`[Federal Register Volume 90, Number 8 (Tuesday, January 14, 2025)]
[Rules and Regulations]
[Pages 3276-3374]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-30824]



[[Page 3275]]

Vol. 90

Tuesday,

No. 8

January 14, 2025

Part II





Consumer Financial Protection Bureau





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12 CFR Part 1022





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

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

[[Page 3276]]


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CONSUMER FINANCIAL PROTECTION BUREAU

12 CFR Part 1022

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


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

AGENCY: Consumer Financial Protection Bureau.

ACTION: Final rule.

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

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

FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory 
Implementation & Guidance Program Analyst, Office of Regulations, at 
202-435-7700 or https://reginquiries.consumerfinance.gov/. If you 
require this document in an alternative electronic format, please 
contact [email protected].

SUPPLEMENTARY INFORMATION:

I. Overview

A. Summary of the Final Rule

    Information about a person's medical history and health is 
sacrosanct and among the most intimate and sensitive categories of 
data. Recognizing the uniquely sensitive nature of such information, 
Congress acted to limit the use and sharing of medical information in 
the financial system by amending the Fair Credit Reporting Act (FCRA) 
through the Fair and Accurate Credit Transactions Act of 2003 (FACT 
Act).\1\ In doing so, Congress ``establish[ed] strong privacy 
protections for consumers' sensitive medical information,'' \2\ in line 
with the overarching privacy protection purpose of the FCRA.\3\ As part 
of these protections, Congress generally limited a creditor's ability 
to obtain or use a consumer's medical information in connection with 
any determination of the consumer's eligibility, or continued 
eligibility, for credit (creditor prohibition), subject to certain 
exceptions.\4\ One of these exceptions required the Federal financial 
banking agencies and the National Credit Union Administration 
(Agencies) to prescribe regulations that permit transactions that are 
determined to be necessary and appropriate to protect legitimate 
operational, transactional, risk, consumer, and other needs (including 
administrative verification purposes), consistent with congressional 
intent to restrict the use of medical information for inappropriate 
purposes.\5\
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    \1\ Fair and Accurate Credit Transactions Act of 2003 (FACT 
Act), Public Law 108-159, 117 Stat. 1952, 1999 (2003).
    \2\ 149 Cong. Rec. H8122-02, H8122 (daily ed. Sept. 10, 2003) 
(statement of Rep. Kanjorsky).
    \3\ 15 U.S.C. 1681 et seq., 1681(a)(4).
    \4\ 15 U.S.C. 1681b(g)(2).
    \5\ 15 U.S.C. 1681b(g)(5).
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    In 2005, the Agencies issued a regulatory exception (financial 
information exception) to this statutory prohibition, permitting 
consumers' medical financial information to be obtained and used by 
creditors in connection with credit eligibility determinations if 
certain conditions were met.\6\ Since the financial information 
exception was created, a number of concerns have been raised about 
whether a regulatory exception that permits creditors to consider 
sensitive medical information about a consumer's debts and certain 
other types of medical information is necessary and appropriate to 
protect legitimate operational, transactional, risk, consumer, and 
other needs, and consistent with the congressional intent to restrict 
the use of medical information for inappropriate purposes.
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    \6\ 70 FR 70664 (Nov. 22, 2005).
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    First, when the Agencies issued the financial information exception 
to the statutory prohibition, they did so without providing evidence or 
reasoning to support their main conclusion that an exception from a 
congressionally created legal requirement was warranted.
    Second, research has shown that medical debt has limited predictive 
value in predicting future default for credit underwriting purposes. 
Questions about the reliability of information about medical debt, as 
compared to information about other types of consumer debt, have been 
raised based on research performed by the CFPB and others.\7\ Medical 
debt may be less predictive of whether a consumer will pay a future 
loan, because medical debts can occur and are collected through unique 
circumstances and practices. For example, consumers often have limited 
ability to control the timing and types of medical services that are 
required.
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    \7\ See, e.g., Kenneth P. Brevoort & Michelle Kambara, Consumer 
Fin. Prot. Bureau, Data point: Medical debt and credit scores (May 
2014), 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.
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    Third, market participants, including in the consumer reporting 
industry and those most financially incentivized to assess the 
predictive value of medical debt, have reduced their reliance on 
medical debt in recognition of its limited utility. Consumer reporting 
agencies have removed certain medical debts from consumer reports.\8\ 
Major credit scoring companies have accorded less weight to, or 
excluded entirely, medical debt information in their newer scoring 
models.\9\ Similarly, some creditors have adjusted how their 
underwriting standards treat medical debt information.\10\
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    \8\ See, e.g., Bus. Wire, Equifax, Experian, and TransUnion 
Support U.S. Consumers With Changes to Medical Collection Debt 
Reporting (Mar. 18, 2022), https://www.businesswire.com/news/home/20220318005244/en/Equifax-Experian-and-TransUnion-Support-U.S.-Consumers-With-Changes-to-Medical-Collection-Debt-Reporting.
    \9\ 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.
    \10\ 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).

