agency.\38\ Despite the protections offered by these rules,
CFPB investigations indicate that some medical debt collectors may
still be attempting to collect on medical debts that were not
substantiated after consumers disputed the validity of the debts.\39\
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\38\ See 12 CFR 1006.30(a).
\39\ See Consumer Fin. Prot. Bureau, CFPB Takes Action Against
Phoenix Financial Services for Illegal Medical Debt Collection and
Credit Reporting Practices (June 8, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against-phoenix-financial-services-for-illegal-medical-debt-collection-and-credit-reporting-practices/">https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against-phoenix-financial-services-for-illegal-medical-debt-collection-and-credit-reporting-practices/</a>; Consumer Fin. Prot. Bureau, CFPB Shuts
Down Commonwealth Financial Systems for Illegal Debt Collection
Practices (Dec. 15, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-shuts-down-commonwealth-financial-systems-for-illegal-debt-collection-practices/">https://www.consumerfinance.gov/about-us/newsroom/cfpb-shuts-down-commonwealth-financial-systems-for-illegal-debt-collection-practices/</a>.
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Recent reporting changes announced by the NCRAs in 2022 and 2023
have begun to reduce the amount of medical debt reported on consumer
reports and benefit some consumers. Specifically, the NCRAs announced
that, starting on July 1, 2022, unpaid medical collections will not
appear on a consumer's report for up to one year (an increase from 180
days), and paid medical collections will no longer be on consumer
reports.\40\ In April 2023, the NCRAs also announced that medical
collections with initial balances below $500 had been removed from
consumer reports.\41\
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\40\ Equifax, First Changes to Reporting of Medical Collection
Debt Roll Out July 1, 2022 (July 1, 2022), <a href="https://www.equifax.com/newsroom/all-news/-/story/first-changes-to-reporting-of-medical-collection-debt-roll-out-july-1-2022">https://www.equifax.com/newsroom/all-news/-/story/first-changes-to-reporting-of-medical-collection-debt-roll-out-july-1-2022</a>; Experian, First Changes to
Reporting of Medical Collection Debt Roll Out July 1, 2022 (July 1,
2022), <a href="https://www.experianplc.com/newsroom/press-releases/2022/first-changes-to-reporting-of-medical-collection-debt-roll-out-july-1-2022">https://www.experianplc.com/newsroom/press-releases/2022/first-changes-to-reporting-of-medical-collection-debt-roll-out-july-1-2022</a>; TransUnion, First Changes to Reporting of Medical Collection
Debt Roll Out July 1, 2022 (July 1, 2022), <a href="https://newsroom.transunion.com/first-changes-to-reporting-of-medical-collection-debt-roll-out-july-1-2022/">https://newsroom.transunion.com/first-changes-to-reporting-of-medical-collection-debt-roll-out-july-1-2022/</a>.
\41\ PR Newswire, Equifax, Experian and TransUnion Remove
Medical Collections Debt Under $500 From U.S. Credit Reports (Apr.
11, 2023), <a href="https://www.prnewswire.com/news-releases/equifax-experian-and-transunion-remove-medical-collections-debt-under-500-from-us-credit-reports-301793769.html">https://www.prnewswire.com/news-releases/equifax-experian-and-transunion-remove-medical-collections-debt-under-500-from-us-credit-reports-301793769.html</a>.
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The CFPB conducted an analysis of the impacts of the NCRAs' medical
debt reporting changes through June 2023.\42\ The CFPB found that after
these changes, 15 million Americans still have $49 billion in medical
bills on their consumer reports. Because the medical collections
tradelines removed by the NCRAs were those with low balances, the total
dollar balances of medical collections on consumer reports fell by only
38 percent nationwide.
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\42\ Ryan Sandler & Zachary Blizard, Consumer Fin. Prot. Bureau,
Recent Changes in Medical Collections on Consumer Credit Records
Data Point, at 3-4, 17 (Mar. 2024), <a href="https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf">https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf</a>.
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Several States and at least one Federal agency have also enacted
policies that limit the inclusion of medical debt on consumer
reports.\43\ For example, Colorado \44\ and New York \45\ each passed
laws in 2023 prohibiting medical debts from appearing on consumer
reports. California, Connecticut, Minnesota, New Jersey, Illinois, and
Virginia followed suit earlier this year.\46\ Maine, in 2019, passed a
law requiring consumer reporting agencies to remove medical debt upon
receiving reasonable evidence that the debt has been settled or
paid.\47\ In 2022, the U.S. Department of Veterans Affairs (VA)
finalized a rule providing that the VA will report medical debt to
consumer reporting agencies only if all other debt collection efforts
have been exhausted, the individual is not catastrophically disabled or
entitled to free medical care from the VA, and the outstanding debt is
over $25.\48\
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\43\ In 2022, the CFPB issued an interpretive rule clarifying
that because FCRA's express preemption provisions have a narrow and
targeted scope, States retain substantial flexibility to pass laws
involving consumer reporting to reflect emerging problems affecting
their local economies and citizens, including problems related to
medical debt. Consumer Fin. Prot. Bureau, The Fair Credit Reporting
Act's Limited Preemption of State Laws, 87 FR 41042 (July 11, 2022).
\44\ Colo. Rev. Stat. section 5-18-109.
\45\ N.Y. Pub. Health Law art. 49-A.
\46\ 2024 Calif. SB 1061; 2024 Conn. Act 24-6; 2024 Minn. Ch.
332C; 2024 New Jersey A3681; 2024 Ill. Pub. Act 103-0648; 2024 Va.
Acts ch. 751.
\47\ Consumer Data Indus. Ass'n v. Frey, 26 F.4th 1 (1st Cir.
2022), cert. denied, 143 S. Ct. 777 (2023).
\48\ U.S. Dep't of Veterans Affairs, Threshold for Reporting VA
Debts to Consumer Reporting Agencies, 87 FR 5693 (Feb. 2, 2022).
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Current Use of Medical Debt in Credit Scoring and Underwriting
Collections tradelines are considered negative information and can
lower consumers' credit scores. A 2014 CFPB analysis found that the
presence of medical collections tradelines on consumer reports is less
predictive of future defaults or serious delinquencies than the
presence of nonmedical collections tradelines, and that consumers with
paid medical debts have delinquency rates well below those of consumers
with the same credit scores whose medical debts were mostly unpaid.\49\
Following the CFPB's publication of its research and in recognition of
the limited predictive value of medical bills, major credit score
providers FICO and VantageScore made changes so that newer versions of
their credit scoring models differentiate between medical and
nonmedical collections tradelines, give less weight to unpaid medical
collections tradelines than to other collections tradelines, and ignore
paid medical collections of any kind.\50\ In January 2023, VantageScore
implemented changes to VantageScore models 3.0 and 4.0 to ignore all
medical collections tradelines.\51\
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\49\ Kenneth P. Brevoort & Michelle Kambara, Consumer Fin. Prot.
Bureau, Data point: Medical debt and credit scores (May 2014),
<a href="https://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit-scores.pdf">https://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit-scores.pdf</a>.
\50\ See Ethan Dornhelm, The Impact of Medical Debt on FICO
Scores, FICO Blog (July 13, 2015), <a href="https://www.fico.com/blogs/impact-medical-debt-ficor-scores">https://www.fico.com/blogs/impact-medical-debt-ficor-scores</a>; VantageScore, How will changes in
how medical collection accounts get reported impact credit scores?
(July 5, 2022), <a href="https://www.vantagescore.com/how-will-changes-in-how-medical-collection-accounts-get-reported-impact-credit-scores/">https://www.vantagescore.com/how-will-changes-in-how-medical-collection-accounts-get-reported-impact-credit-scores/</a>.
\51\ See AnnaMaria Andriotis, Major Credit-Score Provider to
Exclude Medical Debts, Wall St. J. (Aug. 10, 2022), <a href="https://www.wsj.com/articles/major-credit-score-provider-to-exclude-medical-debts-11660102729">https://www.wsj.com/articles/major-credit-score-provider-to-exclude-medical-debts-11660102729</a> (VantageScore CEO quoted as saying that having
medical debt is not necessarily reflective of a consumer's ability
to pay back a loan).
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Older FICO scoring models that do not differentiate between medical
and nonmedical collections tradelines, however, remain common in the
market. For example, while the Government-Sponsored Enterprises (GSEs),
the Federal National Mortgage Association (Fannie Mae) and the Federal
Home Loan Mortgage Corporation (Freddie Mac), and the Federal Housing

[[Page 3281]]

Administration generally do not consider medical debt in their credit
risk assessments within their respective automated underwriting
systems,\52\ the GSEs require creditors to provide credit scores
derived from the older Classic FICO \53\ for each borrower on a loan
that the GSEs purchase to assess eligibility for certain loan products
and make certain pricing decisions.\54\ The GSEs and the Federal
Housing Finance Agency (FHFA) announced in 2022 that they had validated
and approved two of the new credit score models that lessen the weight
of or do not consider medical collections, but that transition is not
expected to occur until the fourth quarter of 2025.\55\
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\52\ See Fed. Nat'l Mortg. Ass'n, Single Family Selling Guide,
B3-2-03 (2021), <a href="https://selling-guide.fanniemae.com/#Public.20Records.2C.20Foreclosures.2C.20and.20Collection.20Accounts">https://selling-guide.fanniemae.com/#Public.20Records.2C.20Foreclosures.2C.20and.20Collection.20Accounts</a>
(noting that ``[c]ollection accounts reported as medical collections
are not used in the DU risk assessment''); Fed. Home Loan Mortg.
Corp., The Single-Family Seller/Servicer Guide, 5201.1 (2022),
<a href="https://guide.freddiemac.com/app/guide/section/5201.1">https://guide.freddiemac.com/app/guide/section/5201.1</a>; U.S. Dep't of
Hous. & Urban Dev., Single Family Housing Policy Handbook, 4000.1
(2021), <a href="https://www.hud.gov/sites/dfiles/OCHCO/documents/4000.1hsgh-102021.pdf">https://www.hud.gov/sites/dfiles/OCHCO/documents/4000.1hsgh-102021.pdf</a>.
\53\ The Classic FICO score is comprised of the following
models: Equifax Beacon[supreg] 5.0, Experian/Fair Isaac Risk Model
V2SM, and TransUnion FICO[supreg] Risk Score, Classic 04.
\54\ See, e.g., Fed. Nat'l Mortg. Ass'n, Single Family Selling
Guide (Oct. 5, 2022), <a href="https://selling-guide.fanniemae.com/sel/b3-5.1-01/general-requirements-credit-scores">https://selling-guide.fanniemae.com/sel/b3-5.1-01/general-requirements-credit-scores</a>.
\55\ Fed. Hous. Fin. Agency, FHFA Announces Key Updates for
Implementation of Enterprise Credit Score Requirements (Feb. 29,
2024), <a href="https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-Key-Updates-for-Implementation-of-Enterprise-Credit-Score-Requirements.aspx">https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-Key-Updates-for-Implementation-of-Enterprise-Credit-Score-Requirements.aspx</a>.
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II. The Proposal and Other Procedural Background

A. Small Business Advisory Review Panel

Pursuant to the Small Business Regulatory Enforcement Fairness Act
of 1996 (SBREFA),\56\ the CFPB issued its Outline of Proposals and
Alternatives under Consideration (Outline or SBREFA Outline).\57\ The
SBREFA Outline addressed a number of consumer reporting topics under
the FCRA, including medical debt collections information proposals
under consideration. The CFPB convened a SBREFA Panel on October 16,
2023, and held Panel meetings on October 18 and 19, 2023.\58\
Representatives from 16 small businesses were selected as small entity
representatives for this SBREFA process. These entities represented
small businesses that the CFPB determined would likely be directly
affected by one or more of the proposals under consideration. On
December 15, 2023, the Panel completed the Final Report of the Small
Business Review Panel on the CFPB's Proposals and Alternatives Under
Consideration for the Consumer Reporting Rulemaking (Panel Report or
SBREFA Report).\59\ In addition to the SBREFA Panel and Panel Report,
the CFPB also invited feedback on the proposals under consideration
from other stakeholders, including small stakeholders who were not
small entity representatives.\60\ The CFPB considered the feedback
related to the medical debt collection information proposals from small
entity representatives and other stakeholders, as well as the findings
and recommendations of the Panel, in preparing the proposed rule and
this final rule.
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\56\ Pub. L. 104-121, 110 Stat. 857 (1996).
\57\ Consumer Fin. Prot. Bureau, Small Business Advisory Review
Panel for Consumer Reporting Rulemaking Outline of Proposals and
Alternatives Under Consideration (Sept. 15, 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_consumer-reporting-rule-sbrefa_outline-of-proposals.pdf">https://files.consumerfinance.gov/f/documents/cfpb_consumer-reporting-rule-sbrefa_outline-of-proposals.pdf</a>.
\58\ The Panel was comprised of a representative from the CFPB,
the Chief Counsel for Advocacy of the Small Business Administration
(Office of Advocacy), and a representative from the Office of
Information and Regulatory Affairs (OIRA) in the Office of
Management and Budget.
\59\ Consumer Fin. Prot. Bureau, Final Report of the Small
Business Review Panel on the CFPB's Proposals and Alternatives Under
Consideration for the Consumer Reporting Rulemaking (Dec. 15, 2023),
<a href="https://files.consumerfinance.gov/f/documents/cfpb_sbrefa-final-report_consumer-reporting-rulemaking_2024-01.pdf">https://files.consumerfinance.gov/f/documents/cfpb_sbrefa-final-report_consumer-reporting-rulemaking_2024-01.pdf</a>. The CFPB considers
the Panel's findings in its final regulatory flexibility analysis,
as set out in part VIII.B below.
\60\ See SBREFA Outline at 5.
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B. Other Stakeholder Outreach

The CFPB has long been engaged in outreach and research related to
medical debt information in the consumer reporting ecosystem. In 2013,
the CFPB and the Federal Trade Commission (FTC) jointly hosted a public
roundtable for industry and other stakeholders on the integrity of
record keeping by debt collectors, debt buyers, and original creditors.
Participants acknowledged that record keeping practices may introduce
variability or inaccuracy to the consumer reporting systems.\61\ In
December 2014, following the CFPB's publication of its research report,
Data Point: Medical Debt and Credit Scores,\62\ the CFPB issued a study
of medical and nonmedical collections tradelines on consumer reports
that assessed the furnishing practices of debt collectors and debt
buyers, the incidence and type of collections tradelines on consumer
reports, and differences between medical and nonmedical debt
reporting.\63\ The CFPB has continued to monitor the incidence of
medical debt on consumer reports and released several other market
analyses and research reports on medical debt collection and consumer
reporting between 2019 and 2024.\64\
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\61\ Fed. Trade Comm'n & Consumer Fin. Prot. Bureau, Roundtable
on Data Integrity in Debt Collection: Life of a Debt (2013), <a href="https://www.ftc.gov/news-events/events/2013/06/life-debt-data-integrity-debt-collection">https://www.ftc.gov/news-events/events/2013/06/life-debt-data-integrity-debt-collection</a>.
\62\ See Kenneth P. Brevoort & Michelle Kambara, Consumer Fin.
Prot. Bureau, Data point: Medical debt and credit scores (May 2014),
<a href="https://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit-scores.pdf">https://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit-scores.pdf</a>.
\63\ Consumer Fin. Prot. Bureau, Consumer credit reports: A
study of medical and non-medical collections (Dec. 2014), <a href="https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf">https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf</a>.
\64\ Consumer Fin. Prot. Bureau, Market Snapshot: Third-Party
Debt Collections Tradeline Reporting (July 2019), <a href="https://files.consumerfinance.gov/f/documents/201907_cfpb_third-party-debt-collections_report.pdf">https://files.consumerfinance.gov/f/documents/201907_cfpb_third-party-debt-collections_report.pdf</a>; Consumer Fin. Prot. Bureau, Market Snapshot:
An Update on Third-Party Debt Collections Tradeline Reporting (Feb.
2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf">https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf</a>; Ryan Sandler & Zachary Blizard, Consumer Fin. Prot. Bureau,
Recent Changes in Medical Collections on Consumer Credit Records
Data Point, at 3-4, 17 (Mar. 2024), <a href="https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf">https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf</a>.
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In developing this final rule and the proposed rule, the CFPB
consulted with staff from various Federal agencies to discuss aspects
of its proposal, in accordance with CFPA section 1022(b)(2)(B).
Specifically, the CFPB met with staff from the Board of Governors of
the Federal Reserve System, the Office of Comptroller of the Currency,
the Federal Deposit Insurance Corporation, the National Credit Union
Administration (NCUA), the FTC, the Department of Health and Human
Services, Department of Housing and Urban Development, the FHFA, the
Small Business Administration, the VA, and the Department of
Agriculture.

