Consumer Financial Protection Bureau says change will strike $49bn in medical debt from credit reports.
Consumers in the United States will no longer have medical debt appear on their credit reports under changes that will make it easier for millions of Americans to obtain loans.
The new rule means that lenders will be barred from using medical information in their lending decisions, the Consumer Financial Protection Bureau (CFPB) said on Tuesday.
Under the change, an estimated $49bn in medical debt will be struck from the credit reports of more than 15 million Americans, the CFPB said.
The consumer watchdog said that its research showed that medical debt is a poor predictor of whether a loan will be repaid, and it expects the changes to result in the approval of approximately 22,000 additional mortgages every year.
“People who get sick shouldn’t have their financial future upended,” CFPB Director Rohit Chopra said in a statement.
“The CFPB’s final rule will close a special carveout that has allowed debt collectors to abuse the credit reporting system to coerce people into paying medical bills they may not even owe.”
US Vice President Kamala Harris said the rule “will help more Americans save money, build wealth, and thrive”.
The measure comes less than two weeks before US President Joe Biden is set to hand over control of the White House to US President-elect Donald Trump.
It is unclear if the rule, which takes 60 days to come into effect, will survive in its current form under Trump, who has pledged to slash government regulations and roll back much of Biden’s agenda.
A number of Republicans expressed concerns that the proposed change would weaken the accuracy of credit reports.
The Consumer Data Industry Association and other trade groups representing financial institutions opposed the change, while the American Medical Association backed the measure.