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

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

B. Market Background

Unique Characteristics of Medical Debt in the United States
    A significant number of Americans have medical debt.\14\ According 
to one nationally representative survey, in 2022 around 41 percent of 
adults stated that they had some kind of medical debt, including debt 
that they were unable to pay, that was on credit cards, that was being 
paid over time, directly to a provider, or that they owed to family 
members, or to a bank, collection agency, or other lender.\15\
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    \14\ For more information about medical debt in the United 
States, including population disparities, impacts on consumers, and 
COVID-19 impacts, see Consumer Fin. Prot. Bureau, Medical Debt 
Burden in the United States (Feb. 2022), https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf.
    \15\ Lunna Lopes et al., Kaiser Fam. Found., Health Care Debt In 
The U.S.: The Broad Consequences Of Medical And Dental Bills (June 
16, 2022), 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).
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    Several characteristics of medical debt pose special risks to 
consumers and distinguish it from other types of debt.\16\ The need for 
medical care can be unexpected,\17\ and medical debt often results from 
bills for a one-time or short-term medical expense due to an unforeseen 
event such as an accident or sudden illness.\18\ Consumers are rarely 
informed of the costs of medical treatment in advance, and because of 
price opacity and an often immediate need for medical care, consumers 
have little or no ability to ``shop around.'' \19\ Americans that live 
in rural communities may also experience limited choices when trying to 
access health care,\20\ which may impact the amount of their medical 
debt in ways that are not reflective of their other debts.
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    \16\ See generally Consumer Fin. Prot. Bureau, Bulletin 2022-01: 
Medical Debt Collection and Consumer Reporting Requirements in 
Connection with the No Surprises Act, 87 FR 3025 (Jan. 20, 2022), 
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.
    \17\ 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).
    \18\ See Lunna Lopes et al., Kaiser Fam. Found., Health Care 
Debt in the U.S.: The Broad Consequences of Medical and Dental Bills 
(June 16, 2022), 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).
    \19\ Consumer Fin. Prot. Bureau, Bulletin 2022-01: Medical Debt 
Collection and Consumer Reporting Requirements in Connection with 
the No Surprises Act, 87 FR 3025 (Jan. 20, 2022), 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).
    \20\ 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).
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    There are significant concerns with the accuracy of medical bills. 
For example, 43 percent of all adults and 53 percent of adults with 
medical debt in a nationally representative survey believed they had 
received a medical or dental bill that included an error.\21\ While the 
survey found that most of these adults had taken some action to dispute 
the mistake, 51 percent reported that they either did not dispute the 
bill or were unable to successfully resolve their dispute. This may be 
because medical billing and collections can be complicated and 
confusing since a consumer may have difficulty determining whether the 
amount is covered by insurance or a hospital's financial assistance 
program (if

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applicable) and, if so, whether and to what extent the amount was 
already paid or reduced.\22\ Also some health care providers and debt 
collectors exploit these complications and charge inflated or unearned 
bills.\23\
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    \21\ See, e.g., Karen Pollitz & Kaye Pestaina, Kaiser Fam. 
Found., Could Consumer Assistance Be Helpful to People Facing 
Medical Debt? (July 14, 2022), 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).
    \22\ 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.
    \23\ Press Release, U.S. Dep't of Just., Hospital Chain Will Pay 
Over $260 Million to Resolve False Billing and Kickback Allegations; 
One Subsidiary Agrees to Plead Guilty (Sept. 25, 2018), 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).
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Medical Debt and Consumer Reporting
    Information about medical debt is used in different ways in the 
financial system. Consumer reporting agencies play a key role in 
assembling and evaluating consumer credit and other information on 
consumers \24\--including information about a consumer's medical debt--
and in providing consumer reports to other companies for employment, 
housing, insurance, and other decisions.\25\ Medical debt information 
on a consumer report can increase the cost and reduce the availability 
of credit, and can even reduce access to employment and housing.\26\
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    \24\ See 15 U.S.C. 1681(a)(3).
    \25\ See Consumer Fin. Prot. Bureau, Medical Debt Burden in the 
United States, at 26 n.117 (Feb. 2022), https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf.
    \26\ 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.
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    Generally, information about a medical debt on a consumer report 
appears as a collection tradeline. After a medical debt has been placed 
by the creditor in collections status because the debt has been unpaid 
for a period of time, the medical debt may be furnished as a 
collections tradeline to consumer reporting agencies by a debt 
collector, including a debt collector who collects on behalf of the 
original creditor for a fee, as well as a debt collector who purchases 
overdue accounts outright from the original creditor (also known as a 
debt buyer).\27\ Such tradelines are referred to as medical collections 
or medical collections tradelines. Research by the CFPB has found that 
nearly all medical collections furnishing is performed by debt 
collectors, rather than by health care providers (as original 
creditors) themselves.\28\ However, a debt collector may have limited 
access to an original creditor's system of records, which may 
contribute to higher dispute rates for collections tradelines compared 
to other components of consumer reports.\29\ When debt collectors 
furnish to consumer reporting agencies, they generally report to one or 
more of the three largest nationwide consumer reporting agencies 
(NCRAs). Debt collections tradelines may persist on consumer reports 
for up to seven years; \30\ however, many collections tradelines are 
removed well in advance of seven years.\31\
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    \27\ Payments made to medical balances not yet sent to 
collections generally are not furnished to consumer reporting 
agencies.
    \28\ Consumer Fin. Prot. Bureau, Market Snapshot: An Update on 
Third Party Debt Collections Tradelines Reporting, at 5 (Feb. 2023), 
https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf.
    \29\ Id.
    \30\ 15 U.S.C. 1681c(a)(4).
    \31\ Consumer Fin. Prot. Bureau, Consumer credit reports: A 
study of medical and non-medical collections, at 27 (Dec. 2014), 
https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf.
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    Historically, medical debts have been the most common type of debt 
on consumer reports at both the consumer-report and individual 
collections tradeline level. The CFPB estimated that medical 
collections accounted for 57 percent of all collections tradelines in 
Q1 2022 and 58 percent in Q2 2018.\32\ When debt collectors acting as 
agents or assignees of health care providers furnish information about 
medical collections, they must notify the consumer reporting agency 
that they are furnishing medical information.\33\ The FCRA generally 
prohibits consumer reporting agencies from reporting to third parties 
the name, address, and telephone number of the health care provider for 
any account identified as from a medical information furnisher that has 
notified the consumer reporting agency of its status, unless that 
information is restricted or coded such that persons other than the 
consumer cannot identify or infer the specific provider or the nature 
of the medical services provided.\34\ Nevertheless, despite the coding 
of information on the consumer reports, a consumer report user could 
infer from the coding that certain debts relate to the provision of 
health care. Like with medical bills, consumers often find errors with 
medical collections tradeline information on their consumer reports. A 
CFPB analysis found that almost 6 percent of medical collections in its 
data were flagged as having been disputed at some point, almost three 
times higher than the rate of dispute flags on credit cards and seven 
times the rate of dispute flags on student loans.\35\
---------------------------------------------------------------------------