C. Summary of the Proposed Rule

On June 11, 2024, the CFPB issued a notice of proposed rulemaking
(NPRM) containing several proposed amendments to Regulation V, which
implements the FCRA, concerning medical information.\65\ The NPRM was
published in the Federal Register on June 18, 2024.\66\ The CFPB
proposed that the final rule, if adopted, would

[[Page 3282]]

take effect sixty days after the date it is published in the Federal
Register.
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\65\ Consumer Fin. Prot. Bureau, Prohibition on Creditors and
Consumer Reporting Agencies Concerning Medical Information
(Regulation V) (June 11, 2024), <a href="https://www.consumerfinance.gov/rules-policy/rules-under-development/prohibition-on-creditors-and-consumer-reporting-agencies-concerning-medical-information-regulation-v/">https://www.consumerfinance.gov/rules-policy/rules-under-development/prohibition-on-creditors-and-consumer-reporting-agencies-concerning-medical-information-regulation-v/</a>.
\66\ 89 FR 51682 (June 18, 2024).
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In the proposed rule, the CFPB discussed how Congress recognized
that a consumer's medical information is particularly sensitive,
warranting heightened privacy protections. The CFPB explained while
Congress did permit the Agencies to create exceptions, Congress
mandated that the Agencies determine that any exception be ``necessary
and appropriate to protect legitimate operational, transactional, risk,
consumer, and other needs'' and consistent with the congressional
intent ``to restrict the use of medical information for inappropriate
purposes.'' \67\ Based on the CFPB's understanding of how consumer
medical debt differs from other types of consumer debt and its uses in
credit underwriting, the CFPB preliminarily determined that creditors'
use of medical debt in underwriting does not meet that statutory
standard, as a result, does not warrant an exception to the medical
information privacy protections established by Congress.
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\67\ 15 U.S.C. 1681b(g)(5).
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The CFPB proposed targeted amendments to Regulation V that would:
(1) remove the financial information exception which broadly permits
creditors to obtain and use medical financial information (including
information about medical debt) in connection with credit eligibility
determinations, while retaining select elements of the exception
related to income, benefits, and loan purpose; and (2) limit the
circumstances under which consumer reporting agencies are permitted to
furnish medical debt information to creditors in connection with credit
eligibility determinations.
Under the proposed rule, a creditor would no longer be able to
obtain or use medical information related to debts, expenses, assets,
or collateral, in connection with a credit eligibility determination,
unless a specific exception otherwise applies to the creditor's
consideration of the medical information. And a consumer reporting
agency generally would be prohibited from furnishing to a creditor a
consumer report containing medical debt information in connection with
a credit eligibility determination.
The CFPB also explained in the proposed rule that as a result of
these changes, consumers' sensitive medical information would be
protected, and consumers would no longer be unfairly penalized in the
credit market for having medical debt. Consumers with and without
medical debt would have equal access to credit at comparable terms and
debt collectors would have less leverage over consumers to pressure
consumers into paying medical debts that they may not owe.
Comments
The CFPB received over 74,000 comments on the proposal.\68\ Around
2,000 of these comments were unique comment letters. These commenters
included: consumers; consumer advocacy groups; consumer reporting, debt
collection, and banking trade groups; economic research and taxpayer
advocacy groups; governmental entities, including members of Congress;
medical, dental and hospital practitioner groups; and patient advocacy
groups.
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\68\ See <a href="https://www.regulations.gov/document/CFPB-2024-0023-0001/comment">https://www.regulations.gov/document/CFPB-2024-0023-0001/comment</a>.
---------------------------------------------------------------------------

The remaining comments included some duplicate submissions (i.e.,
letters with the same content from the same commenter submitted through
multiple channels, or letters with the same content submitted by
multiple people on behalf of the same commenting organization) as well
as comments that appeared to be part of several comment submission
campaigns. Such comment campaigns typically advocated for or against
particular provisions in the proposal and urged additional changes.
The CFPB considered all the comments it received regarding the
proposal, made certain modifications, and is adopting the final rule as
described in part IV below.

III. Legal Authority

A. CFPA Section 1022(b)

Section 1022(b)(1) of the CFPA authorizes the CFPB to prescribe
rules ``as may be necessary or appropriate to enable the [CFPB] to
administer and carry out the purposes and objectives of the Federal
consumer financial laws, and to prevent evasions thereof.'' \69\ The
term ``Federal consumer financial laws'' includes the ``enumerated
consumer laws,'' which include the FCRA.\70\
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\69\ 12 U.S.C. 5512(b)(1).
\70\ See 12 U.S.C. 5481(12), (14).
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Section 1022(b)(2) of the CFPA prescribes certain standards for
rulemaking that the CFPB must follow in issuing rules under Federal
consumer financial laws.\71\ For a discussion of the CFPB's standards
for rulemaking under CFPA section 1022(b)(2), see part VII below.
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\71\ See 12 U.S.C. 5512(b)(2).
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B. Fair Credit Reporting Act

The FCRA was enacted in 1970 and was one of the world's first data
privacy laws. The law was enacted after growing public concern about
the lack of regulation concerning the widespread dissemination of
sensitive information about Americans. One of Congress's main purposes
in passing the FCRA was a respect for the consumer's right to
privacy.\72\ The law has been amended several times in the ensuing
years, including by the FACT Act.\73\ For example, Congress, through
the FACT Act, amended the FCRA to include additional protections for
consumer privacy, such as restricting the use and transfer of sensitive
medical information, enhancing the ability of consumers to combat
identity theft, increasing the accuracy of consumer reports, and
allowing consumers to exercise greater control regarding the type and
amount of marketing solicitations they receive.\74\
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\72\ FCRA section 602(a)(4) (15 U.S.C. 1681(a)(4)).
\73\ Pub. L. 108-159 (Dec. 4, 2003). Congress also enacted
specific protections for servicemembers and veterans, including with
respect to medical debt and credit monitoring. Economic Growth,
Regulatory Relief, and Consumer Protection Act, Pub. L. 115-174,
section 302, 132 Stat. 1296, 1333 (2018).
\74\ H. Rep. No. 108-396, at 1 (2003) (Conf. Rep.); S. Rep. No.
108-166, at 3 (2003) (Conf. Rep.).
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The FCRA governs the collection, assembly, and use of consumer
report information and provides the framework for the consumer
reporting system in the United States. The FCRA regulates the practices
of consumer reporting agencies that collect and compile consumer
information into consumer reports for use by creditors, insurance
companies, employers, landlords, and other entities in making
eligibility decisions affecting consumers. The FCRA also limits the
circumstances under which persons, such as creditors, may obtain and
use consumer report information from consumer reporting agencies.
The FCRA was enacted to (1) prevent the misuse of sensitive
consumer information by limiting recipients to those who have a
legitimate need for it; (2) improve the accuracy and integrity of
consumer reports; and (3) promote the efficiency of the nation's
banking and consumer credit systems.\75\ An important purpose of the
FCRA is to enable creditors to make appropriate credit decisions based
on accurate consumer reporting information that truly reflects whether
a consumer will repay a loan, while simultaneously

[[Page 3283]]

protecting the privacy of consumer data.\76\
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\75\ Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 52 (2007); see
also 15 U.S.C. 1681(a)(4) (recognizing ``a need to insure that
consumer reporting agencies exercise their grave responsibilities
with fairness, impartiality, and a respect for the consumer's right
to privacy'').
\76\ S. Rep. No. 91-517, at 1 (1969); see also Trans Union Corp.
v. FTC, 81 F.3d 228, 234 (D.C. Cir. 1996).
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FCRA Section 621(e)
Effective July 21, 2011, section 1088 of the CFPA made conforming
amendments to the FCRA, transferring rulemaking authority under much of
the FCRA, except with respect to sections 615(e) and 628 and with
respect to certain motor vehicle dealers, to the CFPB. Section 621(e)
of the FCRA authorizes the CFPB to issue regulations as ``necessary or
appropriate to administer and carry out the purposes and objectives of
[the FCRA], and to prevent evasions thereof or to facilitate compliance
therewith.'' \77\
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\77\ See CFPA section 1088(a)(10)(E) (15 U.S.C. 1681s(e)).
---------------------------------------------------------------------------

FCRA Section 604(g)(2) and (5)
Through the FACT Act, Congress added, in FCRA section 604(g)(2), a
broad new limitation on the ability of creditors to obtain or use
medical information pertaining to a consumer in connection with any
determination of the consumer's eligibility, or continued eligibility,
for credit.\78\ Congress also limited the circumstances under which
consumer reporting agencies could furnish consumer reports containing
medical information for credit, employment, or insurance purposes,\79\
and generally required consumer reporting agencies providing consumer
reports not to furnish contact information for medical information
furnishers--who were also required to identify themselves to consumer
reporting agencies \80\--without restrictions or coding ``that do not
identify, or provide information sufficient to infer, the specific
provider or the nature of such services, products, or devices to a
person other than the consumer.'' \81\ Congress also broadly defined
medical information in FCRA section 603(i) to include ``information or
data . . . created or derived from a health care provider or the
consumer, that relates to . . . the payment for the provision of health
care to an individual.'' \82\
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\78\ FACT Act sections 411(a), 412(f)(2), 117 Stat. 1999-2000,
2003 (15 U.S.C. 1681b(g)(2)). FCRA section 604(g)(2) provides:
``Except as permitted pursuant to paragraph (3)(C) or regulations
prescribed under paragraph (5)(A), a creditor shall not obtain or
use medical information (other than medical information treated in
the manner required under section 1681c(a)(6) of this title)
pertaining to a consumer in connection with any determination of the
consumer's eligibility, or continued eligibility, for credit.'' 15
U.S.C. 1681b(g)(2).
\79\ FACT Act section 411(a), 117 Stat. 2000 (15 U.S.C.
1681b(g)(1)).
\80\ FACT Act section 412(a), 117 Stat. 2002 (15 U.S.C. 1681s-
2(a)(9)).
\81\ FACT Act section 412(b), 117 Stat. 2002 (15 U.S.C.
1681c(a)(6)).
\82\ FACT Act section 411(c), 117 Stat. 2001 (15 U.S.C.
1681a(i)).
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Congress initially granted rulemaking authority to the Agencies to
make exceptions to the limitation on creditors obtaining and using
medical information that are necessary and appropriate to protect
legitimate operational, transactional, risk, consumer, and other needs
(including administrative verification purposes), consistent with
congressional intent to restrict the use of medical information for
inappropriate purposes.\83\ Pursuant to this authority, the Agencies
promulgated final rules that, among other things, implemented the
statute's general prohibition on creditors obtaining or using medical
information pertaining to a consumer in connection with any
determination of the consumer's eligibility, or continued eligibility,
for credit and created exceptions to the prohibition.\84\
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\83\ FACT Act section 411(a), 117 Stat. 2001 (15 U.S.C.
1681b(g)(5)(A)).
\84\ 70 FR 70664 (Nov. 22, 2005). See also interim final rules
published at 70 FR 33958 (June 10, 2005).
---------------------------------------------------------------------------

The Agencies' final rules contain the financial information
exception for creditors obtaining and using medical information in
credit eligibility determinations.\85\ The financial information
exception consists of a three-part test which allows creditors to use
medical information in connection with credit eligibility
determinations so long as (1) the information is the type of
information routinely used in making credit eligibility determinations;
(2) the creditor uses the information in a manner and to an extent no
less favorably than comparable nonmedical information; and (3) the
creditor does not take the consumer's physical, mental, or behavioral
health, condition or history, type of treatment, or prognosis into
account when making the determination. The Agencies stated that the
``three-part test strikes a balance between permitting creditors to
obtain and use certain medical information about consumers when
necessary and appropriate to satisfy prudent underwriting criteria and
to ensure that credit is extended in a safe and sound manner, while
restricting the use of medical information for inappropriate
purposes.'' \86\ Although the Agencies explained the boundaries of
their three-part test, and gave responses to commenters on various
examples, they did not provide evidence or reasoning to support the
main conclusion that an exception from a congressionally created legal
requirement was warranted, other than a single conclusory sentence in
the proposed rule stating that ``[a] creditor should not be prohibited
from obtaining or using information about a debt, for example, in
connection with making a credit decision, just because that debt
happens to be for medical products or services.'' \87\
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\85\ 70 FR 70664, 70667 (Nov. 22, 2005).
\86\ 69 FR 23380, 23384 (Apr. 28, 2004).
\87\ Id.
---------------------------------------------------------------------------

The Agencies' final rules also identified a limited number of other
particular purposes for which a creditor may use medical information in
connection with any determination of the consumer's eligibility, or
continued eligibility, for credit.\88\ For example, a creditor may use
medical information in credit eligibility determinations to comply with
applicable requirements of local, State, or Federal laws.\89\ The
Agencies found that this exception, and the other enumerated specific
exceptions, are necessary and appropriate to protect legitimate
operational, transactional, risk, consumer, and other needs (including
administrative verification purposes), and are consistent with the
congressional intent to restrict the use of medical information for
inappropriate purposes.\90\
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\88\ 70 FR 70664, 70668 (Nov. 22, 2005).
\89\ This exception is restated at Sec. 1022.30(e)(1)(ii).
\90\ 69 FR 23380, 23382 (Apr. 28, 2004).
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Congress (through the CFPA) transferred to the CFPB primary
regulatory authority for the FCRA.\91\ The CFPB restated the Agencies'
regulations as an interim final rule, with request for comment, on
December 21, 2011.\92\ On April 28, 2016, the CFPB finalized the
interim final rule without assessing or otherwise reconsidering the
policy decisions and justifications that served as the basis for the
regulations.\93\
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\91\ Title X of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, Pub. L. 111-203, section 1088, 124 Stat. 1376, 1955
(2010).
\92\ 76 FR 79308 (Dec. 21, 2011).
\93\ 81 FR 25323 (Apr. 28, 2016).
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As a result of the transfer of authority, FCRA section 604(g)(5)
now authorizes the CFPB to prescribe regulations to create exceptions
from the statutory prohibition on obtaining or using medical
information in connection with determinations of credit eligibility.
However, the CFPB must determine that such exceptions to the general
prohibition in FCRA section 604(g)(2) are necessary and appropriate to
protect legitimate operational, transactional, risk, consumer, and
other needs (including administrative verification purposes),
consistent with the

