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

Federal RegisterJan 14, 2025

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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.

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

https://reginquiries.consumerfinance.gov/.

If you require this document in an alternative electronic format, please contact

CFPB_Accessibility@cfpb.gov.

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).

In doing so, Congress “establish[ed] strong privacy protections for consumers' sensitive medical information,”

in line with the overarching privacy protection purpose of the FCRA.

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.

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.

Fair and Accurate Credit Transactions Act of 2003 (FACT Act), Public Law 108-159, 117 Stat. 1952, 1999 (2003).

149 Cong. Rec. H8122-02, H8122 (daily ed. Sept. 10, 2003) (statement of Rep. Kanjorsky).

15 U.S.C. 1681

et seq.,

1681(a)(4).

15 U.S.C. 1681b(g)(2).

15 U.S.C. 1681b(g)(5).

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.

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.

70 FR 70664 (Nov. 22, 2005).

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.

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.

See, e.g.,

Kenneth P. Brevoort & Michelle Kambara, Consumer Fin. Prot. Bureau,

Data point: Medical debt and credit scores

(May 2014),

https://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit-scores.pdf. See also

Mark Rukavina,

Medical Debt and Its Relevance When Assessing Creditworthiness,

46 Suffolk U. L. Rev. 967 (2013),

https://bpb-us-e1.wpmucdn.com/sites.suffolk.edu/dist/3/1172/files/2014/01/Rukavina_Lead.pdf.

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.

Major credit scoring companies have accorded less weight to, or excluded entirely, medical debt information in their newer scoring models.

Similarly, some creditors have adjusted how their underwriting standards treat medical debt information.

See, e.g.,

Bus. Wire,

Equifax, Experian, and TransUnion Support U.S. Consumers With Changes to Medical Collection Debt Reporting

(Mar. 18, 2022),

https://www.businesswire.com/news/home/20220318005244/en/Equifax-Experian-and-TransUnion-Support-U.S.-Consumers-With-Changes-to-Medical-Collection-Debt-Reporting.

See

AnnaMaria Andriotis,

Major Credit-Score Provider to Exclude Medical Debts,

Wall St. J. (Aug. 10, 2022),

https://www.wsj.com/articles/major-credit-score-provider-to-exclude-medical-debts-11660102729

(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),

https://www.fico.com/blogs/impact-medical-debt-ficor-scores.

See, e.g.,

Fed. Nat'l Mortg. Ass'n,

Single Family Selling Guide,

B3-2-03 (2021),

https://selling-guide.fanniemae.com/#Public.20Records.2C.20Foreclosures.2C.20and.20Collection.20Accounts

(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),

https://guide.freddiemac.com/app/guide/section/5201.1;

U.S. Dep't of Hous. & Urban Dev.,

Single Family Housing Policy Handbook,

4000.1 (2021),

https://www.hud.gov/sites/dfiles/OCHCO/documents/4000.1hsgh-112021.pdf. 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),

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/

(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).

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 §§ 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)

(

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).

The amendments also apply to a consumer reporting agency as defined in section 603(f) of the FCRA.

Public Law 111-203, 124 Stat. 1955, 2004 (2010).

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.

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.

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 § 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 § 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 § 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 § 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 § 1022.30(d) by moving relevant provisions to the list of specific exceptions to the creditor prohibition at § 1022.30(e)(1)(x), with technical edits for renumbering, and is finalizing proposed § 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 § 1022.30(e)(1)(x)(A) to add a new provision at final § 1022.30(e)(1)(x)(A)(

), 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 § 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 § 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 § 1022.30; and (2) the

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 § 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 § 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 § 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 § 1022.30(e), as applicable. With respect to the ability-to-repay requirements in Regulation Z § 1026.43(c), final Example 6 also contains additional information on the interplay between the ability-to-repay requirement in Regulation Z § 1026.43(c) and final § 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.

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.

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),

https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf.