    \32\ 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.
    \33\ See 15 U.S.C. 1681s-2(a)(9).
    \34\ 15 U.S.C. 1681c(a)(6); see 15 U.S.C. 1681s-2(a)(9) 
(requiring medical information furnishers to notify consumer 
reporting agencies of such status).
    \35\ Consumer Fin. Prot. Bureau, Paid and Low-Balance Medical 
Collections on Consumer Credit Reports (July 27, 2022), 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.\36\ A 2024 review of consumer complaints 
found that consumers complain that debt collectors

[[Page 3280]]

continue to collect on and report medical bills to credit reporting 
agencies even after the consumer has shown that they do not owe the 
amount.\37\
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    \36\ Consumer Fin. Prot. Bureau, Complaint Bulletin: Medical 
billing and collection issues described in consumer complaints (Apr. 
2022), https://files.consumerfinance.gov/f/documents/cfpb_complaint-bulletin-medical-billing_report_2022-04.pdf.
    \37\ 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.\38\ Despite the protections offered by these rules, 
CFPB investigations indicate that some medical debt collectors may 
still be attempting to collect on medical debts that were not 
substantiated after consumers disputed the validity of the debts.\39\
---------------------------------------------------------------------------

    \38\ See 12 CFR 1006.30(a).
    \39\ See Consumer Fin. Prot. Bureau, CFPB Takes Action Against 
Phoenix Financial Services for Illegal Medical Debt Collection and 
Credit Reporting Practices (June 8, 2023), 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.\40\ In April 2023, the NCRAs also announced that medical 
collections with initial balances below $500 had been removed from 
consumer reports.\41\
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    \40\ Equifax, First Changes to Reporting of Medical Collection 
Debt Roll Out July 1, 2022 (July 1, 2022), 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/.
    \41\ 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.
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    The CFPB conducted an analysis of the impacts of the NCRAs' medical 
debt reporting changes through June 2023.\42\ The CFPB found that after 
these changes, 15 million Americans still have $49 billion in medical 
bills on their consumer reports. Because the medical collections 
tradelines removed by the NCRAs were those with low balances, the total 
dollar balances of medical collections on consumer reports fell by only 
38 percent nationwide.
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    \42\ Ryan Sandler & Zachary Blizard, Consumer Fin. Prot. Bureau, 
Recent Changes in Medical Collections on Consumer Credit Records 
Data Point, at 3-4, 17 (Mar. 2024), https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf.
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    Several States and at least one Federal agency have also enacted 
policies that limit the inclusion of medical debt on consumer 
reports.\43\ For example, Colorado \44\ and New York \45\ each passed 
laws in 2023 prohibiting medical debts from appearing on consumer 
reports. California, Connecticut, Minnesota, New Jersey, Illinois, and 
Virginia followed suit earlier this year.\46\ Maine, in 2019, passed a 
law requiring consumer reporting agencies to remove medical debt upon 
receiving reasonable evidence that the debt has been settled or 
paid.\47\ In 2022, the U.S. Department of Veterans Affairs (VA) 
finalized a rule providing that the VA will report medical debt to 
consumer reporting agencies only if all other debt collection efforts 
have been exhausted, the individual is not catastrophically disabled or 
entitled to free medical care from the VA, and the outstanding debt is 
over $25.\48\
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    \43\ In 2022, the CFPB issued an interpretive rule clarifying 
that because FCRA's express preemption provisions have a narrow and 
targeted scope, States retain substantial flexibility to pass laws 
involving consumer reporting to reflect emerging problems affecting 
their local economies and citizens, including problems related to 
medical debt. Consumer Fin. Prot. Bureau, The Fair Credit Reporting 
Act's Limited Preemption of State Laws, 87 FR 41042 (July 11, 2022).
    \44\ Colo. Rev. Stat. section 5-18-109.
    \45\ N.Y. Pub. Health Law art. 49-A.
    \46\ 2024 Calif. SB 1061; 2024 Conn. Act 24-6; 2024 Minn. Ch. 
332C; 2024 New Jersey A3681; 2024 Ill. Pub. Act 103-0648; 2024 Va. 
Acts ch. 751.
    \47\ Consumer Data Indus. Ass'n v. Frey, 26 F.4th 1 (1st Cir. 
2022), cert. denied, 143 S. Ct. 777 (2023).
    \48\ U.S. Dep't of Veterans Affairs, Threshold for Reporting VA 
Debts to Consumer Reporting Agencies, 87 FR 5693 (Feb. 2, 2022).
---------------------------------------------------------------------------

Current Use of Medical Debt in Credit Scoring and Underwriting
    Collections tradelines are considered negative information and can 
lower consumers' credit scores. A 2014 CFPB analysis found that the 
presence of medical collections tradelines on consumer reports is less 
predictive of future defaults or serious delinquencies than the 
presence of nonmedical collections tradelines, and that consumers with 
paid medical debts have delinquency rates well below those of consumers 
with the same credit scores whose medical debts were mostly unpaid.\49\ 
Following the CFPB's publication of its research and in recognition of 
the limited predictive value of medical bills, major credit score 
providers FICO and VantageScore made changes so that newer versions of 
their credit scoring models differentiate between medical and 
nonmedical collections tradelines, give less weight to unpaid medical 
collections tradelines than to other collections tradelines, and ignore 
paid medical collections of any kind.\50\ In January 2023, VantageScore 
implemented changes to VantageScore models 3.0 and 4.0 to ignore all 
medical collections tradelines.\51\
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    \49\ Kenneth P. Brevoort & Michelle Kambara, Consumer Fin. Prot. 
Bureau, Data point: Medical debt and credit scores (May 2014), 
https://files.consumerfinance.gov/f/201405_cfpb_report_data-point_medical-debt-credit-scores.pdf.
    \50\ 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/.
    \51\ 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