[[Page 3284]]

congressional intent to restrict the use of medical information for
inappropriate purposes.\94\ Because the CFPB has determined that a
regulatory exception for certain financial information is not necessary
and appropriate to protect legitimate operational, transactional, risk,
consumer, and other needs (including administrative verification
purposes), the CFPB is removing the exception. This ensures that only
exceptions that are necessary and appropriate, consistent with the
CFPB's rulemaking authority under FCRA section 604(g)(5), remain in
Sec. 1022.30.
---------------------------------------------------------------------------

\94\ 15 U.S.C. 1681b(g)(5).
---------------------------------------------------------------------------

FCRA Section 604(a) Permissible Purposes and Related Provisions
The FCRA protects consumer privacy in multiple ways, including by
clearly prohibiting certain uses of data and limiting the circumstances
under which consumer reporting agencies may disclose consumer
information. FCRA section 604, entitled Permissible purposes of
consumer reports, identifies an exclusive list of permissible purposes
for which consumer reporting agencies may provide consumer reports.\95\
The statute states that a consumer reporting agency may provide
consumer reports under these circumstances ``and no other.'' In
addition, FCRA section 607(a) requires that ``[e]very consumer
reporting agency shall maintain reasonable procedures designed to . . .
limit the furnishing of consumer reports to the purposes listed under
section 604.'' \96\
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\95\ 15 U.S.C. 1681b(a). Other sections of the FCRA identify
additional limited circumstances under which consumer reporting
agencies are permitted or required to disclose certain information
to government agencies. See 15 U.S.C. 1681f, 1681u, 1681v; see also,
e.g., FTC v. Manager, Retail Credit Co., Miami Beach Branch Off.,
515 F.2d 988, 994-95 (D.C. Cir. 1975) (holding that 15 U.S.C.
1681s(a) authorizes the FTC to obtain consumer reports in FCRA
enforcement investigations). Further, the Debt Collection
Improvement Act of 1996, Pub. L. 104-134, section 31001(m)(1), 110
Stat. 1321-366, allows the head of an executive, judicial, or
legislative agency to obtain a consumer report under certain
circumstances relating to debt collection. See 31 U.S.C. 3711(h).
\96\ 15 U.S.C. 1681e(a).
---------------------------------------------------------------------------

In addition to imposing permissible purpose limitations on consumer
reporting agencies, the FCRA limits the circumstances under which third
parties may obtain and use consumer report information from consumer
reporting agencies. FCRA section 604(f) provides that a person shall
not use or obtain a consumer report unless the consumer report is
obtained for a purpose for which the consumer report is authorized to
be furnished under FCRA section 604 and the purpose is certified in
accordance with FCRA section 607 by a prospective user of the
report.\97\
---------------------------------------------------------------------------

\97\ 15 U.S.C. 1681b(f).
---------------------------------------------------------------------------

The FCRA's permissible purpose provisions are thus a key component
to the statute's protection of consumer privacy. Consumers suffer harm
when consumer reporting agencies provide consumer reports to persons
who are not authorized to receive the information or when recipients of
consumer reports obtain or use such reports for purposes other than
permissible purposes. These harms include the invasion of consumers'
privacy, as well as reputational, emotional, physical, and economic
harms.
Because the CFPB is removing the financial information exception,
which broadly permitted creditors to obtain and use medical financial
information (including information about medical debt) in connection
with credit eligibility determinations, creditors generally will no
longer have a permissible purpose for consumer reports containing
medical debt information.

IV. Discussion of the Final Rule

A. Overview of the CFPB's Approach

As discussed above, the CFPB proposed to amend Regulation V to
remove a regulatory exception from the limitation in the FCRA on
creditors obtaining or using information on medical debts for credit
eligibility determinations. The CFPB also proposed that a consumer
reporting agency generally may not furnish to a creditor a consumer
report containing information on medical debt that the creditor is
prohibited from using.
Congress restricted a creditor's ability to obtain or use a
consumer's medical information in connection with any determination of
the consumer's eligibility, or continued eligibility, for credit.\98\
When the Agencies issued the current regulatory exception to the
statutory prohibition, they did so without providing evidence or
reasoning to support their main conclusion that an exception from a
congressionally created legal requirement was warranted. Research has
shown that medical debt has limited predictive value for credit
underwriting purposes. Market participants, including in the consumer
reporting industry and those most financially incentivized to assess
the predictive value of medical debt, have reduced their reliance on
medical debt in recognition of its limited utility.
---------------------------------------------------------------------------

\98\ 15 U.S.C. 1681b(g)(2).
---------------------------------------------------------------------------

The CFPB proposed this rule to address concerns that the regulatory
exception to the medical information privacy protections established by
Congress, which allows creditors to use medical debt information for
underwriting, is not necessary and appropriate to protect legitimate
operational, transactional, risk, consumer, and other needs, nor
consistent with the intent to restrict the use of medical information
for inappropriate purposes. The CFPB proposed removing the broad
regulatory exception--while retaining select elements of the exception
related to income, benefits, and loan purpose--and limiting the
circumstances under which consumer reporting agencies are permitted to
furnish medical debt information to creditors in connection with credit
eligibility determinations.
The CFPB is adopting the same general approach in the final rule,
with some modifications, as discussed herein.
Comments Received on the CFPB's Proposed Approach Generally
Comments received by the CFPB on the proposal, and responses
thereto, are discussed in more detail throughout this notice. The
following is a synopsis of comments received on the CFPB's proposed
approach generally.
Commenters, including consumer advocate groups and consumers
(generally in the form of a comment submission campaign), supported the
CFPB's proposal, noting that the rule would align with congressional
intent behind the FCRA, as amended by the FACT Act, and agreeing that
medical debt information should be treated differently than other debt
information. Commenters stated that the proposed rule is within the
CFPB's legal authority under FCRA sections 621(e) and 604(g)(5) and
will promote the FCRA's objectives as to the accuracy, fairness, and
privacy of consumer information--given that medical debt is often
inaccurate or error prone, is inconsistently reported, and has limited
predictive value for credit underwriting. Commenters also stated that
medical debt disproportionately impacts vulnerable populations and the
CFPB's proposal would mitigate medical debt's negative impacts on
consumers' health decisions and financial well-being, including by
increasing consumers' access to credit.
Other commenters including industry commenters and consumers
opposed the CFPB's proposal, asserting that it is arbitrary and
capricious, exceeds the CFPB's legal authority, and conflicts with
FCRA, as amended by the FACT

[[Page 3285]]

Act, and other laws. Commenters disagreed with the proposal's evidence
that medical debt information has limited predictive value and asserted
it is necessary for credit underwriting purposes and should not be
treated differently than other debt information. Commenters stated that
the CFPB's proposal would undermine the fairness and accuracy of credit
reports and have negative impacts on consumers' ability to repair
credit scores by making payments on collection tradelines and on
creditors' ability to accurately assess creditworthiness--resulting in
less-qualified consumers becoming overleveraged and well-qualified
consumers experiencing decreased access to credit. Commenters also
contended that the CFPB's proposal could result in lost income for
medical providers, higher healthcare costs for consumers, and increased
debt collection litigation.

B. Removal of the Financial Information Exception to the Creditor
Prohibition on Obtaining or Using Medical Information

The creditor prohibition in section 604(g)(2) of the FCRA,\99\
incorporated at Regulation V Sec. 1022.30(b), restricts creditors from
obtaining or using (i.e., considering) medical information pertaining
to a consumer in connection with any determination of the consumer's
eligibility, or continued eligibility, for credit. Regulatory
exceptions to this prohibition are at current Sec. 1022.30(d) and (e),
which are respectively titled ``Financial information exception for
obtaining and using medical information'' (financial information
exception) and ``Specific exceptions for obtaining and using medical
information''.
---------------------------------------------------------------------------

\99\ FCRA section 604(g)(2) (15 U.S.C. 1681b(g)(2)).
---------------------------------------------------------------------------

The CFPB proposed removing the financial information exception at
Sec. 1022.30(d). For the reasons discussed in part IV.B.1, Medical
Information Related to Debts, and part IV.B.2, Medical Information
Related to Expenses, Assets, and Collateral, the CFPB is finalizing
this change as proposed. The CFPB also proposed retaining certain
elements of the financial information exception related to income,
benefits, and purpose of the loan by moving relevant provisions to the
list of specific exceptions to the creditor prohibition at Sec.
1022.30(e). For reasons discussed in part IV.B.3, Medical Information
Related to Income, Benefits, or the Purpose of the Loan, the CFPB is
finalizing its proposal to retain elements of the financial information
exception as to income, benefits, and the purpose of the loan. The CFPB
has also revised the proposed text for the revised exception to include
medical information contained in the transaction information of an
account for a consumer financial product or service described in 12 CFR
1033.111(b)(1) through (3), and accessed with the consumer's
authorization, as discussed in part VI.A, Consumer-Authorized
Transaction History.
Additionally, the CFPB proposed adding a definition for ``medical
debt information'' at Sec. 1022.3(j). The CFPB is finalizing the
definition as proposed for the reasons discussed in the relevant
portion of the discussion in part IV.B.1, Medical Information Related
to Debts. The CFPB also proposed and is finalizing conforming
amendments to Sec. 1022.30(c) to remove the reference to the financial
information exception in Sec. 1022.30(d), because the exception is
removed under the final rule. Further, the CFPB proposed and is
finalizing the removal of an example at existing Sec.
1022.30(c)(3)(iii), which the CFPB discusses further in part IV.C,
Limits on a Consumer Reporting Agency's Disclosure of Medical Debt
Information.
In the NPRM, the CFPB explained that Congress had put in place
strong privacy protections for consumers' medical information in the
FCRA, including by enacting the creditor prohibition through FCRA
section 604(g)(2).\100\ Congress also provided additional protections
by stipulating that the CFPB may permit exceptions to the creditor
prohibition only when the CFPB has determined the exceptions to be
``necessary and appropriate to protect legitimate operational,
transactional, risk, consumer, and other needs . . . consistent with
the intent of [FCRA section 604(g)(2)] to restrict the use of medical
information for inappropriate purposes.'' \101\
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\100\ As described above, Congress also limited the
circumstances under which consumer reporting agencies can provide
consumer reports containing medical information for credit,
employment, or insurance purposes, and required consumer reporting
agencies to restrict or code contact information for medical
information furnishers. 15 U.S.C. 1681b(g)(1), 1681c(a)(6).
\101\ 15 U.S.C. 1681b(g)(5).
---------------------------------------------------------------------------

The CFPB further explained that, consistent with the general
creditor prohibition in FCRA section 604(g)(2), current Sec.
1022.30(b)(1) states: ``A creditor may not obtain or use medical
information pertaining to a consumer in connection with any
determination of the consumer's eligibility, or continued eligibility,
for credit, except as provided in this section.'' The CFPB also noted
that in 2005, before the CFPA transferred primary regulatory authority
for the FCRA to the CFPB, the Agencies adopted the exceptions to this
prohibition that are now codified in the financial information
exception at Sec. 1022.30(d) and the list of specific exception at
Sec. 1022.30(e) (listing specific exceptions).
The CFPB also explained that the financial information exception
allows a creditor to consider medical information pertaining to a
consumer in connection with any determination of the consumer's
eligibility, or continued eligibility, for credit if the conditions of
the following three-part test are met: (1) the information is the type
routinely used in making credit eligibility determinations, such as
information relating to debts, expenses, income, benefits, assets,
collateral, or the purpose of the loan, including the use of proceeds;
(2) the creditor uses the medical information in a manner and to an
extent no less favorable than it would use comparable information that
is not medical information; and (3) the creditor does not take the
consumer's physical, mental, or behavioral health, condition or
history, type of treatment, or prognosis into account as part of the
credit eligibility determination.\102\
---------------------------------------------------------------------------

\102\ 12 CFR 1022.30(d)(1).
---------------------------------------------------------------------------

The CFPB observed that the predecessor Agencies had stated that it
was their belief that the financial information exception struck a
balance between permitting creditors to obtain and use certain medical
information about consumers when necessary and appropriate to satisfy
prudent underwriting criteria and ensuring that credit is extended in a
safe and sound manner, while restricting the use of medical information
for inappropriate purposes.\103\ However, the CFPB noted that the
Agencies had not cited evidence or provided analysis in support of this
statement of their conclusion.
---------------------------------------------------------------------------

\103\ Fair Credit Reporting Medical Information Regulations
(2004 NPRM), 69 FR 23380, 23384 (Apr. 28, 2004).
---------------------------------------------------------------------------

Comments received in response to specific aspects of the CFPB's
proposal to remove the financial information exception, and the CFPB's
reasons for finalizing its proposed removal of the exception with
regard to each such aspect, are discussed separately below in this part
IV.B, Removal of the Financial Information Exception to the Creditor
Prohibition on Obtaining or Using Medical Information.
1. Medical Information Related to Debts
In its proposal, the CFPB explained that by proposing to eliminate
the financial information exception, the CFPB was generally proposing
to prohibit creditors from considering, in