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),

https://www.kff.org/report-section/kff-health-care-debt-survey-main-findings/

(reporting results of 2022 Kaiser Family Foundation Health Care Debt Survey, which polled 2,375 adults).

Several characteristics of medical debt pose special risks to consumers and distinguish it from other types of debt.

The need for medical care can be unexpected,

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.

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.”

Americans that live in rural communities may also experience limited choices when trying to access health care,

which may impact the amount of their medical debt in ways that are not reflective of their other debts.

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),

https://www.govinfo.gov/content/pkg/FR-2022-01-20/pdf/2022-01012.pdf;

Consumer Fin. Prot. Bureau,

Consumer credit reports: A study of medical and non-medical collections,

at 15-16, 38-42 (Dec. 2014),

https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf.

See

Consumer Fin. Prot. Bureau,

Complaint Bulletin: Medical billing and collection issues described in consumer complaints,

at 7 (Apr. 2022),

https://files.consumerfinance.gov/f/documents/cfpb_complaint-bulletin-medical-billing_report_2022-04.pdf

(describing consumer complaints received by the CFPB about unexpected medical care).

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),

https://www.kff.org/report-section/kff-health-care-debt-survey-main-findings/

(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),

https://www.commonwealthfund.org/publications/surveys/2023/oct/paying-for-it-costs-debt-americans-sicker-poorer-2023-affordability-survey

(about half of adults with medical debt say it is from treatment received for an ongoing condition).

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),

https://www.govinfo.gov/content/pkg/FR-2022-01-20/pdf/2022-01012.pdf. See also

Consumer Fin. Prot. Bureau,

Complaint Bulletin: Medical billing and collection issues described in consumer complaints,

at 7-8 (Apr. 20, 2022),

https://www.consumerfinance.gov/data-research/research-reports/complaint-bulletin-medical-billing-and-collection-issues-described-in-consumer-complaints/

(detailing consumer complaints received by the CFPB).

See, e.g.,

U.S. Gov't Acct. Off.,

Health Care Capsule: Accessing Health Care in Rural America

(May 2023),

https://www.gao.gov/assets/gao-23-106651.pdf

(generally describing health care access challenges for rural populations).

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.

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

applicable) and, if so, whether and to what extent the amount was already paid or reduced.

Also some health care providers and debt collectors exploit these complications and charge inflated or unearned bills.

See, e.g.,

Karen Pollitz & Kaye Pestaina, Kaiser Fam. Found.,

Could Consumer Assistance Be Helpful to People Facing Medical Debt?

(July 14, 2022),

https://www.kff.org/policy-watch/could-consumer-assistance-be-helpful-to-people-facing-medical-debt/

(analyzing results of 2022 Kaiser Family Foundation Health Care Debt Survey).

See, e.g.,

Consumer Fin. Prot. Bureau,

Medical Debt Burden in the United States,

at 9-14 (Feb. 2022),

https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf

(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),

https://files.consumerfinance.gov/f/documents/cfpb_complaint-bulletin-medical-billing_report_2022-04.pdf.

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),

https://www.justice.gov/opa/pr/hospital-chain-will-pay-over-260-million-resolve-false-billing-and-kickback-allegations-one;

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),

https://www.justice.gov/usao-cdca/pr/prime-healthcare-services-and-its-ceo-agree-pay-65-million-settle-medicare-overbilling;

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),

https://www.justice.gov/opa/pr/clinical-laboratory-and-its-owner-agree-pay-additional-57-million-resolve-outstanding;

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),

https://www.justice.gov/opa/pr/physician-partners-america-pay-245-million-settle-allegations-unnecessary-testing-improper;

Erica Zucco,

Providence will refund medical bills for thousands of patients after agreement with attorney general,

King 5 News (Feb. 1, 2024),

https://www.king5.com/article/news/health/providence-forgive-137-million-medical-payments-refund-20m-patients-after-agreement/281-3063dd66-ab54-413a-893a-73463f213a5b;

Off. of the Att'y Gen. of Va.,

Common Health Care Fraud Schemes, https://www.oag.state.va.us/contact-us/frequently-asked-questions?id=511

(last visited Dec. 2, 2024).