[[Page 3281]]

Administration generally do not consider medical debt in their credit 
risk assessments within their respective automated underwriting 
systems,\52\ the GSEs require creditors to provide credit scores 
derived from the older Classic FICO \53\ for each borrower on a loan 
that the GSEs purchase to assess eligibility for certain loan products 
and make certain pricing decisions.\54\ The GSEs and the Federal 
Housing Finance Agency (FHFA) announced in 2022 that they had validated 
and approved two of the new credit score models that lessen the weight 
of or do not consider medical collections, but that transition is not 
expected to occur until the fourth quarter of 2025.\55\
---------------------------------------------------------------------------

    \52\ 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.
    \53\ The Classic FICO score is comprised of the following 
models: Equifax Beacon[supreg] 5.0, Experian/Fair Isaac Risk Model 
V2SM, and TransUnion FICO[supreg] Risk Score, Classic 04.
    \54\ See, e.g., Fed. Nat'l Mortg. Ass'n, Single Family Selling 
Guide (Oct. 5, 2022), https://selling-guide.fanniemae.com/sel/b3-5.1-01/general-requirements-credit-scores.
    \55\ 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),\56\ the CFPB issued its Outline of Proposals and 
Alternatives under Consideration (Outline or SBREFA Outline).\57\ The 
SBREFA Outline addressed a number of consumer reporting topics under 
the FCRA, including medical debt collections information proposals 
under consideration. The CFPB convened a SBREFA Panel on October 16, 
2023, and held Panel meetings on October 18 and 19, 2023.\58\ 
Representatives from 16 small businesses were selected as small entity 
representatives for this SBREFA process. These entities represented 
small businesses that the CFPB determined would likely be directly 
affected by one or more of the proposals under consideration. On 
December 15, 2023, the Panel completed the Final Report of the Small 
Business Review Panel on the CFPB's Proposals and Alternatives Under 
Consideration for the Consumer Reporting Rulemaking (Panel Report or 
SBREFA Report).\59\ In addition to the SBREFA Panel and Panel Report, 
the CFPB also invited feedback on the proposals under consideration 
from other stakeholders, including small stakeholders who were not 
small entity representatives.\60\ The CFPB considered the feedback 
related to the medical debt collection information proposals from small 
entity representatives and other stakeholders, as well as the findings 
and recommendations of the Panel, in preparing the proposed rule and 
this final rule.
---------------------------------------------------------------------------

    \56\ Pub. L. 104-121, 110 Stat. 857 (1996).
    \57\ Consumer Fin. Prot. Bureau, Small Business Advisory Review 
Panel for Consumer Reporting Rulemaking Outline of Proposals and 
Alternatives Under Consideration (Sept. 15, 2023), https://files.consumerfinance.gov/f/documents/cfpb_consumer-reporting-rule-sbrefa_outline-of-proposals.pdf.
    \58\ The Panel was comprised of a representative from the CFPB, 
the Chief Counsel for Advocacy of the Small Business Administration 
(Office of Advocacy), and a representative from the Office of 
Information and Regulatory Affairs (OIRA) in the Office of 
Management and Budget.
    \59\ Consumer Fin. Prot. Bureau, Final Report of the Small 
Business Review Panel on the CFPB's Proposals and Alternatives Under 
Consideration for the Consumer Reporting Rulemaking (Dec. 15, 2023), 
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.
    \60\ See SBREFA Outline at 5.
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B. Other Stakeholder Outreach

    The CFPB has long been engaged in outreach and research related to 
medical debt information in the consumer reporting ecosystem. In 2013, 
the CFPB and the Federal Trade Commission (FTC) jointly hosted a public 
roundtable for industry and other stakeholders on the integrity of 
record keeping by debt collectors, debt buyers, and original creditors. 
Participants acknowledged that record keeping practices may introduce 
variability or inaccuracy to the consumer reporting systems.\61\ In 
December 2014, following the CFPB's publication of its research report, 
Data Point: Medical Debt and Credit Scores,\62\ the CFPB issued a study 
of medical and nonmedical collections tradelines on consumer reports 
that assessed the furnishing practices of debt collectors and debt 
buyers, the incidence and type of collections tradelines on consumer 
reports, and differences between medical and nonmedical debt 
reporting.\63\ The CFPB has continued to monitor the incidence of 
medical debt on consumer reports and released several other market 
analyses and research reports on medical debt collection and consumer 
reporting between 2019 and 2024.\64\
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    \61\ Fed. Trade Comm'n & Consumer Fin. Prot. Bureau, Roundtable 
on Data Integrity in Debt Collection: Life of a Debt (2013), https://www.ftc.gov/news-events/events/2013/06/life-debt-data-integrity-debt-collection.
    \62\ 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.
    \63\ 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.
    \64\ 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.\65\ The NPRM was 
published in the Federal Register on June 18, 2024.\66\ The CFPB 
proposed that the final rule, if adopted, would

[[Page 3282]]

take effect sixty days after the date it is published in the Federal 
Register.
---------------------------------------------------------------------------