[[Page 3286]]

connection with credit eligibility determinations, certain financial
information related to consumers' medical debts.
The financial information exception currently permits a creditor to
consider certain medical information related to a consumer's debts in
connection with any determination of the consumer's eligibility, or
continued eligibility, for credit.\104\ Such medical information
related to medical debt includes, for example, ``[t]he dollar amount,
repayment terms, repayment history, and similar information regarding
medical debts to calculate, measure, or verify the repayment ability of
the consumer, the use of proceeds, or the terms for granting credit''
\105\ and ``[t]he identity of creditors to whom outstanding medical
debts are owed in connection with an application for credit, including
but not limited to, a transaction involving the consolidation of
medical debts'' \106\ (collectively referred to herein as financial
information).
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\104\ 12 CFR 1022.30(d)(1)(i).
\105\ 12 CFR 1022.30(d)(2)(i)(A).
\106\ 12 CFR 1022.30(d)(2)(i)(D).
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Thus, under the CFPB's proposal, which the CFPB is finalizing as
proposed for the reasons discussed in this part IV.B.1, a creditor
would no longer be able to consider such medical information related to
a consumer's medical debt, unless one of the specific exceptions in
final Sec. 1022.30(e) applies. Specifically, as discussed in further
detail below, the CFPB is finalizing its interpretation as set forth in
the proposed rule that for information about a consumer's debt to be
``medical information'' under FCRA section 603(i), the information must
relate to a debt the consumer owes, or at one time owed, directly to a
health care provider or to the health care provider's agent or assignee
for the provision of the health care underlying the payment obligation.
The CFPB is also finalizing its definition of medical debt information
in final Sec. 1022.3(j), as medical information that pertains to a
debt owed by a consumer to a person whose primary business is providing
medical services, products, or devices (also referred to herein as a
health care provider), or to the person's agent or assignee, for the
provision of such medical services, products, or devices. The
definition also provides that medical debt information includes, but is
not limited to, medical bills that are not past due or that have been
paid. Further, the CFPB has concluded that it generally is neither
``necessary and appropriate to protect legitimate operational,
transactional, risk, consumer, and other needs,'' nor consistent with
Congress's intent ``to restrict the use of medical information for
inappropriate purposes,'' for creditors to consider sensitive financial
information concerning a consumer's medical debt in underwriting.
Preliminary Interpretation--Owes or Owed to a Health Care Provider
FCRA section 603(i)'s definition of ``medical information,''
incorporated in Regulation V at Sec. 1022.3(k), informs the types of
medical debt that creditors are generally prohibited from considering,
but for which the financial information exception currently applies.
Medical information is defined as ``[i]nformation or data, whether oral
or recorded, in any form or medium, created by or derived from a health
care provider or the consumer'' that relates to, among other things,
``[t]he payment for the provision of health care to an individual.''
In its proposal, the CFPB explained that with regard to ``[t]he
payment for the provision of health care to an individual''--i.e., the
subset of ``medical information'' concerning debt--the CFPB proposed to
interpret FCRA section 603(i) to mean that medical information about a
consumer's debt must relate to a debt the consumer owes, or at one time
owed (for example, in the case of paid medical debt), directly to a
health care provider or to the health care provider's agent or
assignee.\107\ Specifically, the CFPB stated that the statute provides
that medical information is information or data ``created by or derived
from a health care provider or the consumer'' that relates to ``the
payment for the provision of health care to an individual.'' And, as a
result, the CFPB preliminarily interpreted the statute's use of the
phrase ``provision of health care,'' following the requirement that the
medical information must be ``created by or derived from a health care
provider or the consumer,'' to mean that for information on a debt to
be medical information under the FCRA, the information must relate to a
debt arising from a payment obligation that the consumer owes (or at
one time owed) directly to a health care provider for the provision of
the health care underlying the payment obligation.
---------------------------------------------------------------------------

\107\ The CFPB explained that its use of the word ``owed''
referred to the characterization of the debt by the health care
provider or its agent or assignee.
---------------------------------------------------------------------------

The CFPB also stated that its preliminary interpretation would
include medical debt that had been sold or resold to a debt buyer, who
had become the health provider's assignee for the debt, because the
payment obligation that was sold was created by a health care provider
and at one time was owed to the health care provider. It would also
include medical debt that had been assigned to a third-party debt
collector, who was acting as an agent on behalf of the health care
provider, or debt buyer to whom the debt was owed.\108\ Further, it
would include medical information in the form of a civil judgment
arising from a debt collection action as to a medical debt directly
owed to a health care provider or debt buyer, whether provided on a
consumer report, by the consumer on a credit application, or if the
creditor learned of the civil judgment through other means; a credit
score that had weighed medical debt information; and debts arising from
medical care that is elective, or otherwise not medically necessary
(e.g., some cosmetic surgeries).
---------------------------------------------------------------------------

\108\ Cf. 15 U.S.C. 1681s-2(a)(9) (providing that the term
``medical information furnisher'' includes the ``agent or assignee''
of a medical provider).
---------------------------------------------------------------------------

The CFPB further explained that because medical information on a
consumer's debt must relate to a debt the consumer owes (or owed)
directly to a health care provider under the CFPB's preliminary
interpretation, medical debt would not include a debt owed to a third-
party lender (including a medical credit card issuer whose products are
offered specifically for the payment of medical services or general
purpose credit card issuer), from whom a consumer took out a loan to
pay medical expenses or bills. The CFPB noted that such loans would be
new debt obligations used to pay the medical debt obligation owed to a
health care provider. Moreover, the CFPB also preliminarily concluded
that debts owed to such third-party lenders are distinguishable from
debts that health care providers have sold to debt buyers because
medical debts are assigned to such debt buyers, but not to third-party
lenders.
The CFPB sought comment on its approach and on whether, in the
alternative, information about debts generally incurred to pay for
medical bills and expenses should be considered to be ``medical
information'' that is ``derived'' from a health care provider or
consumer. The CFPB also sought comment on the feasibility of furnishing
such medical debt information under this latter approach to consumer
reporting agencies and reporting to creditors in a way that
distinguishes between loan obligations and disbursements that pay for
medical expenses and those that do not.

[[Page 3287]]

In consideration of its preliminary interpretation of FCRA section
603(i), the CFPB also proposed adding a definition for medical debt
information at Sec. 1022.3(j) to facilitate compliance with various
aspects of the proposed rule. As explained in the NPRM, the CFPB's
intent was for the definition of medical debt information under
proposed Sec. 1022.3(j) to align with the scope of information about
medical debt (also referred to herein as medical debt information) that
creditors would be prohibited from considering if the financial
information exception is removed.
The CFPB's proposed medical debt definition, comments received in
response to the proposed definition, and the CFPB's responses are
generally discussed later in this part. To the extent commenters raised
issues related to and about the CFPB's preliminary interpretation of
medical debt information under FCRA section 603(i) in the context of
their discussion of other aspects of the CFPB's proposal, including of
the proposed definition at Sec. 1022.3(j), such issues are generally
addressed immediately below.
Comments--Preliminary Interpretation: Owes or Owed to a Health Care
Provider
The CFPB received a number of comments related to and about its
preliminary interpretation of medical information under FCRA section
603(i), that medical information about a consumer's debt must relate to
a debt the consumer owes, or at one time owed, directly to a health
care provider or to the health care provider's agent or assignee.
Comments also discussed the corresponding scope of the proposed medical
debt information definition at Sec. 1022.3(j) in relation to medical
debt owed to third-party lenders, information about civil judgments
arising from medical debt collection litigation, and credit scores that
weighed medical debt information.\109\
---------------------------------------------------------------------------

\109\ The CFPB also received comments addressing its preliminary
interpretation that information about a debt originally owed to a
health care provider that has been sold and resold to a debt buyer
or assigned to a third-party debt collector is generally medical
information. These comments are discussed with comments about the
CFPB's proposed medical debt information definition (Sec.
1022.3(j)) later in this part.
---------------------------------------------------------------------------

Third-Party Lenders
A number of commenters agreed with the CFPB's position that medical
debt directly owed to a health care provider, or to their agent or
assignee, should be information about medical debt that is subject to
the creditor prohibition. One such commenter, who generally supported
the CFPB's proposal, stated that the CFPB's interpretation of FCRA
section 603(i) would protect consumers' sensitive medical information
and prevent the mischaracterization or improper assignments of debts
arising from services directly provided by health care professionals.
However, the commenter, and many others that also substantially
supported the CFPB's proposal, expressed concern that the CFPB's
proposed interpretation and proposed medical debt information
definition did not also include information about medical debts
incurred by a consumer that had been paid for with third-party lender
payment products. Some of these commenters urged the CFPB to revise its
preliminary interpretation as to medical debt information under FCRA
section 603(i) and/or its proposed definition under Sec. 1022.3(j) to
include information about such debts owed to third-party lenders.
Specifically, commenters stated that the CFPB should include other
sources of medical debt, such as general purpose credit cards, medical
credit cards, medical installment loans, loans owed to friends and
family, and loans owed to third-party lenders, within the scope of the
rulemaking. While some commenters urged the CFPB to include all types
of third-party loan products, many commenters specifically emphasized
that medical debt incurred through medical credit cards and general
purpose credit cards should be included. Others requested that the CFPB
include medical credit cards without mention of general purpose credit
cards. Some commenters urged the CFPB to more broadly include third-
party medical payment or lending products specifically meant to pay for
medical care, such as medical credit cards (including those used to pay
dental expenses) or medical financing plans.
With regard to credit cards, commenters stated that credit cards
are a significant source of medical debt, with some commenters flagging
that they are prevalently used by specific populations like older
Americans or patients with chronic conditions or cancer. These
commenters also stated that the same reasons that make information
about medical debt unfair and unreliable indicators of a consumer's
creditworthiness (i.e., that the debts are often incurred on an
involuntary and unexpected basis so that consumers have little ability
to compare and negotiate prices) also apply to medical debt paid for
with these kinds of third-party lending products. The commenters
expressed concern that not including medical debt from these types of
products within the scope of the CFPB's final rule would leave
consumers with such debt without the protections of the rule. One
commenter stated that a broad interpretation of the term medical
information and medical debt information definition would provide
flexibility to capture future types of medical financing.
With regard to medical payment products, commenters stated that if
the CFPB's final rule does not apply to debts owed to issuers of
medical payment products, such debts could become a loophole that would
result in more medical providers promoting or requiring the use of
these products, particularly if there is general shift towards
requiring upfront payment for medical services. One commenter cited
Arizona's Predatory Debt Collection Protection Act as an example of the
importance of ensuring that such types of debt are included in the
final definition. The commenter stated that although the Arizona law
limits the maximum interest rate on medical debt to 3 percent, the law
does not consider credit cards or loans taken out to pay for medical
debt to be subject to the interest rate ceiling. And, as a result,
there are medical credit cards charging Arizona residents significantly
more than 3 percent interest.
With regard to medical credit cards, some commenters stated that
medical credit cards can be more expensive than other forms of payment,
may be advertised with low promotional interest rates but later have
much higher interest rates, and may be used to pay for expenses that
the consumer never incurred. Other commenters stated that consumers may
be misled or not fully informed about such cards by their medical
providers and in some instances may not even be aware that they are
opening up a credit account. Commenters also noted that the use of
medical credit cards is increasing, citing factors such as how they are
being used to finance a growing array of medical services that may or
may not be covered by health insurance, the trend of health insurance
practices shifting costs to patients through high deductible and
limited network plans, and that medical providers may be motivated to
promote medical credit cards' use to reduce administrative billing
costs and improve the timeliness of consumer payments. A couple of
commenters also noted that some states, like Connecticut and New York,
already restrict the medical debt from being on credit reports,
including if charged to a medical credit card.
Several commenters stated that expanding the CFPB's preliminary

[[Page 3288]]

interpretation of medical debt information and proposed definition
would be consistent with the FCRA. A couple of commenters stated that
the CFPB should consider information about debts generally incurred to
pay for medical bills and expenses to be ``medical information'' that
is ``derived'' from a health care provider or consumer under FCRA
section 603(i). Another commenter made a similar argument, specifically
as to medical credit cards. One commenter suggesting that the
interpretation and proposed definition should include all purchases for
medical services, products and devices, irrespective of the type of
financing, stated that these changes would be consistent with the FCRA,
because a consumer creates medical information by seeking out and
obtaining medical services, products or devices and creates a payment
obligation through intermediary payment methods by opening up a credit
card or medical payment product where they bear the financial
obligation. The commenter cited, as an example, a definition for
``medical debt'' in legislation under consideration in Congress, which
provides that a medical debt is a debt related to, in whole or in part,
transactions, accounts, or balances arising from the receipt of medical
services, products, or devices.\110\ Another commenter urging the CFPB
to include medical credit cards within the final rule's scope stated
that medical credit cards are lending products, which the CFPB has
broad authority over.
---------------------------------------------------------------------------

\110\ Medical Debt Relief Act, H.R. 6003, 118th Cong. (2023).
---------------------------------------------------------------------------

Some commenters stated that they agree with the CFPB's
interpretation, and its proposed definition for medical debt
information aligning with that interpretation, because they said it
reflects the most reasonable interpretation of the statute.
Consequently, these commenters stated that the CFPB should not revise
the CFPB's interpretation of medical information under FCRA section
603(i) and the CFPB's proposed medical debt definition to include
medical debts paid for with payment products from third-party lenders
and creditors, such as general purpose credit card issuers, specialty
credit card issuers, issuers of medical payment products, and home
equity lenders. The commenters stated that the distinction was
important, with several urging the CFPB to affirmatively exclude
medical debt owed to third-party lenders and creditors in the final
medical debt information definition. Several of the commenters, who
also generally opposed the CFPB's proposal, stated that an expansion of
the medical debt information definition would remove more types of debt
information from creditors' consideration when underwriting credit and
affect creditors' ability to make risk-based lending decisions, leading
to overleveraged consumers or causing lenders to tighten their
underwriting standards and increase the cost of credit to offset
anticipated increases in a consumer's repayment risk.
One commenter stated that the CFPB's preliminary interpretation of
FCRA section 603(i) is arbitrary and capricious, because it
distinguishes between creditors who are health care providers (and
their agents or assignees) and credit card issuers. The commenter
stated that such a distinction is arbitrary because whether a consumer
pays a healthcare provider by credit card or if the healthcare provider
sends a consumer a bill is the result of the consumer's choice of
payment and individual health provider billing practices. Yet, under
the CFPB's preliminary interpretation and its proposed rule, in the
former scenario information about the debt could be on a consumer
report and in the latter it could not be, even though the consumer has
the same credit risk and the same amount of debt. The commenter stated
the proposed approach could give consumers the ability to manipulate
their credit scores. The commenter stated that the CFPB did not address
this issue in the NPRM, which it says is arbitrary and capricious. The
commenter also characterized the CFPB's interpretation as a departure
from the position it states was taken by the CFPB's predecessor
Agencies and accepted by the CFPB in restating Regulation V after
primary regulatory authority for the FCRA was transferred to it.
Specifically, the commenter cited the Agencies' interim final rule
implementing section 411 of the FACT Act. The commenter pointed to
language where the Agencies stated that the creditor prohibition at
FCRA section 604(g)(2) applies to all creditors and that the scope of
the exceptions to the prohibition adopted pursuant to FCRA section
604(g)(5) is as broad as the prohibition and applies to all
creditors.\111\ The commenter started that the CFPB did not address
what the commenter characterized as a change in interpretation as to
the statutory text.
---------------------------------------------------------------------------

\111\ 70 FR 33958, 33963 (June 10, 2005).
---------------------------------------------------------------------------