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

—including information about a consumer's medical debt—and in providing consumer reports to other companies for employment, housing, insurance, and other decisions.

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.

See

15 U.S.C. 1681(a)(3).

See

Consumer Fin. Prot. Bureau,

Medical Debt Burden in the United States,

at 26 n.117 (Feb. 2022),

https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf.

See

Consumer Fin. Prot. Bureau,

Data Point: Consumer Credit and the Removal of Medical Collections from Credit Reports,

at 2 (Apr. 2023),

https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-removal-medical-collections-from-credit-reports_2023-04.pdf.

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).

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.

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.

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;

however, many collections tradelines are removed well in advance of seven years.

Payments made to medical balances not yet sent to collections generally are not furnished to consumer reporting agencies.

Consumer Fin. Prot. Bureau,

Market Snapshot: An Update on Third Party Debt Collections Tradelines Reporting,

at 5 (Feb. 2023),

https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf.

Id.

15 U.S.C. 1681c(a)(4).

Consumer Fin. Prot. Bureau,

Consumer credit reports: A study of medical and non-medical collections,

at 27 (Dec. 2014),

https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf.

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.

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.

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.

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.

Consumer Fin. Prot. Bureau,

Market Snapshot: An Update on Third Party Debt Collections Tradelines Reporting,

at 16-17 (Feb. 2023),

https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf.

See

15 U.S.C. 1681s-2(a)(9).

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).

Consumer Fin. Prot. Bureau,

Paid and Low-Balance Medical Collections on Consumer Credit Reports

(July 27, 2022),

https://www.consumerfinance.gov/data-research/research-reports/paid-and-low-balance-medical-collections-on-consumer-credit-reports/.

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.

A 2024 review of consumer complaints found that consumers complain that debt collectors

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.

Consumer Fin. Prot. Bureau,

Complaint Bulletin: Medical billing and collection issues described in consumer complaints

(Apr. 2022),

https://files.consumerfinance.gov/f/documents/cfpb_complaint-bulletin-medical-billing_report_2022-04.pdf.

Consumer Fin. Prot. Bureau,

Fair Debt Collection Practices Act: CFPB Annual Report 2024

(Sept. 2024),

https://files.consumerfinance.gov/f/documents/cfpb_fdcpa-2024-annual-report_2024-09.pdf.

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.

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.

See

12 CFR 1006.30(a).

See

Consumer Fin. Prot. Bureau,

CFPB Takes Action Against Phoenix Financial Services for Illegal Medical Debt Collection and Credit Reporting Practices

(June 8, 2023),

https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against-phoenix-financial-services-for-illegal-medical-debt-collection-and-credit-reporting-practices/

; Consumer Fin. Prot. Bureau,

CFPB Shuts Down Commonwealth Financial Systems for Illegal Debt Collection Practices

(Dec. 15, 2023),

https://www.consumerfinance.gov/about-us/newsroom/cfpb-shuts-down-commonwealth-financial-systems-for-illegal-debt-collection-practices/.

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.

In April 2023, the NCRAs also announced that medical collections with initial balances below $500 had been removed from consumer reports.

Equifax,

First Changes to Reporting of Medical Collection Debt Roll Out July 1, 2022

(July 1, 2022),

https://www.equifax.com/newsroom/all-news/-/story/first-changes-to-reporting-of-medical-collection-debt-roll-out-july-1-2022

; Experian,

First Changes to Reporting of Medical Collection Debt Roll Out July 1, 2022

(July 1, 2022),

https://www.experianplc.com/newsroom/press-releases/2022/first-changes-to-reporting-of-medical-collection-debt-roll-out-july-1-2022

; TransUnion,

First Changes to Reporting of Medical Collection Debt Roll Out July 1, 2022

(July 1, 2022),

https://newsroom.transunion.com/first-changes-to-reporting-of-medical-collection-debt-roll-out-july-1-2022/.