    \65\ 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/.
    \66\ 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.'' \67\ Based on the CFPB's understanding of how consumer 
medical debt differs from other types of consumer debt and its uses in 
credit underwriting, the CFPB preliminarily determined that creditors' 
use of medical debt in underwriting does not meet that statutory 
standard, as a result, does not warrant an exception to the medical 
information privacy protections established by Congress.
---------------------------------------------------------------------------

    \67\ 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.\68\ Around 
2,000 of these comments were unique comment letters. These commenters 
included: consumers; consumer advocacy groups; consumer reporting, debt 
collection, and banking trade groups; economic research and taxpayer 
advocacy groups; governmental entities, including members of Congress; 
medical, dental and hospital practitioner groups; and patient advocacy 
groups.
---------------------------------------------------------------------------

    \68\ 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.'' \69\ The 
term ``Federal consumer financial laws'' includes the ``enumerated 
consumer laws,'' which include the FCRA.\70\
---------------------------------------------------------------------------

    \69\ 12 U.S.C. 5512(b)(1).
    \70\ 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.\71\ For a discussion of the CFPB's standards 
for rulemaking under CFPA section 1022(b)(2), see part VII below.
---------------------------------------------------------------------------

    \71\ 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.\72\ The law has been amended several times in the ensuing 
years, including by the FACT Act.\73\ For example, Congress, through 
the FACT Act, amended the FCRA to include additional protections for 
consumer privacy, such as restricting the use and transfer of sensitive 
medical information, enhancing the ability of consumers to combat 
identity theft, increasing the accuracy of consumer reports, and 
allowing consumers to exercise greater control regarding the type and 
amount of marketing solicitations they receive.\74\
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    \72\ FCRA section 602(a)(4) (15 U.S.C. 1681(a)(4)).
    \73\ Pub. L. 108-159 (Dec. 4, 2003). Congress also enacted 
specific protections for servicemembers and veterans, including with 
respect to medical debt and credit monitoring. Economic Growth, 
Regulatory Relief, and Consumer Protection Act, Pub. L. 115-174, 
section 302, 132 Stat. 1296, 1333 (2018).
    \74\ H. Rep. No. 108-396, at 1 (2003) (Conf. Rep.); S. Rep. No. 
108-166, at 3 (2003) (Conf. Rep.).
---------------------------------------------------------------------------

    The FCRA governs the collection, assembly, and use of consumer 
report information and provides the framework for the consumer 
reporting system in the United States. The FCRA regulates the practices 
of consumer reporting agencies that collect and compile consumer 
information into consumer reports for use by creditors, insurance 
companies, employers, landlords, and other entities in making 
eligibility decisions affecting consumers. The FCRA also limits the 
circumstances under which persons, such as creditors, may obtain and 
use consumer report information from consumer reporting agencies.
    The FCRA was enacted to (1) prevent the misuse of sensitive 
consumer information by limiting recipients to those who have a 
legitimate need for it; (2) improve the accuracy and integrity of 
consumer reports; and (3) promote the efficiency of the nation's 
banking and consumer credit systems.\75\ An important purpose of the 
FCRA is to enable creditors to make appropriate credit decisions based 
on accurate consumer reporting information that truly reflects whether 
a consumer will repay a loan, while simultaneously

[[Page 3283]]

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

    \77\ See CFPA section 1088(a)(10)(E) (15 U.S.C. 1681s(e)).
---------------------------------------------------------------------------

FCRA Section 604(g)(2) and (5)
    Through the FACT Act, Congress added, in FCRA section 604(g)(2), a 
broad new limitation on the ability of creditors to obtain or use 
medical information pertaining to a consumer in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit.\78\ Congress also limited the circumstances under which 
consumer reporting agencies could furnish consumer reports containing 
medical information for credit, employment, or insurance purposes,\79\ 
and generally required consumer reporting agencies providing consumer 
reports not to furnish contact information for medical information 
furnishers--who were also required to identify themselves to consumer 
reporting agencies \80\--without restrictions or coding ``that do not 
identify, or provide information sufficient to infer, the specific 
provider or the nature of such services, products, or devices to a 
person other than the consumer.'' \81\ Congress also broadly defined 
medical information in FCRA section 603(i) to include ``information or 
data . . . created or derived from a health care provider or the 
consumer, that relates to . . . the payment for the provision of health 
care to an individual.'' \82\
---------------------------------------------------------------------------

    \78\ FACT Act sections 411(a), 412(f)(2), 117 Stat. 1999-2000, 
2003 (15 U.S.C. 1681b(g)(2)). FCRA section 604(g)(2) provides: 
``Except as permitted pursuant to paragraph (3)(C) or regulations 
prescribed under paragraph (5)(A), a creditor shall not obtain or 
use medical information (other than medical information treated in 
the manner required under section 1681c(a)(6) of this title) 
pertaining to a consumer in connection with any determination of the 
consumer's eligibility, or continued eligibility, for credit.'' 15 
U.S.C. 1681b(g)(2).
    \79\ FACT Act section 411(a), 117 Stat. 2000 (15 U.S.C. 
1681b(g)(1)).
    \80\ FACT Act section 412(a), 117 Stat. 2002 (15 U.S.C. 1681s-
2(a)(9)).
    \81\ FACT Act section 412(b), 117 Stat. 2002 (15 U.S.C. 
1681c(a)(6)).
    \82\ FACT Act section 411(c), 117 Stat. 2001 (15 U.S.C. 
1681a(i)).
---------------------------------------------------------------------------

    Congress initially granted rulemaking authority to the Agencies to 
make exceptions to the limitation on creditors obtaining and using 
medical information that are necessary and appropriate to protect 
legitimate operational, transactional, risk, consumer, and other needs 
(including administrative verification purposes), consistent with 
congressional intent to restrict the use of medical information for 
inappropriate purposes.\83\ Pursuant to this authority, the Agencies 
promulgated final rules that, among other things, implemented the 
statute's general prohibition on creditors obtaining or using medical 
information pertaining to a consumer in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit and created exceptions to the prohibition.\84\
---------------------------------------------------------------------------