In the NPRM, the CFPB asked for public comment on the feasibility
of furnishing medical debt information to consumer reporting agencies
and reporting to creditors in a way that distinguishes between loan
obligations and disbursements that pay for medical expenses and those
that do not, if the CFPB were to consider information about debts
generally incurred to pay for medical bills and expenses to be
``medical information'' that is ``derived'' from a health care provider
or consumer. One commenter who supported expanding the CFPB's proposed
definition of medical debt information (and interpretation of medical
information under the FCRA) suggested that for medical expenses charged
to general purpose credit cards, a furnisher or lender providing
information to the credit reporting agencies would merely need to
designate that the debt is medical debt. Other commenters stated that
they believed medical expenses on credit cards could be identified by
using Merchant Category Codes (MCC). One commenter stated that the CFPB
should require credit card issuers to have medical providers identify
themselves using the MCCs for medical services and supplies. Another
commenter noted, for example, that flexible spending account credit
cards use MCCs to automatically substantiate qualified expenses and
suggested that a similar technology applied under the CFPB's final
rule.
Some commenters suggested that the CFPB require credit card issuers
to exclude negative information about debts from merchants who are
coded under the MCCs as medical providers. One such commenter stated
that, under this approach, the CFPB would be required to establish
rules for payment application and allocation of interest for mixed
medical and non-medical credit card balances through a separate
rulemaking, which it anticipated would not be more complicated than the
rules for payment allocation and calculation of interest on balances
with different annual percentage rates (APRs) under Regulation Z, to
make clear to what portions of a consumer's credit card debt could be
provided to consumer reporting agencies and creditors. Another
commenter said that the CFPB should additionally develop mechanisms for
identifying and tracking when loan disbursements or payments from other
general purpose lending products are used to pay for medical expenses.
A different commenter suggested that the CFPB require creditors to
expand their categorization system to flag medical expenses at the
point of transaction or through subsequent verification processes. The
commenter stated that a new merchant code could be created to flag
healthcare provider payments or existing medical

[[Page 3289]]

merchant codes would be flagged as part of a broader medical expense
category.
In contrast, commenters supporting the current scope of the
proposed medical debt information definition stated that it is not
feasible to implement an expansion of the medical debt information
definition and interpretation of medical information under the FCRA to
include products from third-party lenders. Specifically, the commenters
stated third-party lenders like credit card issuers or home equity
lenders would need to be able to identify medical charges or expenses
and recalculate fields such as the consumer's current balance, credit
limit, amount past due, and actual payment amount. One commenter also
stated that, unlike credit card issuers who may be able to identify
which merchant a consumer has shopped with, banks that offer unsecured
credit generally do not know how a consumer spends loan proceeds and if
any of the loan was used to pay for medical expenses. A couple of
commenters stated that even if a third-party lender or creditor were
able to identify such charges using merchant category codes or some
other information, it would need to maintain two sets of records, one
with medical debt information and one without, which may lead to
consumer confusion and other operational risks.
Several commenters asked that if the CFPB does not include debts
owed to third-party lenders or creditors such as credit card issuers
within the scope of the final rule, that the CFPB continue to evaluate
the impacts of such debt, such as for specific populations like family
caregivers and persons in their care who may not understand the scope
of the CFPB's final rule, and to ascertain the impact of the final
rule. Other commenters asked the CFPB to actively regulate and
implement consumer protections related to medical lending products.
Civil Judgments
The CFPB also received several comments about its interpretation of
FCRA section 603(i) that medical debt information includes civil
judgments arising from medical debt collection actions, where the debt
is directly owed to a health care provider, or to their agent or
assignee. One commenter supported the CFPB's proposed approach, stating
that the CFPB's interpretation is important considering that there are
credit reporting agencies that specialize in providing consumer reports
consisting of public records information, including about civil
judgments. This commenter recommended that the CFPB include its
interpretation about civil judgments in the final regulatory text or in
official commentary. A couple of commenters opposed the CFPB's
interpretation about civil judgments. The commenters generally stated
that it is not apparent from public record information whether a debt
underlying a civil judgment is owed or was once owed directly to a
health care provider for the provision of health care, particularly if
the legal action was brought by a debt buyer whose name does not
reference health care. In such cases, the commenters stated creditors
would need to engage in burdensome individualized investigations to
determine if a civil judgment is medical debt information. The
commenters suggested that the CFPB revise its interpretation so that
information about a civil judgment arising from a medical debt
collection action is not considered medical information under the FCRA.
In the alternative, one of the commenters suggested that the CFPB
revise its interpretation of what constitutes medical information about
a debt, so that it includes, other than the name of the judgment
creditor, publicly available information that the civil judgment arises
from a debt collection action as to a medical debt directly owed to a
health care provider or to such person's assignee (as opposed to debt
buyer, as referenced in the CFPB's NPRM).
This commenter also stated that the CFPB's discussion of its
preliminary interpretation in the NPRM was inconsistent with its
proposed definition for medical debt information. According to the
commenter, while the proposed definition is clear that the debt at
issue must be owed to health care provider or to their agent or
assignee, in the NPRM the CFPB stated that medical information in the
form of a civil judgment arising from a debt collection action as to a
medical debt ``directly owed to a health care provider or debt buyer''
would be considered information about a debt that is medical
information under FCRA section 603(i).\112\ The commenter stated that
this statement in the preamble of the NPRM could be read as meaning
that the CFPB's proposal includes medical debt owed to a debt buyer
even if the debt had not been originally owed to a health care
provider.
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\112\ 79 FR 51682, 51690 (June 18, 2024).
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Credit Scores
Several commenters generally opposing the CFPB's proposed rule also
disagreed that credit scores that have weighed medical debt information
should be medical debt information under the CFPB's preliminary
interpretation. One commenter stated that the final rule should provide
that a creditor that considers a credit score that could have weighed
medical debt information does not violate the creditor prohibition.
Another commenter, a financial institution, stated that credit scores
are essential for lenders to determine a consumer's creditworthiness.
The commenter argued that removing medical debt information from the
data used to calculate credit scores would lead to the inflation of
those scores, affect lenders' ability to accurately make credit risk
assessments, and lead to loan defaults. The commenter stated that CFPB
should consider establishing a safe harbor for financial institutions
that inadvertently rely on a credit score that weighed medical debt
information, because a lender would have difficulty recalculating a
credit score due to the proprietary nature of the credit score
algorithms used by consumer reporting agencies.
Final Rule--Owes or Owed to a Health Care Provider
For the reasons set forth herein, the CFPB is finalizing its
interpretation as set forth in the proposed rule that for information
about a consumer's debt to be ``medical information'' under FCRA
section 603(i), the information must relate to a debt the consumer
owes, or at one time owed, directly to a health care provider or to the
health care provider's agent or assignee for the provision of the
health care underlying the payment obligation. The CFPB's
interpretation includes medical information in the form of a civil
judgment arising from a debt collection action as to a medical debt
directly owed to a health care provider or their assignee (i.e., a debt
buyer), whether provided on a consumer report, by the consumer on a
credit application, or if the creditor learns of the civil judgment
through other means; a credit score that had weighed medical debt
information; and debts arising from medical care that is elective, or
otherwise not medically necessary (e.g., some cosmetic surgeries).
As discussed later in this part with regard to the definition of
medical debt information under proposed and final Sec. 1022.3(j), the
CFPB also finalizes its approach that its interpretation includes
medical debt that has been sold or resold to a debt buyer--who has
become the health provider's assignee for the debt, because the payment
obligation that was sold was created by a health care provider and at
one time was owed

[[Page 3290]]

to the health care provider--as well as medical debt that has been
assigned to a third-party debt collector, who is acting as an agent on
behalf of the health care provider or debt buyer to whom the debt is
owed. The CFPB also addresses comments regarding the CFPB's approach as
to medical information about debts arising from elective versus non-
elective care with the other comments about the CFPB's proposed medical
debt information definition.
Third-Party Lenders
FCRA section 603(i) defines ``medical information'' as
``[i]nformation or data, whether oral or recorded, in any form or
medium, created by or derived from a health care provider or the
consumer'' that relates to, among other things, ``[t]he payment for the
provision of health care to an individual'' (emphasis added). As set
forth in its proposal, the CFPB believes that it is consistent with the
text of FCRA section 603(i) to interpret the statute's use of these two
phrases to mean that for information on a debt to be medical
information under the FCRA, the information must relate to a debt
arising from a payment obligation that the consumer owes (or at one
time owed) directly to a health care provider for the provision of the
health care underlying the payment obligation.
The CFPB also finds that the manner in which the final rule
implements FCRA section 603(i) is appropriate at this time given
operational difficulties for information furnishers, creditors, and
consumer reporting agencies in distinguishing between third-party loan
obligations and disbursements that pay for medical expenses and those
that do not. To implement the rule, entities furnishing information on
consumer debts, consumer reporting agencies receiving such information
and providing consumer reports to creditors, and creditors receiving
information about the consumer's debt obligations must be able to
identify the specific information subject to the rule's requirements.
Logically, a debt owed directly to a health care provider for the
provision of health care to an individual is generally understood by
consumers and the health care providers (and their agents and
assignees) that are furnishing information to consumer reporting
agencies to be medical debt. And, because of medical information
furnisher obligations under FCRA section 623(a)(9), information about
such debts that is furnished by health care providers (or their agents
or assignees) already is and can be easily labeled as medical
information by consumer reporting agencies so that they may comply with
their medical debt information disclosure obligations under final Sec.
1022.38.\113\ The CFPB also notes that it did not receive any comments
disagreeing that information about debts owed directly to a health care
provider for the provision of health care to an individual is medical
information under the statute, even if some commenters urged the CFPB
to expand its interpretation.
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\113\ See 15 U.S.C. 1681c(a)(6), 1681s-2(a)(9).
---------------------------------------------------------------------------

In contrast, currently medical information is generally not easily
identifiable when a consumer uses a credit card or the proceeds of a
loan from a third-party lender to pay, for example, a medical bill.
When a consumer owes a debt to a third-party lender, the amount of that
debt may consist of a mix of both medical and non-medical debt.
In the context of credit and debit cards, the CFPB does not believe
that the problem of identifying medical debt can be resolved with
existing MCCs \114\ used by credit card issuers to categorize
businesses by the type of services or goods the business provides or
existing systems in place for health-related tax-advantaged accounts or
arrangements, including health savings accounts (HSAs), flexible
spending accounts (FSAs), and health reimbursement accounts (HRAs)
pursuant to guidelines set by the Internal Revenue Service (IRS).\115\
With respect to MCCs, some commenters suggested that the CFPB simply
require credit card issuers to exclude negative information about debts
from merchants coded as some sort of health care provider under the
MCCs when furnishing information to consumer reporting agencies.
However, it is not clear that all credit card transactions at
businesses that could reasonably be said to provide health care
services, products, or devices would be related to a ``payment for the
provision of health care'' as required for medical information under
FCRA section 603(i). For example, as raised by other commenters, in
addition to selling prescription medicine, a pharmacy may also sell
household or grocery items. Medical credit cards are also currently
used to pay for some expenses that are not clearly medical in nature,
such as for funeral services.\116\
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\114\ See, e.g., Visa, Visa Merchant Data Standards Manual--Visa
Supplemental Requirements (Apr. 2023), <a href="https://usa.visa.com/content/dam/VCOM/download/merchants/visa-merchant-data-standards-manual.pdf">https://usa.visa.com/content/dam/VCOM/download/merchants/visa-merchant-data-standards-manual.pdf</a>;
Mastercard, Quick Reference Booklet--Merchant Edition (Apr. 16,
2024), <a href="https://www.mastercard.us/content/dam/public/mastercardcom/na/global-site/documents/quick-reference-booklet-merchant.pdf">https://www.mastercard.us/content/dam/public/mastercardcom/na/global-site/documents/quick-reference-booklet-merchant.pdf</a>.
\115\ With these accounts or arrangements, consumers can use
their cards to pay for certain medical care expenses that are deemed
qualified under guidelines set by the Internal Revenue Service
(IRS). See Consumer Fin. Prot. Bureau, What is a flexible spending
account (FSA) card or health savings account card (HSA)?, <a href="https://www.consumerfinance.gov/ask-cfpb/what-is-a-flexible-spending-account-fsa-card-health-savings-account-card-hsa-en-417/">https://www.consumerfinance.gov/ask-cfpb/what-is-a-flexible-spending-account-fsa-card-health-savings-account-card-hsa-en-417/</a> (last
reviewed Sept. 6, 2024); Ryan J. Rosso, Cong. Rsch. Serv., R45277,
Health Savings Accounts (HSAs) (2022), <a href="https://crsreports.congress.gov/product/pdf/R/R45277">https://crsreports.congress.gov/product/pdf/R/R45277</a>. See also Ryan J.
Rosso, Cong. Rsch. Serv., R46782, A Comparison of Tax-Advantaged
Accounts for Health Care Expenses 5 (2021) (explaining qualified
medical expenses under the Internal Revenue Code, 26 U.S.C. 213(d)),
<a href="https://crsreports.congress.gov/product/pdf/R/R46782">https://crsreports.congress.gov/product/pdf/R/R46782</a>.
\116\ See, e.g., CareCredit, Ways to use your health and
wellness credit card, <a href="https://www.carecredit.com/procedures/">https://www.carecredit.com/procedures/</a>
(listing categories of procedures a CareCredit medical credit card
can be used for) (last visited Nov. 15, 2024).
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Similarly, one commenter suggested that technology similar to the
inventory information approval system used for FSA cards could be
adapted to identify specific medical expenses charged to credit or
debit cards. But not all businesses participate in inventory approval
systems and/or accept FSA and HSA cards, even if some system was
developed to specifically identify expenses that would be medical
information under FCRA section 603(i), as opposed to identification as
medical expenses under other law. Furthermore, this system is complex;
the IRS has issued detailed guidance with regard to the substantiation
of eligible medical care expenses paid for with such cards, even at
certain businesses with non-health care related MCCs if the business
meets conditions such as participation in an inventory information
approval system.\117\
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\117\ See, e.g., Internal Revenue Serv., Notice 2007-2
(addressing the use of debit cards for medical expense
reimbursements at merchants with non-health care related MCCs),
<a href="https://www.irs.gov/pub/irs-drop/n-07-02.pdf">https://www.irs.gov/pub/irs-drop/n-07-02.pdf</a> and Notice 2006-69
Debit cards used to reimburse participants in self-insured medical
reimbursement plans and dependent care assistance programs
(describing inventory information approval system requirements),
<a href="https://www.irs.gov/pub/irs-drop/n-06-69.pdf">https://www.irs.gov/pub/irs-drop/n-06-69.pdf</a> (both last visited Dec.
5, 2024).
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Some commenters suggested that the CFPB itself develop or require
industry to develop and use transaction-level classification codes to
identify what would be medical information at the transactional level
under FCRA section 603(i). However, such work or any such requirements
would require further input and consultation with industry experts and
impose more burden on creditors, information furnishers, and consumer
reporting agencies than have been contemplated for this rulemaking. As
a result, the CFPB declines to impose such a requirement or itself
develop such rules at this time.
Identification of medical debt information could also be
problematic