PR Newswire,

Equifax, Experian and TransUnion Remove Medical Collections Debt Under $500 From U.S. Credit Reports

(Apr. 11, 2023),

https://www.prnewswire.com/news-releases/equifax-experian-and-transunion-remove-medical-collections-debt-under-500-from-us-credit-reports-301793769.html.

The CFPB conducted an analysis of the impacts of the NCRAs' medical debt reporting changes through June 2023.

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.

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),

https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf.

Several States and at least one Federal agency have also enacted policies that limit the inclusion of medical debt on consumer reports.

For example, Colorado

and New York

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.

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.

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.

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).

Colo. Rev. Stat. section 5-18-109.

N.Y. Pub. Health Law art. 49-A.

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.

Consumer Data Indus. Ass'n

Frey,

26 F.4th 1 (1st Cir. 2022), cert. denied, 143 S. Ct. 777 (2023).

U.S. Dep't of Veterans Affairs,

Threshold for Reporting VA Debts to Consumer Reporting Agencies,

87 FR 5693 (Feb. 2, 2022).

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.

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.

In January 2023, VantageScore implemented changes to VantageScore models 3.0 and 4.0 to ignore all medical collections tradelines.

Kenneth P. Brevoort & Michelle Kambara, Consumer Fin. Prot. Bureau,

Data point: Medical debt and credit scores

(May 2014),

https://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit-scores.pdf.

See

Ethan Dornhelm,

The Impact of Medical Debt on FICO Scores,

FICO Blog (July 13, 2015),

https://www.fico.com/blogs/impact-medical-debt-ficor-scores

; VantageScore,

How will changes in how medical collection accounts get reported impact credit scores?

(July 5, 2022),

https://www.vantagescore.com/how-will-changes-in-how-medical-collection-accounts-get-reported-impact-credit-scores/.

See

AnnaMaria Andriotis,

Major Credit-Score Provider to Exclude Medical Debts,

Wall St. J. (Aug. 10, 2022),

https://www.wsj.com/articles/major-credit-score-provider-to-exclude-medical-debts-11660102729

(VantageScore CEO quoted as saying that having medical debt is not necessarily reflective of a consumer's ability to pay back a loan).

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

Administration generally do not consider medical debt in their credit risk assessments within their respective automated underwriting systems,

the GSEs require creditors to provide credit scores derived from the older Classic FICO

for each borrower on a loan that the GSEs purchase to assess eligibility for certain loan products and make certain pricing decisions.

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.

See

Fed. Nat'l Mortg. Ass'n,

Single Family Selling Guide,

B3-2-03 (2021),

https://selling-guide.fanniemae.com/#Public.20Records.2C.20Foreclosures.2C.20and.20Collection.20Accounts

(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),

https://guide.freddiemac.com/app/guide/section/5201.1

; U.S. Dep't of Hous. & Urban Dev.,

Single Family Housing Policy Handbook,

4000.1 (2021),

https://www.hud.gov/sites/dfiles/OCHCO/documents/4000.1hsgh-102021.pdf.

The Classic FICO score is comprised of the following models: Equifax Beacon® 5.0, Experian/Fair Isaac Risk Model V2SM, and TransUnion FICO® Risk Score, Classic 04.

See, e.g.,

Fed. Nat'l Mortg. Ass'n,

Single Family Selling Guide

(Oct. 5, 2022),

https://selling-guide.fanniemae.com/sel/b3-5.1-01/general-requirements-credit-scores.

Fed. Hous. Fin. Agency,

FHFA Announces Key Updates for Implementation of Enterprise Credit Score Requirements

(Feb. 29, 2024),

https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-Key-Updates-for-Implementation-of-Enterprise-Credit-Score-Requirements.aspx.

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),

the CFPB issued its Outline of Proposals and Alternatives under Consideration (Outline or SBREFA Outline).