    \83\ FACT Act section 411(a), 117 Stat. 2001 (15 U.S.C. 
1681b(g)(5)(A)).
    \84\ 70 FR 70664 (Nov. 22, 2005). See also interim final rules 
published at 70 FR 33958 (June 10, 2005).
---------------------------------------------------------------------------

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

    \85\ 70 FR 70664, 70667 (Nov. 22, 2005).
    \86\ 69 FR 23380, 23384 (Apr. 28, 2004).
    \87\ Id.
---------------------------------------------------------------------------

    The Agencies' final rules also identified a limited number of other 
particular purposes for which a creditor may use medical information in 
connection with any determination of the consumer's eligibility, or 
continued eligibility, for credit.\88\ For example, a creditor may use 
medical information in credit eligibility determinations to comply with 
applicable requirements of local, State, or Federal laws.\89\ The 
Agencies found that this exception, and the other enumerated specific 
exceptions, are necessary and appropriate to protect legitimate 
operational, transactional, risk, consumer, and other needs (including 
administrative verification purposes), and are consistent with the 
congressional intent to restrict the use of medical information for 
inappropriate purposes.\90\
---------------------------------------------------------------------------

    \88\ 70 FR 70664, 70668 (Nov. 22, 2005).
    \89\ This exception is restated at Sec.  1022.30(e)(1)(ii).
    \90\ 69 FR 23380, 23382 (Apr. 28, 2004).
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    Congress (through the CFPA) transferred to the CFPB primary 
regulatory authority for the FCRA.\91\ The CFPB restated the Agencies' 
regulations as an interim final rule, with request for comment, on 
December 21, 2011.\92\ On April 28, 2016, the CFPB finalized the 
interim final rule without assessing or otherwise reconsidering the 
policy decisions and justifications that served as the basis for the 
regulations.\93\
---------------------------------------------------------------------------

    \91\ Title X of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, Pub. L. 111-203, section 1088, 124 Stat. 1376, 1955 
(2010).
    \92\ 76 FR 79308 (Dec. 21, 2011).
    \93\ 81 FR 25323 (Apr. 28, 2016).
---------------------------------------------------------------------------

    As a result of the transfer of authority, FCRA section 604(g)(5) 
now authorizes the CFPB to prescribe regulations to create exceptions 
from the statutory prohibition on obtaining or using medical 
information in connection with determinations of credit eligibility. 
However, the CFPB must determine that such exceptions to the general 
prohibition in FCRA section 604(g)(2) are necessary and appropriate to 
protect legitimate operational, transactional, risk, consumer, and 
other needs (including administrative verification purposes), 
consistent with the

[[Page 3284]]

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

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

FCRA Section 604(a) Permissible Purposes and Related Provisions
    The FCRA protects consumer privacy in multiple ways, including by 
clearly prohibiting certain uses of data and limiting the circumstances 
under which consumer reporting agencies may disclose consumer 
information. FCRA section 604, entitled Permissible purposes of 
consumer reports, identifies an exclusive list of permissible purposes 
for which consumer reporting agencies may provide consumer reports.\95\ 
The statute states that a consumer reporting agency may provide 
consumer reports under these circumstances ``and no other.'' In 
addition, FCRA section 607(a) requires that ``[e]very consumer 
reporting agency shall maintain reasonable procedures designed to . . . 
limit the furnishing of consumer reports to the purposes listed under 
section 604.'' \96\
---------------------------------------------------------------------------

    \95\ 15 U.S.C. 1681b(a). Other sections of the FCRA identify 
additional limited circumstances under which consumer reporting 
agencies are permitted or required to disclose certain information 
to government agencies. See 15 U.S.C. 1681f, 1681u, 1681v; see also, 
e.g., FTC v. Manager, Retail Credit Co., Miami Beach Branch Off., 
515 F.2d 988, 994-95 (D.C. Cir. 1975) (holding that 15 U.S.C. 
1681s(a) authorizes the FTC to obtain consumer reports in FCRA 
enforcement investigations). Further, the Debt Collection 
Improvement Act of 1996, Pub. L. 104-134, section 31001(m)(1), 110 
Stat. 1321-366, allows the head of an executive, judicial, or 
legislative agency to obtain a consumer report under certain 
circumstances relating to debt collection. See 31 U.S.C. 3711(h).
    \96\ 15 U.S.C. 1681e(a).
---------------------------------------------------------------------------

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

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

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

IV. Discussion of the Final Rule

A. Overview of the CFPB's Approach

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

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

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

[[Page 3285]]

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

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

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

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

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

    \100\ As described above, Congress also limited the 
circumstances under which consumer reporting agencies can provide 
consumer reports containing medical information for credit, 
employment, or insurance purposes, and required consumer reporting 
agencies to restrict or code contact information for medical 
information furnishers. 15 U.S.C. 1681b(g)(1), 1681c(a)(6).
    \101\ 15 U.S.C. 1681b(g)(5).
---------------------------------------------------------------------------

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

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

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

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

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

[[Page 3286]]

connection with credit eligibility determinations, certain financial 
information related to consumers' medical debts.
    The financial information exception currently permits a creditor to 
consider certain medical information related to a consumer's debts in 
connection with any determination of the consumer's eligibility, or 
continued eligibility, for credit.\104\ Such medical information 
related to medical debt includes, for example, ``[t]he dollar amount, 
repayment terms, repayment history, and similar information regarding 
medical debts to calculate, measure, or verify the repayment ability of 
the consumer, the use of proceeds, or the terms for granting credit'' 
\105\ and ``[t]he identity of creditors to whom outstanding medical 
debts are owed in connection with an application for credit, including 
but not limited to, a transaction involving the consolidation of 
medical debts'' \106\ (collectively referred to herein as financial 
information).
---------------------------------------------------------------------------