[[Page 3291]]

in the case of third-party loans. For example, a home equity lender
would not know whether and how much of the proceeds of the loan were
used to pay for a medical expense and thus whether it should furnish
the loan to consumer reporting agencies as being for medical purposes.
As a result, the CFPB also declines to impose such a requirement or
itself develop such rules at this time.
The CFPB appreciates, as raised by many commenters, that many
Americans use credit products offered by third-party lenders to pay
their medical bills. However, as described in more detail in part VII,
CFPA Section 1022(b) Analysis, the CFPB has also determined that there
is not yet substantial evidence that the inclusion of information
related to medical debt owed to third-party lenders on consumer
reports, or its use in underwriting, leads to consumer harm.
While including information about medical debts owed to third-party
lenders might have additional benefits for consumers, the CFPB has
determined that such information is beyond the scope of this rulemaking
and for the reasons stated above, the CFPB declines to change its
approach at this time.
One commenter stated that the CFPB's approach is arbitrary and
capricious, because it would generally provide that information about a
debt owed directly to a health care provider, or its agent or assignee,
for the payment of the provider's provision of health care is medical
information about a debt under the FCRA and the CFPB's proposed rule,
whereas a debt owed to a third-party lender would not be, even though
the consumer (and their creditworthiness) is the same in either
instance. However, as stated above, the CFPB believes that its approach
aligns with the definition of medical information under FCRA section
603(i). Further, as noted, the operational difficulties and likely
compliance burdens further justify its approach.
The CFPB also disagrees with the commenter's statement that the
CFPB's interpretation was an arbitrary and capricious deviation from
the predecessor Agencies' interpretation of the FCRA in the 2005
interim final rule implementing section 411 of the FACT Act. The
language cited by the commenter from the 2005 interim final rule
relates to the Agencies' interpretation of the general applicability of
the creditor prohibition and the exceptions to the creditor
prohibition. The CFPB agrees with the Agencies' statements in the 2005
interim final rule that the creditor prohibition and any exceptions to
the prohibition are applicable to all creditors. Accordingly, the CFPB
did not propose to, and the final rule does not, distinguish between
creditor types in regulating creditors' ability to obtain or use
medical information for the purpose of making credit eligibility
determinations. The CFPB's interpretation pertains to the issue of what
types of information fall under the definition of medical information
under FCRA section 603(i), which is entirely distinct from the issue
considered by the Agencies in 2005 of whether all creditors should be
subject to the creditor prohibition and any exceptions to the
prohibition under FCRA section 604(g)(2) and (g)(5).
With regard to some commenters' requests that the CFPB evaluate the
impacts of its final rule and examine or engage in rulemaking as to
medical lending products, the CFPB has long been engaged in outreach
and research related to medical debt information in the consumer
reporting ecosystem, including on issues such as medical lending
products.\118\ The CFPB will continue to observe the market and may
consider issuing other guidance or rules if it later determines that
doing so is consistent with its authority under the FCRA.
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\118\ See, e.g., Consumer Fin. Prot. Bureau, Medical Credit
Cards and Financing Plans (May 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_medical-credit-cards-and-financing-plans_2023-05.pdf">https://files.consumerfinance.gov/f/documents/cfpb_medical-credit-cards-and-financing-plans_2023-05.pdf</a>; Lorelei Salas, Consumer Fin. Prot.
Bureau, Ensuring consumers aren't pushed into medical payment
products (June 18, 2024), <a href="https://www.consumerfinance.gov/about-us/blog/ensuring-consumers-arent-pushed-into-medical-payment-products/">https://www.consumerfinance.gov/about-us/blog/ensuring-consumers-arent-pushed-into-medical-payment-products/</a>.
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Civil Judgments
As explained above, the CFPB interprets FCRA section 603(i) to mean
that medical information about a consumer's debt must relate to a debt
the consumer owes, or at one time owed (for example, in the case of
paid medical debt), directly to a health care provider or to the health
care provider's agent or assignee. Generally, the CFPB's approach
applies regardless of the form of the medical information pertaining to
a consumer's debt owed to a health care provider, or their agent or
assignee. A civil judgment on a medical debt is information about a
medical debt that has been reduced to judgment. Thus, under the CFPB's
interpretation, medical information about a consumer's debts includes
medical information in the form of a civil judgment arising from a debt
collection action as to a medical debt directly owed to a health care
provider or to their assignee (i.e., a debt buyer), whether provided on
a consumer report or by the consumer on a credit application. It also
includes information about a civil judgment the creditor learned of
through other means. The CFPB declines to revise its interpretation to
exclude civil judgments as suggested by several commenters.
The CFPB appreciates the comment it received supporting its
approach to civil judgments. However, the CFPB declines to explicitly
address civil judgments in the regulation or in official commentary as
suggested by the commenter. The CFPB believes that its approach to
civil judgments is a straightforward application of its interpretation
and that it is not necessary to include it in regulatory text or in
official commentary.
The CFPB declines to revise its interpretation in the manner
suggested by one commenter. The commenter suggested that the CFPB
clarify that as to civil judgments, medical information would include
publicly available information--other than the name of the judgment
creditor--that the judgment was related to a debt collection action
arising from a debt directly owed to a health care provider or their
assignee, which the commenter stated would avoid having creditors
engage in individualized investigations to determine whether a civil
judgment is medical information about a medical debt. The CFPB does not
believe that the commenter's suggested clarification aligns with the
text of the statute. The definition of medical information under FCRA
section 603(i) does not imply that only publicly available information
can be medical information. It also does not provide a basis for
stating that the name of the entity to whom the consumer owes a debt is
not medical information.\119\
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\119\ Cf. 15 U.S.C. 1681c(a)(6) (the name of a medical
information furnisher--i.e., a health care provider or its agent or
assignee--that has notified the consumer reporting agency of its
status must be coded or restricted on a consumer report in a manner
that would not identify, or provide information sufficient to infer,
the specific provider or the nature of the services, products, or
devices).
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The CFPB appreciates, as raised by the commenter and others, that a
creditor may need to engage in follow-up inquiries to determine if a
civil judgment is medical information about a debt under the CFPB's
interpretation of FCRA section 603(i) and under final Sec. 1022.3(j).
The CFPB reminds creditors that the example in final Sec.
1022.30(e)(6) explains how creditors may use medical information
provided by the consumer in compliance with TILA and Regulation Z, as
set forth in Sec. 1022.30(e)(1)(ii), for purposes of compliance with
the ability-to-repay

[[Page 3292]]

rule under Sec. 1026.43(c) for closed-end mortgages, the repayment
ability rule under Sec. 1026.34(a)(4) for open-end, high-cost
mortgages, and the ability-to-pay rule under Sec. 1026.51(a) for open-
end (not home-secured) credit card accounts.
The commenter also suggested that the CFPB's statements in the
preamble about its approach to civil judgments were inconsistent, and
could be read to mean that the CFPB intends to treat as medical
information civil judgments arising from a debt collection action
brought by a debt buyer, even if the underlying debt was not originally
owed to a health care provider. The CFPB clarifies that under its
interpretation of FCRA section 603(i), medical information about a
consumer's debts includes medical information in the form of a civil
judgment arising from a debt collection action as to a medical debt
directly owed to a health care provider or to their assignee (i.e., a
debt buyer).
Credit Scores
The CFPB declines to adopt suggestions from some commenters that
the CFPB provide that credit scores that weighed information about
medical debt should not be subject to the creditor prohibition under
the CFPB's final rule or that the CFPB establish a safe harbor for
creditors that inadvertently use such scores. The CFPB's approach to
credit scores is a logical extension of its interpretation of FCRA
section 603(i) as to medical debt information (and, correspondingly,
the definition for medical debt information under Sec. 1022.3(j)). As
explained above, the removal of the existing financial information
exception in Sec. 1022.30(d) as to medical debt information in the
final rule means that the creditor prohibition under FCRA section
604(g)(2) and Sec. 1022.30(b) will apply to generally prohibit
creditors from obtaining or using such information for credit
eligibility determinations. It would be a paradoxical effect if
creditors were then permitted to use a credit score that weighed such
information in making those same credit eligibility determinations.
The CFPB also does not believe that a safe harbor for a creditor's
inadvertent use of a credit score that weighed medical debt information
is necessary. Under final Sec. 1022.38, consumer reporting agencies
will generally be prohibited from furnishing consumer reports
reflecting medical debt information to creditors, and any credit score
based on the information in a consumer's file generally would not weigh
medical debt information after the effective date of the final rule.
Accordingly, no safe harbor is required.\120\
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\120\ As discussed in part XI, the CFPB intends that, if the
consumer reporting agency prohibition on furnishing medical debt
information finalized in Sec. 1022.38 (or any provision or
application of that section) is stayed or determined to be invalid,
the amendments to Sec. 1022.30 are severable and shall continue in
effect. Should that occur, consumer reporting agencies would not be
prohibited from furnishing medical debt information to creditors for
use in underwriting, and accordingly their credit scores could also
reflect medical debt information. In such a circumstance, the CFPB
could revisit the question of a safe harbor for creditors that
inadvertently use such scores.
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Proposed Definition--Medical Debt Information (Sec. 1022.3(j))
In consideration of its preliminary interpretation of FCRA section
603(i), the CFPB also proposed adding a definition for medical debt
information at Sec. 1022.3(j) to facilitate compliance with various
aspects of the proposed rule. Under proposed Sec. 1022.3(j), medical
debt information would have been defined as medical information that
pertains to a debt owed by a consumer to a person whose primary
business is providing medical services, products, or devices (i.e., a
health care provider), or to the person's agent or assignee, for the
provision of such medical services, products, or devices. The
definition would have also clarified that medical debt information
includes, but is not limited to, medical bills that are not past due or
that have been paid.
The CFPB explained that it intended for the definition of medical
debt information to align with the scope of information about medical
debt that creditors would be prohibited from considering if the
financial information exception is removed.
The proposed definition would have also clarified that the term
includes information about a debt owed to a health care provider's
agent or assignee. The CFPB explained that it intended, by including
agents and assignees in the medical debt information definition, to
include medical debt that has been purchased by a debt buyer or that is
being collected by a third-party debt collector. The CFPB sought
comment on whether this aspect of the proposed definition should be
modified, such as to ensure it accommodated circumstances where the
medical debt has been sold and then resold, as well as on its proposed
definition for medical debt information generally.
The CFPB also sought comment on whether the proposed definition
provided the clarity needed for consumers, creditors, and consumer
reporting agencies to implement the proposed rule if finalized.
Comments--Proposed Definition, Medical Debt Information (Sec.
1022.3(j))
In addition to comments about whether the CFPB's interpretation of
FCRA section 603(i) as to medical debt information and the CFPB's
proposed definition at Sec. 1022.3(j) should be revised to include
information about debts paid for with third-party lender or creditor
products, civil judgments, and credit scores (discussed above), the
CFPB also received comments about other aspects of the proposed medical
debt information definition. Such comments included those about the
types of expenses and providers included under the definition (i.e.,
because they are ``medical'' or ``health care''-related in nature),
suggestions for different treatment of debt arising from elective
versus non-elective care, and other general comments about the proposed
inclusion of information about debts owed to agents and assignees of
medical providers. These comments, and others, are described below.
General Comments and Payment Status
The CFPB received one comment explicitly supporting the inclusion
of a proposed definition for medical debt information, which the
commenter stated would facilitate compliance with and enforcement of
the final rule. Another commenter stated that the CFPB's proposed
medical debt definition was insufficiently clear as to what constitutes
medical debt, but did not provide any explanation or illustrative
examples.
A couple of commenters expressed support for the CFPB's proposal to
expressly provide that medical debt information includes, but is not
limited to, information involving medical bills that have already been
paid or that are not yet past due. One such commenter suggested that
the CFPB include an example about a past-due medical bill to clarify
that medical debt information also includes information about past-due
medical debt.
Agents and Assignees
Several commenters agreed with the CFPB's proposal that generally
information about a debt owed to a health care provider's agent or
assignee should be considered medical debt information, as well as with
the CFPB's statements in the preamble that such agents and assignees
would include third-party debt collectors and debt buyers. One such
commenter stated that the CFPB should explicitly reference debt buyers
and debt collectors in either the text of the definition or in official

[[Page 3293]]

commentary to the final rule to facilitate the CFPB's intent.
Health Care Providers
The CFPB received a few comments about whether certain persons
would be considered a ``person whose primary business is providing
medical services, products, or devices'' (i.e., a health care provider)
under the proposed medical debt information definition.
One commenter stated that the proposal was not clear as to whether
unlicensed or unregulated providers of complementary and alternative
medicine would be considered covered health care providers under the
definition. The commenter stated its belief that medical debt
information under the rule should be limited to information about debts
owed to only regulated or licensed persons who provide medical
services, products, or devices. The commenter also suggested that,
accordingly, the text of the proposed definition be modified to refer
to a ``health care provider'' in place of a ``person'' and to
explicitly state that the term refers to a provider of services or a
provider of medical or health services as defined under the statute
governing the Medicare program, at 42 U.S.C. 1395x(u) and 1395x(s),
respectively.
Another commenter asked the CFPB to clarify whether a person who,
in addition to ``providing medical services, products, and devices,''
also provides a significant amount of non-medical services, products,
and devices would be considered to be a health care provider under the
CFPB's proposed medical debt information definition.
One commenter generally supporting the CFPB's proposal expressed
concern that the medical debt information definition may not include
debts owed to hospitals or health care facilities. The commenter
explained that consumers often receive bills not just from providers
who provide a health care service like radiological services, but also
a bill from the facility in the form of a facility fee. The commenter
stated that limiting the definition of medical debt information debts
owed to a person, or a person's agent or assignee, may exclude such
facility fees charged by hospitals or health care facilities. To avoid
this outcome, the commenter suggested that the CFPB include hospitals
and health care facilities in the medical debt information definition.
With regard to hospitals, one commenter generally supporting the
proposed rule stated its view that hospital bills are particularly
prone to error, and as a result also expressed concern that existing
Sec. 1022.30(c)(3)(i)'s example refers to information about a hospital
bill that a creditor ``receives'' (which the commenter also said was
ambiguous). This commenter also suggested that the CFPB require
creditors to include a disclaimer on credit applications to inform
consumers that it is not necessary to include medical debt information
and if the consumer chooses to disclose such information, it will be
used by the creditor to determine the consumer's creditworthiness.
Medical Services, Products, and Devices
The CFPB also received comments about whether specific types of
services, products, or devices should be considered ``medical services,
products, or devices'' under the proposed medical debt information
definition. Several commenters stated that the CFPB's proposed
definition was unclear in this regard and as a result may lead to
confusion and add to the compliance and operational burden for
regulated entities and small businesses.
Several commenters stated that information about debt arising from
dental care should be included in the scope of the medical debt
information definition. One of the commenters emphasized that dental
debt can present a burden for consumers, citing reports that many
Americans report that dental bills are the cause of some of their
medical debt and that there may be a disproportionate impact on Black
and Latino communities who have a higher incidence of periodontal
disease. The commenter also noted that many dental costs may not be
covered by health insurance. Another commenter stated that the CFPB
should explicitly note in the final rule and provide official staff
commentary stating that medical debt information includes information
about dental debt. The commenter suggested that the CFPB revise its
proposed medical debt information definition to change references to
``medical services, products, or devices'' to ``health care services,
products, or devices'' to capture information about dental debt. Other
commenters questioned generally if dental debt was within the scope of
the CFPB's proposed definition.
Several commenters raised questions about whether debt related to
other specific types of services, products, or devices were included in
the CFPB's proposed medical debt information definition. For example,
the commenters asked for clarity about whether veterinarian services,
eye care or vision services, counseling, therapy, over-the-counter
medication, bandages, dermatological services, cosmetic procedures,
pharmacy expenses, primary and specialty care, lab and diagnostic
expenses, other outpatient care, and massages were covered under the
definition.
Elective Medical Care
Some commenters suggested that the CFPB's final rule should
distinguish between information about medical debt that arises from
elective care versus non-elective (or emergency) care. Generally, these
commenters stated that elective medical procedures are typically
planned and discretionary, unlike non-elective medical debt which arise
from unexpected or unavoidable circumstances. Specifically, the
commenters stated that elective medical care reflect a consumer's
conscious financial decision and thus should be included in creditors'
determination of a consumers' ability to repay a future loan. The
commenters suggested that by categorizing medical debt in this way, the
CFPB would be able to protect consumers from the adverse effects of
medical debt and also allow lenders to have access to necessary
information for making informed credit decisions. One commenter
similarly suggested that the CFPB's final medical debt information
definition not include information about debt arising from elective
procedures, unless the elective procedure was needed as the result of
an injury or illness. Another commenter suggested that the CFPB
distinguish between non-elective care and other types of health care-
related debt, including daily goods and services. A few commenters
suggested that the CFPB's rule should not apply to elective and
cosmetic surgery and should be limited to emergency medical treatment
only.
One commenter stated that the CFPB's approach may lead to unequal
treatment. The commenter, who generally argued that the CFPB's proposal
would cause distortions in the credit market, stated that consumers
with recurring medical expenses would benefit less from the rule,
because they continually will have new medical debts.
One commenter, who also generally supported the CFPB's proposed
rule and urged the CFPB to include debt paid for with third-party
medical payment products in the final medical debt definition,
suggested that CFPB restrict reporting of debt paid for with third-
party medical payment products unless the medical provider and the
consumer each attest to the elective or non-elective nature of the
medical service, to allow the medical and financial industries to
report debt related to only elective medical care to a consumer
reporting agency, but did not make a