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.

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).

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.

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.

Pub. L. 104-121, 110 Stat. 857 (1996).

Consumer Fin. Prot. Bureau,

Small Business Advisory Review Panel for Consumer Reporting Rulemaking Outline of Proposals and Alternatives Under Consideration

(Sept. 15, 2023),

https://files.consumerfinance.gov/f/documents/cfpb_consumer-reporting-rule-sbrefa_outline-of-proposals.pdf.

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.

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),

https://files.consumerfinance.gov/f/documents/cfpb_sbrefa-final-report_consumer-reporting-rulemaking_2024-01.pdf.

The CFPB considers the Panel's findings in its final regulatory flexibility analysis, as set out in part VIII.B below.

See

SBREFA Outline at 5.

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.

In December 2014, following the CFPB's publication of its research report,

Data Point: Medical Debt and Credit Scores,

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.

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.

Fed. Trade Comm'n & Consumer Fin. Prot. Bureau,

Roundtable on Data Integrity in Debt Collection: Life of a Debt

(2013),

https://www.ftc.gov/news-events/events/2013/06/life-debt-data-integrity-debt-collection.

See

Kenneth P. Brevoort & Michelle Kambara, Consumer Fin. Prot. Bureau,

Data point: Medical debt and credit scores

(May 2014),

https://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit-scores.pdf.

Consumer Fin. Prot. Bureau,

Consumer credit reports: A study of medical and non-medical collections

(Dec. 2014),

https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf.

Consumer Fin. Prot. Bureau,

Market Snapshot: Third-Party Debt Collections Tradeline Reporting

(July 2019),

https://files.consumerfinance.gov/f/documents/201907_cfpb_third-party-debt-collections_report.pdf;

Consumer Fin. Prot. Bureau,

Market Snapshot: An Update on Third-Party Debt Collections Tradeline Reporting

(Feb. 2023),

https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf;

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),

https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf.

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.

The NPRM was published in the

Federal Register

on June 18, 2024.

The CFPB proposed that the final rule, if adopted, would

take effect sixty days after the date it is published in the

Federal Register

Consumer Fin. Prot. Bureau,

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

(June 11, 2024),

https://www.consumerfinance.gov/rules-policy/rules-under-development/prohibition-on-creditors-and-consumer-reporting-agencies-concerning-medical-information-regulation-v/.

89 FR 51682 (June 18, 2024).

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.”

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.

15 U.S.C. 1681b(g)(5).

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.

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.

See https://www.regulations.gov/document/CFPB-2024-0023-0001/comment.

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.”

The term “Federal consumer financial laws” includes the “enumerated consumer laws,” which include the FCRA.

12 U.S.C. 5512(b)(1).

See

12 U.S.C. 5481(12), (14).

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.

For a discussion of the CFPB's standards for rulemaking under CFPA section 1022(b)(2), see part VII below.

See

12 U.S.C. 5512(b)(2).

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.

The law has been amended several times in the ensuing years, including by the FACT Act.

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.

FCRA section 602(a)(4) (15 U.S.C. 1681(a)(4)).

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).

H. Rep. No. 108-396, at 1 (2003) (Conf. Rep.); S. Rep. No. 108-166, at 3 (2003) (Conf. Rep.).

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.

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

protecting the privacy of consumer data.

Safeco Ins. Co. of Am.

Burr,

551 U.S. 47, 52 (2007);

see also, e.g., FTC

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).

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.

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.

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.

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

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,

incorporated at Regulation V § 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 § 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”.

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

The CFPB proposed removing the financial information exception at § 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 § 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 § 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 § 1022.30(c) to remove the reference to the financial information exception in § 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 § 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

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 § 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 § 1022.30(d) and the list of specific exception at § 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

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

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).

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).

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 § 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 § 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 § 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.