    \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 Sec.  1022.30(e) applies. Specifically, as discussed in further 
detail below, the CFPB is finalizing its interpretation as set forth in 
the proposed rule that for information about a consumer's debt to be 
``medical information'' under FCRA section 603(i), the information must 
relate to a debt the consumer owes, or at one time owed, directly to a 
health care provider or to the health care provider's agent or assignee 
for the provision of the health care underlying the payment obligation. 
The CFPB is also finalizing its definition of medical debt information 
in final Sec.  1022.3(j), as medical information that pertains to a 
debt owed by a consumer to a person whose primary business is providing 
medical services, products, or devices (also referred to herein as a 
health care provider), or to the person's agent or assignee, for the 
provision of such medical services, products, or devices. The 
definition also provides that medical debt information includes, but is 
not limited to, medical bills that are not past due or that have been 
paid. Further, the CFPB has concluded that it generally is neither 
``necessary and appropriate to protect legitimate operational, 
transactional, risk, consumer, and other needs,'' nor consistent with 
Congress's intent ``to restrict the use of medical information for 
inappropriate purposes,'' for creditors to consider sensitive financial 
information concerning a consumer's medical debt in underwriting.
Preliminary Interpretation--Owes or Owed to a Health Care Provider
    FCRA section 603(i)'s definition of ``medical information,'' 
incorporated in Regulation V at Sec.  1022.3(k), informs the types of 
medical debt that creditors are generally prohibited from considering, 
but for which the financial information exception currently applies. 
Medical information is defined as ``[i]nformation or data, whether oral 
or recorded, in any form or medium, created by or derived from a health 
care provider or the consumer'' that relates to, among other things, 
``[t]he payment for the provision of health care to an individual.''
    In its proposal, the CFPB explained that with regard to ``[t]he 
payment for the provision of health care to an individual''--i.e., the 
subset of ``medical information'' concerning debt--the CFPB proposed to 
interpret FCRA section 603(i) to mean that medical information about a 
consumer's debt must relate to a debt the consumer owes, or at one time 
owed (for example, in the case of paid medical debt), directly to a 
health care provider or to the health care provider's agent or 
assignee.\107\ Specifically, the CFPB stated that the statute provides 
that medical information is information or data ``created by or derived 
from a health care provider or the consumer'' that relates to ``the 
payment for the provision of health care to an individual.'' And, as a 
result, the CFPB preliminarily interpreted the statute's use of the 
phrase ``provision of health care,'' following the requirement that the 
medical information must be ``created by or derived from a health care 
provider or the consumer,'' to mean that for information on a debt to 
be medical information under the FCRA, the information must relate to a 
debt arising from a payment obligation that the consumer owes (or at 
one time owed) directly to a health care provider for the provision of 
the health care underlying the payment obligation.
---------------------------------------------------------------------------

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

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

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

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

[[Page 3287]]

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

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

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

[[Page 3288]]

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

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

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

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

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

[[Page 3289]]

merchant codes would be flagged as part of a broader medical expense 
category.
    In contrast, commenters supporting the current scope of the 
proposed medical debt information definition stated that it is not 
feasible to implement an expansion of the medical debt information 
definition and interpretation of medical information under the FCRA to 
include products from third-party lenders. Specifically, the commenters 
stated third-party lenders like credit card issuers or home equity 
lenders would need to be able to identify medical charges or expenses 
and recalculate fields such as the consumer's current balance, credit 
limit, amount past due, and actual payment amount. One commenter also 
stated that, unlike credit card issuers who may be able to identify 
which merchant a consumer has shopped with, banks that offer unsecured 
credit generally do not know how a consumer spends loan proceeds and if 
any of the loan was used to pay for medical expenses. A couple of 
commenters stated that even if a third-party lender or creditor were 
able to identify such charges using merchant category codes or some 
other information, it would need to maintain two sets of records, one 
with medical debt information and one without, which may lead to 
consumer confusion and other operational risks.
    Several commenters asked that if the CFPB does not include debts 
owed to third-party lenders or creditors such as credit card issuers 
within the scope of the final rule, that the CFPB continue to evaluate 
the impacts of such debt, such as for specific populations like family 
caregivers and persons in their care who may not understand the scope 
of the CFPB's final rule, and to ascertain the impact of the final 
rule. Other commenters asked the CFPB to actively regulate and 
implement consumer protections related to medical lending products.
Civil Judgments
    The CFPB also received several comments about its interpretation of 
FCRA section 603(i) that medical debt information includes civil 
judgments arising from medical debt collection actions, where the debt 
is directly owed to a health care provider, or to their agent or 
assignee. One commenter supported the CFPB's proposed approach, stating 
that the CFPB's interpretation is important considering that there are 
credit reporting agencies that specialize in providing consumer reports 
consisting of public records information, including about civil 
judgments. This commenter recommended that the CFPB include its 
interpretation about civil judgments in the final regulatory text or in 
official commentary. A couple of commenters opposed the CFPB's 
interpretation about civil judgments. The commenters generally stated 
that it is not apparent from public record information whether a debt 
underlying a civil judgment is owed or was once owed directly to a 
health care provider for the provision of health care, particularly if 
the legal action was brought by a debt buyer whose name does not 
reference health care. In such cases, the commenters stated creditors 
would need to engage in burdensome individualized investigations to 
determine if a civil judgment is medical debt information. The 
commenters suggested that the CFPB revise its interpretation so that 
information about a civil judgment arising from a medical debt 
collection action is not considered medical information under the FCRA. 
In the alternative, one of the commenters suggested that the CFPB 
revise its interpretation of what constitutes medical information about 
a debt, so that it includes, other than the name of the judgment 
creditor, publicly available information that the civil judgment arises 
from a debt collection action as to a medical debt directly owed to a 
health care provider or to such person's assignee (as opposed to debt 
buyer, as referenced in the CFPB's NPRM).
    This commenter also stated that the CFPB's discussion of its 
preliminary interpretation in the NPRM was inconsistent with its 
proposed definition for medical debt information. According to the 
commenter, while the proposed definition is clear that the debt at 
issue must be owed to health care provider or to their agent or 
assignee, in the NPRM the CFPB stated that medical information in the 
form of a civil judgment arising from a debt collection action as to a 
medical debt ``directly owed to a health care provider or debt buyer'' 
would be considered information about a debt that is medical 
information under FCRA section 603(i).\112\ The commenter stated that 
this statement in the preamble of the NPRM could be read as meaning 
that the CFPB's proposal includes medical debt owed to a debt buyer 
even if the debt had not been originally owed to a health care 
provider.
---------------------------------------------------------------------------