[[Page 3294]]

similar suggestion for medical debts owed directly to a health care
provider.
Final Rule--Definition, Medical Debt Information (Sec. 1022.3(j))
For the reasons stated herein, the CFPB finalizes its definition as
proposed for medical debt information at Sec. 1022.3(j). Under final
Sec. 1022.3(j), medical debt information is defined as medical
information that pertains to a debt owed by a consumer to a person
whose primary business is providing medical services, products, or
devices (also referred to herein as a health care provider), or to the
person's agent or assignee, for the provision of such medical services,
products, or devices. The definition also provides that medical debt
information includes, but is not limited to, medical bills that are not
past due or that have been paid.
Generally, under the final definition, for information about a debt
to be medical debt information, it must meet two requirements. First,
the debt must be directly owed to a person whose primary business is
providing medical services, products, or devices, or their agent or
assignee. Second, the debt must be for the provision of the medical
services, products, or devices by the health care provider.
The final definition is adapted from FCRA section 623(a)(9), which
defines the term ``medical information furnisher'' as a person whose
primary business is providing medical services, products, or devices,
or the person's agent or assignee, who furnishes information to a
consumer reporting agency on a consumer. The CFPB believes that
aligning the definition of ``medical debt information'' with the FCRA
definition for ``medical information furnisher'' will provide a
familiar standard under the FCRA that will facilitate compliance with
the proposed rule. For consumer reporting agencies specifically, the
CFPB anticipates that the self-identification of medical information
furnishers under FCRA section 623(a)(9) will assist consumer reporting
agencies in identifying and excluding medical debt information from
consumer reports provided to creditors, as required under final Sec.
1022.38.
The CFPB intends for the final medical debt information definition
to align with the CFPB's interpretation of FCRA section 603(i) as to
medical information and thus correspond with the scope of the medical
information about a consumer's medical debts that a creditor generally
may not obtain or use under final Sec. 1022.30, as revised to remove
the financial information exception at Sec. 1022.30(d). The medical
debt information definition also establishes what medical information a
consumer reporting agency must consider in complying with final Sec.
1022.38.
General Comments and Payment Status
The CFPB agrees with the commenter stating that including a medical
debt definition in the final rule will facilitate compliance and
enforcement of the final rule. The CFPB also appreciates the comments
supporting the proposed definition's clarification that medical debt
information includes information about medical bills that are not past
due or that have been paid. The CFPB disagrees, however, with one
commenter's suggestion that the CFPB include a specific example in the
text of the regulation as to a past-due medical bill. The CFPB believes
that it is clear from the definition and use of the term ``debt'' that
medical information about a past-due medical bill is medical debt
information under the rule.
Agents and Assignees
The CFPB appreciates the comments it received supporting its
interpretation that agents and assignees of a health care provider
under the proposed medical debt information definition includes third-
party debt collectors and debt buyers. The CFPB is finalizing this
approach for the proposed definition (which the CFPB intends to align
with the scope of medical debt information under its interpretation of
FCRA section 603(i)). The CFPB declines to implement a suggestion from
one commenter that it explicitly reference debt buyer and third-party
debt collectors in the text of the regulation. The CFPB believes the
medical debt information definition is sufficiently clear and finalizes
Sec. 1022.3(j) as proposed.
Health Care Providers
Under the CFPB's proposed and final definition at Sec. 1022.3(j),
for information about a consumer's debt to be medical debt information,
the debt must be owed by the consumer to ``a person whose primary
business is providing medical services, products, or devices.'' For the
purposes of this document, the CFPB refers to such a person as a health
care provider. As noted above, this aspect of the final medical debt
information definition at Sec. 1022.3(j) is adapted from the
definition of ``medical information furnisher'' in FCRA section
623(a)(9) and the CFPB anticipates it will provide a familiar standard
that will facilitate compliance with the final rule.
Some commenters asked for clarification as to whether specific
types of providers, such as providers of complementary and alternative
medicine or pharmacies, would be health providers under the rule. The
CFPB notes neither the definition of medical information in FCRA
section 603(i) nor the definition of medical information furnisher in
FCRA section 623(a)(9) states that only providers of certain kinds of
health care are ``medical.'' The CFPB likewise declines to do so for
the final rule. Generally, the CFPB anticipates that whether a provider
is a health care provider for the purposes of the final rule will
depend on the specific facts and circumstances for each provider. The
CFPB also anticipates that such determinations may be guided by whether
such providers, as well as their agents and assignees, notify consumer
reporting agencies of their status as medical information furnishers
under FCRA section 623(a)(9).
As to the comment seeking clarification about whether hospitals and
health care facilities and facility fees they may charge would be
covered under the CFPB's rule, the CFPB believes the definition is
sufficiently clear and as a result declines to revise the definition to
reference hospitals and health care facilities as suggested by the
commenter. However, while generally a determination as to whether a
person is a health care provider under the final rule may depend on
individual facts and circumstances, the CFPB believes that hospitals
and health care facilities are plainly ``person[s] whose primary
business is providing medical services, products, or devices.''
Further, the CFPB also believes that facility fees that may be charged
in association with a consumer's health care are clearly part of the
``provision of such medical services, products, or devices'' to a
consumer and that information about a medical debt arising from such
fees are medical debt information under the final rule, even if the
specific medical professional providing care at, for example, a
hospital sends a separate bill for the care provided.
In response to one commenter expressing concerns about hospitals
and requesting the CFPB require disclaimers on credit applications, the
CFPB does not believe that any examples in Sec. 1022.30 should be
revised to refer to something other than a hospital bill where
currently used. The examples are meant to be illustrative and hospital
bills are often a source of medical information, even if they contain
errors. Further, the CFPB declines to require creditors to include a
disclaimer informing consumers that they do not need to provide medical
debt

[[Page 3295]]

information on credit applications. Such a disclaimer would not be an
accurate reflection of the proposed or final rule.
Medical Services, Products, and Devices
The CFPB disagrees with commenters stating that the proposed
definition for medical debt information, which the CFPB is finalizing
as proposed, is unclear. As noted earlier, neither the definition of
medical information in FCRA section 603(i) nor the definition of
medical information furnisher in FCRA section 623(a)(9) states that
only certain types of health care or providers of such health care are
``medical.'' It also does not state that only certain types of
services, products, or devices are ``medical.'' The CFPB accordingly
declines to specify in the text of the definition or in official
commentary, as urged by a commenter, that certain types of medical
services, products, or devices are covered under the CFPB's medical
debt information definition or under the CFPB's interpretation of FCRA
section 603(i). As with health care providers, the CFPB anticipates
that industry's interpretation of the similar definition for medical
information furnisher under FCRA section 623(a)(9) will provide a
familiar standard that will facilitate compliance with the final rule.
Generally, as long as both requirements of the definition are
satisfied (i.e., that the debt is directly owed to a health care
provider, or their agent or assignee, and it is for the provision of
medical services, products, or devices), information about the debt at
issue is considered medical debt information under the final rule.
Thus, for example, the CFPB would anticipate that debt owed to an
optometry or ophthalmology practice (or its agent or assignee) arising
from its provision of eye care would be covered under the CFPB's final
rule, as well as a debt owed to a dental practice (or its agent or
assignee) arising from its provision of dental care. Similarly, the
CFPB would also anticipate that a debt owed to a health care provider
or a supplier of durable medical equipment (or their agent or assignee)
arising from the purchase of a wheelchair, or a debt owed to a supplier
of orthotic and prosthetic devices (or its agent or assignee) arising
from the purchase of a prosthetic limb, would generally also be covered
under the final rule. However, a debt to a grocery store arising from
bandages purchased there would not meet the requirements, because the
primary business of the grocery store is not the provision of medical
services, products, or devices.
Elective Medical Care
Some commenters urged the CFPB to distinguish and provide different
treatment under the final rule for different types of medical debt,
including as to debt arising from elective care versus non-elective
care or emergency care. The CFPB understands that many elective
procedures are treatment for serious illnesses and health conditions
that are often unanticipated. In such circumstances, consumers still
have limited ability to shop around or control the timing of costs.
And, many of the factors regarding errors in medical billing and
collections still apply to limit the value of information about such
types of medical debt. Further, CFPB research discussed elsewhere in
this preamble indicates generally that the use of medical debt
information (including information about debts related to both elective
and non-elective medical care) in credit eligibility determinations
does not reduce the delinquency risk faced by creditors, and commenters
have not cited any research establishing that debt related to elective
medical care is more predictive of delinquency risk than debt related
to non-elective medical care. As a result, after further consideration,
the CFPB declines to provide different treatment for debt arising from
elective care than from other types of medical debt under the final
rule.
The CFPB also disagrees with the commenter stating that a failure
to distinguish between medical debt arising from elective care versus
non-elective care would benefit consumers unequally because some
consumers have recurring medical expenses that may lead to new debt.
Under the final rule, treatment by creditors and consumer reporting
agencies of medical debt will be the same, without regard to whether
the debt is recurring. To the extent the commenter was expressing the
general concern, also expressed by other commenters, that the rule
would impact creditors' ability to accurately assess consumers'
delinquency risk because they would have less information about
consumers' medical debts, the CFPB disagrees as discussed in part VII,
CFPA Section 1022(b) Analysis.
Determination that Medical Debt Information Is Not Necessary and
Appropriate for Credit Eligibility Determinations
Under FCRA section 604(g)(5), the CFPB (like the predecessor
Agencies before it) has authority to permit an exception to the
creditor prohibition that it determines to be necessary and
appropriate, consistent with the intent of the creditor prohibition to
restrict the use of medical information for inappropriate
purposes.\121\
---------------------------------------------------------------------------

\121\ 15 U.S.C. 1681b(g)(5).
---------------------------------------------------------------------------

When the predecessor Agencies established the existing financial
information exception at Sec. 1022.30(d), it appears that the Agencies
addressed specific comments on the parameters of their proposal for the
financial information exception (which they substantially finalized as
proposed) but did not provide evidence or analysis to support their
determination.\122\
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\122\ 70 FR 33958, 33966-67 (June 10, 2005); see also part
III.B, Fair Credit Reporting Act.
---------------------------------------------------------------------------

In the period since the predecessor Agencies enacted their rule,
creditors have been able to obtain and use financial information
relating to a consumer's medical debts as a result of the financial
information exception. However, and as the CFPB explained in its
proposal, there has been a significant body of research and marketplace
changes that have shed more light on the nature of medical debt and
financial information available to creditors about medical debt. The
CFPB stated that these developments provide a more nuanced picture that
raises questions about creditors' use of medical debt information in
credit underwriting.
In consideration of its stated points, the CFPB preliminarily
determined that it is not ``necessary and appropriate to protect
legitimate operational, transactional, risk, consumer, and other
needs'' for creditors to consider sensitive financial information
concerning consumers' medical debt, nor is it consistent with the
intent of the creditor prohibition to restrict the use of medical
information for inappropriate purposes, as required for an exception
under FCRA section 604(g)(5).\123\ The CFPB sought comment on its
preliminary determination.
---------------------------------------------------------------------------

\123\ 15 U.S.C. 1681b(g)(5).
---------------------------------------------------------------------------

In support of this preliminary conclusion, the CFPB cited a number
of points. Comments addressing these points, and others, are discussed
below, with references where they are also discussed in part VII, CFPA
Section 1022(b) Analysis, as part of the CFPB's discussion of the
potential benefits, costs, and impacts of the rule.
First, the CFPB noted that recent research has demonstrated that
unlike other types of debt, medical debt often results from an event
such as an accident or sudden illness.\124\ In these

[[Page 3296]]

circumstances, the CFPB explained that consumers have no control over
whether to incur a debt; they may have limited or no ability to shop
around and may not be able to control the amount or timing of their
costs.
---------------------------------------------------------------------------

\124\ Lunna Lopes et al., Kaiser Fam. Found., Health Care Debt
in the U.S.: The Broad Consequences of Medical and Dental Bills
(June 16, 2022), <a href="https://www.kff.org/health-costs/report/kff-health-care-debt-survey/">https://www.kff.org/health-costs/report/kff-health-care-debt-survey/</a> (results of national survey show that 7 in 10
adults with health care debt say that the bills that led to their
debt were for a one-time or short-term medical expense).
---------------------------------------------------------------------------