In consideration of its preliminary interpretation of FCRA section 603(i), the CFPB also proposed adding a definition for medical debt information at § 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 § 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 § 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 § 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

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 (§ 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 § 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

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

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.

112

79 FR 51682, 51690 (June 18, 2024).

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 § 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

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 § 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.

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

114

See, e.g.,

Visa,

Visa Merchant Data Standards Manual—Visa Supplemental Requirements

(Apr. 2023),

https://usa.visa.com/content/dam/VCOM/download/merchants/visa-merchant-data-standards-manual.pdf;

Mastercard,

Quick Reference Booklet—Merchant Edition

(Apr. 16, 2024),

https://www.mastercard.us/content/dam/public/mastercardcom/na/global-site/documents/quick-reference-booklet-merchant.pdf.

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)?, https://www.consumerfinance.gov/ask-cfpb/what-is-a-flexible-spending-account-fsa-card-health-savings-account-card-hsa-en-417/

(last reviewed Sept. 6, 2024); Ryan J. Rosso, Cong. Rsch. Serv., R45277,

Health Savings Accounts (HSAs)

(2022),

https://crsreports.congress.gov/product/pdf/R/R45277. 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)),

https://crsreports.congress.gov/product/pdf/R/R46782.

116

See, e.g.,

CareCredit,

Ways to use your health and wellness credit card, https://www.carecredit.com/procedures/

(listing categories of procedures a CareCredit medical credit card can be used for) (last visited Nov. 15, 2024).

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

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),

https://www.irs.gov/pub/irs-drop/n-07-02.pdf

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),

https://www.irs.gov/pub/irs-drop/n-06-69.pdf

(both last visited Dec. 5, 2024).

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

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.

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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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See, e.g.,

Consumer Fin. Prot. Bureau,

Medical Credit Cards and Financing Plans

(May 2023),

https://files.consumerfinance.gov/f/documents/cfpb_medical-credit-cards-and-financing-plans_2023-05.pdf;

Lorelei Salas, Consumer Fin. Prot. Bureau,

Ensuring consumers aren't pushed into medical payment products

(June 18, 2024),

https://www.consumerfinance.gov/about-us/blog/ensuring-consumers-arent-pushed-into-medical-payment-products/.

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

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).

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 § 1022.3(j). The CFPB reminds creditors that the example in final § 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 § 1022.30(e)(1)(ii), for purposes of compliance with the ability-to-repay

rule under § 1026.43(c) for closed-end mortgages, the repayment ability rule under § 1026.34(a)(4) for open-end, high-cost mortgages, and the ability-to-pay rule under § 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 § 1022.3(j)). As explained above, the removal of the existing financial information exception in § 1022.30(d) as to medical debt information in the final rule means that the creditor prohibition under FCRA section 604(g)(2) and § 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 § 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.

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As discussed in part XI, the CFPB intends that, if the consumer reporting agency prohibition on furnishing medical debt information finalized in § 1022.38 (or any provision or application of that section) is stayed or determined to be invalid, the amendments to § 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.

Proposed Definition—Medical Debt Information (§ 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 § 1022.3(j) to facilitate compliance with various aspects of the proposed rule. Under proposed § 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 (§ 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 § 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

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 § 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

similar suggestion for medical debts owed directly to a health care provider.

Final Rule—Definition, Medical Debt Information (§ 1022.3(j))

For the reasons stated herein, the CFPB finalizes its definition as proposed for medical debt information at § 1022.3(j). Under final § 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 § 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 § 1022.30, as revised to remove the financial information exception at § 1022.30(d). The medical debt information definition also establishes what medical information a consumer reporting agency must consider in complying with final § 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 § 1022.3(j) as proposed.

Health Care Providers

Under the CFPB's proposed and final definition at § 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 § 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 § 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

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.

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15 U.S.C. 1681b(g)(5).

When the predecessor Agencies established the existing financial information exception at § 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

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).

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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

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),

https://www.kff.org/health-costs/report/kff-

health-care-debt-survey/

(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 limi

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