Many commenters, who generally supported the CFPB's proposal,
agreed with these findings by the CFPB. Some such commenters emphasized
that patients in need of urgent or emergency medical care are not in a
position to negotiate the costs of their care and have little choice
about which health providers to receive care from based on who will
accept their insurance (if the consumer has any). A few commenters also
stated there is also generally a lack of price transparency for care,
despite Federal law requiring it, because providers may not comply with
the law or the prices are missing, unreliable, or difficult to obtain
in advance or because of the health providers' practice (also known as
chargemaster pricing) of charging high rates that are discounted for
insurers but not for uninsured or out-of-network patients.
In contrast, and as described in more detail in part VII, CFPA
Section 1022(b) Analysis, commenters opposing the CFPB's proposed rule
alleged that the CFPB had overstated the extent to which medical debt
results from circumstances over which consumers have no control. The
commenters also stated that there is no statutory basis for excluding a
creditor's consideration of such debt because it is unexpected. They
further questioned this aspect of the CFPB's rationale, noting that the
CFPB's proposal is not limited to just unexpected medical debt and also
covered elective services. These commenters and others stated their
opinion that, even assuming a medical debt is unexpected, there are
many consumer debts that are the result of unplanned events that are
not the fault of the consumer and all such information is still
pertinent for credit underwriting regardless of their underlying cause.
Another commenter stated that even if medical debt is not a good
indicator of a consumer's repayment risk because in many cases it is
unavoidable or the result of an emergency, it does not alter the
consumer's ability to repay even if relevant to a consumer's
willingness to repay. One commenter stated that medical debt should not
be treated differently from other kinds of consumer debt because it is
taken on involuntarily, because consumers are aware that illness is
inevitable and should be saving for such expenses.
As explained above and in part VII, CFPA Section 1022(b) Analysis,
available data implies that a substantial fraction of medical debt
results from unplanned expenditures. The CFPB did not state in its
proposal or mean to imply that all medical debt is the result of sudden
events. However, as stated in the NPRM, the fact that much medical debt
is unexpected means that, as to much medical debt, consumers had
limited ability to understand and control costs or their timing,
distinguishing such debt from other types of consumer debt. For
example, as noted by a commenter, even when a hospital must make prices
known to consumers under Federal law,\125\ reporting indicates that
consumers may still have difficulty ascertaining the cost of their
care.\126\ And, while consumers may also encounter a need to take on
debt as a result of unexpected, non-medical events, the CFPB notes that
medical debt is also unique in ways that limit its informational value,
such as because of the prevalence of errors in such information and
inconsistent reporting, as further addressed below and elsewhere in
this preamble.
---------------------------------------------------------------------------

\125\ See 45 CFR part 180 (Centers for Medicare & Medicaid
Services Hospital Price Transparency rule).
\126\ See U.S. PIRG Educ. Fund, Post the Price: Hospital Price
Transparency Could Save Patients Thousands (May 2024), <a href="https://publicinterestnetwork.org/wp-content/uploads/2024/05/Re-uploaded-Revised-After-Release_-Cleveland-Price-Transparency-Report-.pdf">https://publicinterestnetwork.org/wp-content/uploads/2024/05/Re-uploaded-Revised-After-Release_-Cleveland-Price-Transparency-Report-.pdf</a>.
---------------------------------------------------------------------------

In response to commenters noting that the rule covers both non-
elective care that stems from emergency health needs as well as
elective care that is planned, the CFPB notes that, as discussed above
with regard to comments about the proposed medical debt information
definition, elective care is inclusive of necessary health care for
unanticipated health conditions. Further, many of the same issues
limiting the informational value of information about non-elective care
applies to medical debt information about elective care.
With regard to the comment about how medical debt information, even
if related to an unexpected or sudden health event, is relevant to a
creditor's assessments of a consumer's ability to repay, the CFPB
refers to its discussion in part VII.E.5, as to the availability of
information on consumer reports used in underwriting and the ability-
to-repay or pay requirements under the Truth in Lending Act and
Regulation Z.
In the proposal, the CFPB also noted that, second, in the period of
time since the predecessor Agencies enacted their rule, more evidence
has come to light showing that information about medical debt is prone
to error. The CFPB stated that third-party surveys and complaints
received by the CFPB have shown that medical bills commonly contain
errors and are frequently disputed by consumers.\127\ Further, the CFPB
noted that the complexity of medical billing, the third-party
reimbursement process, and debt collection practices can lead to
consumer confusion on payment due dates and amounts owed for medical
bills, as well as questions about the accuracy of their bills.\128\
---------------------------------------------------------------------------

\127\ See, e.g., Karen Pollitz & Kaye Pestaina, Kaiser Fam.
Found., Could Consumer Assistance Be Helpful to People Facing
Medical Debt? (July 14, 2022), <a href="https://www.kff.org/policy-watch/could-consumer-assistance-be-helpful-to-people-facing-medical-debt/">https://www.kff.org/policy-watch/could-consumer-assistance-be-helpful-to-people-facing-medical-debt/</a>
(reporting survey results that 43 percent of all adults and 53
percent of adults with health care debt say they thought they
received a medical or dental bill with an error).
\128\ See, e.g., Consumer Fin. Prot. Bureau, Medical Debt Burden
in the United States, at 9-14 (Feb. 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf">https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf</a> (describing issues with medical
billing and collections practices); Gideon Weissman et al., Frontier
Grp. & U.S. Pub. Int. Rsch. Grp. Educ. Fund, Medical Debt
Malpractice: Consumer Complaints About Medical Debt Collectors, and
How the CFPB Can Help (Spring 2017), <a href="https://publicinterestnetwork.org/wp-content/uploads/2017/04/Medical-Debt-Malpractic-vUS-1.pdf">https://publicinterestnetwork.org/wp-content/uploads/2017/04/Medical-Debt-Malpractic-vUS-1.pdf</a> (63 percent of medical debt collection
complaints submitted to the CFPB asserted that the debt had never
been owed in the first place, had already been paid or discharged in
bankruptcy, or was not verified as the consumer's debt).
---------------------------------------------------------------------------

Comments about inaccuracy and errors in medical debt information
and with medical billing are addressed in part VII, CFPA Section
1022(b) Analysis. However, to summarize at a high level, the CFPB
received a large number of comments agreeing with the CFPB's point,
with many commenters providing or citing to consumer anecdotes or
publicly available consumer complaints about consumers encountering
errors in their medical bills, notices of collection for medical debt,
or on their consumer reports. In addition to the issues raised by the
CFPB, commenters also stated that third-party debt collectors and debt
buyers often lack access to original creditors' systems of records
about medical debt, which can lead to errors on collection notices sent
to consumers or in medical debt information reported to consumer
reporting agencies. Several commenters also flagged that many consumers
have difficulty understanding medical bills, navigating insurance
appeals, or successfully using the dispute process for errors related
to medical debt information on their consumer reports, suggesting that
the

[[Page 3297]]

rate of error may be higher than is known.
Some commenters generally opposing the CFPB's proposal did not
disagree with the CFPB that information about medical debt often
contains errors, but either implied that even erroneous medical debt
information is needed for accurate credit assessments or stated that
the solution for errors in medical debt information is to improve the
accuracy of medical debt information that is reported to consumer
reporting agencies or reform the health care system. One commenter
stated that billing errors should be resolved between health care
providers and consumers rather than by removing medical debt
information from consumer reports. Other commenters opposing the
proposal stated that the CFPB's assessment that information about
medical debt is prone to error is based upon biased and/or flawed
studies and information.
As explained in detail in part VII, CFPA Section 1022(b) Analysis,
the CFPB understands that many medical collections included on consumer
reports reflect incorrect billing, including debts that were already
paid by either the consumer or by their insurance company, or debts
that are not owed by the consumer. Further, the CFPB understands that
the prevalence of such errors could be due to factors such as that,
unlike other consumer debts like banking/financial debts, nearly all
credit reporting of medical debt is managed by third-party debt
collection agencies, who may have limited access to the original
creditors' systems of records.\129\ The CFPB disagrees with commenters
implying that erroneous medical debt information can assist in making
accurate evaluations of a consumer's ability to repay future debt. The
CFPB has also assessed potential alternatives for improving the
accuracy of medical debt information reported to consumer reporting
agencies and determined that such measures would not be sufficient to
achieve the objective of protecting consumer privacy with respect to
sensitive medical information.
---------------------------------------------------------------------------

\129\ Consumer Fin. Prot. Bureau, Market Snapshot: An Update on
Third Party Debt Collections Tradelines Reporting, at 5 (Feb. 2023),
<a href="https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf">https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf</a>.
---------------------------------------------------------------------------

In support of its preliminary determination, the CFPB also
explained that, third, its work shows that medical debt information has
relatively limited predictive value. Generally, the CFPB cited its
research from 2014, which the CFPB explained found that medical debt
collections tradelines (also referred to as medical collections) are
less predictive of future consumer credit performance than nonmedical
collections.\130\ The CFPB cited research included in part XI,
Technical Appendix, of the NPRM (which is also addressed in part XII,
Technical Appendix, of this final rule), which the CFPB said suggests
that not only can creditors responsibly underwrite credit without
information about consumers' medical debts, but also that such
information may lead to a market failure because it may be an
inaccurate signal of whether a consumer will pay a future debt. The
CFPB also stated that under the assumption that two-year serious
delinquency is a good proxy for the overall risk of a credit account,
the Technical Appendix implies that information about consumers'
medical debts distorts underwriting decisions, impairs creditors'
ability to make safe and low-risk credit approvals, and thus reduces
credit approval volumes within creditors' risk-tolerances.
---------------------------------------------------------------------------

\130\ Kenneth P. Brevoort & Michelle Kambara, Consumer Fin.
Prot. Bureau, Data point: Medical debt and credit scores (May 2014),
<a href="https://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit-scores.pdf">https://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit-scores.pdf</a>.
---------------------------------------------------------------------------

The CFPB also noted that two major credit score providers had
adjusted their newer models to reduce or eliminate the weight of
medical debt collections,\131\ which it said further confirmed the
limited value of medical debt information for ensuring that credit
decisions are based on whether a consumer will repay a loan. The CFPB
observed that, however, some widely used models still weigh medical and
nonmedical collections equally.\132\ The CFPB stated that this means
that consumers with medical debt may still be negatively affected if
creditors use older scoring models that overweigh medical debt.
---------------------------------------------------------------------------

\131\ See VantageScore, Major Credit Score News: VantageScore
Removes Medical Debt Collection Records From Latest Scoring Models
[Update] (Aug. 10, 2022), <a href="https://www.vantagescore.com/major-credit-score-news-vantagescore-removes-medical-debt-collection-records-from-latest-scoring-models/">https://www.vantagescore.com/major-credit-score-news-vantagescore-removes-medical-debt-collection-records-from-latest-scoring-models/</a> (VantageScore to remove medical
collection data from VantageScore 3.0 and 4.0 models by January
2023); Ethan Dornhelm, The Impact of Medical Debt Collections on
FICO Scores, FICO Blog (July 13, 2015), <a href="https://www.fico.com/blogs/impact-medical-debt-collections-ficor-scores">https://www.fico.com/blogs/impact-medical-debt-collections-ficor-scores</a> (describing changes to
FICO Score 9 with regard to medical collections).
\132\ Consumer Fin. Prot. Bureau, Medical Debt Burden in the
United States, at 27-28 (Feb. 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf">https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf</a>.
---------------------------------------------------------------------------

Comments about the CFPB's findings and research about the limited
predictive value of medical debt information are discussed in part VII,
CFPA Section 1022(b) Analysis. Generally, however, the CFPB received
comments both agreeing and disagreeing with the CFPB's findings about
the value of medical debt information for predicting a consumer's
ability to repay a future debt. Commenters disagreeing with the CFPB's
conclusions emphasized that the CFPB's research states that medical
debt is less predictive and is not ``not'' predictive of a consumer's
risk of delinquency. These commenters also stated that because, in
their view, medical debt information is predictive, creditors need such
information to make accurate assessments of a consumers'
creditworthiness and capacity to take on debt. One commenter also
stated that the CFPB had failed to consider whether voluntarily
incurred medical debt differs from involuntarily incurred medical debt
in terms of predictiveness. Commenters disputing the CFPB's finding
that medical debt information has limited predictive value also stated
that even though one major credit score provider, VantageScore, has
removed medical debt as a factor in its newer credit score models,
another major credit score provider, FICO, has found that consumers
with unpaid medical debt tradelines are more risky than consumers
without any derogatory information in their credit files.
Commenters opposing the rule also stated that several public
statements by CFPB officials that medical debt information is not
predictive contradict the CFPB's research findings that medical
collections information is relatively less predictive than nonmedical
collections information. Commenters also stated that the proposal
conflicts with the CFPB's positions in other contexts, such as with
regard to a CFPB blog post about credit reporting and the buy now pay
later industry encouraging more information furnishing of both positive
and negative information.\133\
---------------------------------------------------------------------------

\133\ Martin Kleinbard & Laura Udis, Buy Now, Pay Later and
Credit Reporting, Consumer Fin. Prot. Bureau (June 15, 2022),
<a href="https://www.consumerfinance.gov/about-us/blog/by-now-pay-later-and-credit-reporting/">https://www.consumerfinance.gov/about-us/blog/by-now-pay-later-and-credit-reporting/</a>.
---------------------------------------------------------------------------

As explained further by the CFPB in part VII, CFPA Section 1022(b)
Analysis, the CFPB maintains that its research shows that medical debt
information overall has only limited predictive value and the CFPB
expects that medical collections can be removed from underwriting
models without significantly reducing their ability to predict serious
delinquency if underwriting models continue to include other variables
that are sufficiently predictive of delinquency risk. The CFPB reminds
creditors and

[[Page 3298]]

consumer reporting agencies to look to the requirements of the final
rule to determine their compliance obligations and not statements
generally characterizing the rule for the public. The CFPB also
disagrees with commenters that the CFPB's proposed approach is
contradictory; any general statements about credit reporting or
consideration of consumer information for credit eligibility were made
under contexts specific to those statements and were not made in
consideration of the findings, evidence, and policies for this final
rule.
In support of its preliminary determination, the CFPB also noted
that, fourth, the inconsistent nature of medical collection furnishing
and medical debt collection practices likely limits the value of such
information for credit underwriting. The CFPB expressed that the vast
majority of such medical debt reporting is done by third-party debt
collectors,\134\ who use consumer reporting as a way to coerce
consumers to pay medical debt, even in some cases for medical debt that
the consumer may not owe or that has already been paid.\135\ However,
the CFPB also explained that not all medical debt is reported; not all
medical debt collectors report medical debts to consumer reporting
agencies and health care providers themselves rarely do so.\136\ The
CFPB suggested that these issues imply that even consumers with similar
amounts of medical debt may face markedly different outcomes in the
credit market based on whether their medical debt is furnished or not.
---------------------------------------------------------------------------

\134\ Consumer Fin. Prot. Bureau, Market Snapshot: An Update on
Third-Party Debt Collections Tradelines Reporting, at 16 (Feb.
2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf">https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf</a> (as of Q1 2022, 57 percent of all tradelines were medical
collections and were the most common collections type); Consumer
Fin. Prot. Bureau, Market Snapshot: Third-Party Debt Collections
Tradelines Reporting, at 12-13 (July 2019), <a href="https://files.consumerfinance.gov/f/documents/201907_cfpb_third-party-debt-collections_report.pdf">https://files.consumerfinance.gov/f/documents/201907_cfpb_third-party-debt-collections_report.pdf</a> (finding that 58 percent of collections
tradelines in credit records from 2004 to 2018 were for medical
debt); Consumer Fin. Prot. Bureau, Consumer credit reports: A study
of medical and non-medical collections, at 5 (Dec. 2014), <a href="https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf">https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf</a> (medical collections account
for 52.1 percent of all collections tradelines).
\135\ See Consumer Fin. Prot. Bureau, Market Snapshot: An Update
on Third-Party Debt Collections Tradelines Reporting, at 12 n.9
(Feb. 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf">https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf</a> (describing how medical tradelines often do
not persist on consumer reports, how medical collections accounts
are rarely marked as paid, and noting ``pay-to-delete'' practices
used by debt collectors and debt buyers to pressure consumers into
paying or settl

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