    \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 Sec.  1022.3(j), the 
CFPB also finalizes its approach that its interpretation includes 
medical debt that has been sold or resold to a debt buyer--who has 
become the health provider's assignee for the debt, because the payment 
obligation that was sold was created by a health care provider and at 
one time was owed

[[Page 3290]]

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

    \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\
---------------------------------------------------------------------------

    \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

[[Page 3291]]

in the case of third-party loans. For example, a home equity lender 
would not know whether and how much of the proceeds of the loan were 
used to pay for a medical expense and thus whether it should furnish 
the loan to consumer reporting agencies as being for medical purposes. 
As a result, the CFPB also declines to impose such a requirement or 
itself develop such rules at this time.
    The CFPB appreciates, as raised by many commenters, that many 
Americans use credit products offered by third-party lenders to pay 
their medical bills. However, as described in more detail in part VII, 
CFPA Section 1022(b) Analysis, the CFPB has also determined that there 
is not yet substantial evidence that the inclusion of information 
related to medical debt owed to third-party lenders on consumer 
reports, or its use in underwriting, leads to consumer harm.
    While including information about medical debts owed to third-party 
lenders might have additional benefits for consumers, the CFPB has 
determined that such information is beyond the scope of this rulemaking 
and for the reasons stated above, the CFPB declines to change its 
approach at this time.
    One commenter stated that the CFPB's approach is arbitrary and 
capricious, because it would generally provide that information about a 
debt owed directly to a health care provider, or its agent or assignee, 
for the payment of the provider's provision of health care is medical 
information about a debt under the FCRA and the CFPB's proposed rule, 
whereas a debt owed to a third-party lender would not be, even though 
the consumer (and their creditworthiness) is the same in either 
instance. However, as stated above, the CFPB believes that its approach 
aligns with the definition of medical information under FCRA section 
603(i). Further, as noted, the operational difficulties and likely 
compliance burdens further justify its approach.
    The CFPB also disagrees with the commenter's statement that the 
CFPB's interpretation was an arbitrary and capricious deviation from 
the predecessor Agencies' interpretation of the FCRA in the 2005 
interim final rule implementing section 411 of the FACT Act. The 
language cited by the commenter from the 2005 interim final rule 
relates to the Agencies' interpretation of the general applicability of 
the creditor prohibition and the exceptions to the creditor 
prohibition. The CFPB agrees with the Agencies' statements in the 2005 
interim final rule that the creditor prohibition and any exceptions to 
the prohibition are applicable to all creditors. Accordingly, the CFPB 
did not propose to, and the final rule does not, distinguish between 
creditor types in regulating creditors' ability to obtain or use 
medical information for the purpose of making credit eligibility 
determinations. The CFPB's interpretation pertains to the issue of what 
types of information fall under the definition of medical information 
under FCRA section 603(i), which is entirely distinct from the issue 
considered by the Agencies in 2005 of whether all creditors should be 
subject to the creditor prohibition and any exceptions to the 
prohibition under FCRA section 604(g)(2) and (g)(5).
    With regard to some commenters' requests that the CFPB evaluate the 
impacts of its final rule and examine or engage in rulemaking as to 
medical lending products, the CFPB has long been engaged in outreach 
and research related to medical debt information in the consumer 
reporting ecosystem, including on issues such as medical lending 
products.\118\ The CFPB will continue to observe the market and may 
consider issuing other guidance or rules if it later determines that 
doing so is consistent with its authority under the FCRA.
---------------------------------------------------------------------------

    \118\ 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\
---------------------------------------------------------------------------

    \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 Sec.  1022.3(j). 
The CFPB reminds creditors that the example in final Sec.  
1022.30(e)(6) explains how creditors may use medical information 
provided by the consumer in compliance with TILA and Regulation Z, as 
set forth in Sec.  1022.30(e)(1)(ii), for purposes of compliance with 
the ability-to-repay

[[Page 3292]]

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

[[Page 3293]]

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

[[Page 3294]]

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

[[Page 3295]]

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

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

    When the predecessor Agencies established the existing financial 
information exception at Sec.  1022.30(d), it appears that the Agencies 
addressed specific comments on the parameters of their proposal for the 
financial information exception (which they substantially finalized as 
proposed) but did not provide evidence or analysis to support their 
determination.\122\
---------------------------------------------------------------------------

    \122\ 70 FR 33958, 33966-67 (June 10, 2005); see also part 
III.B, Fair Credit Reporting Act.
---------------------------------------------------------------------------

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

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

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

[[Page 3296]]

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

    \124\ Lunna Lopes et al., Kaiser Fam. Found., Health Care Debt 
in the U.S.: The Broad Consequences of Medical and Dental Bills 
(June 16, 2022), 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 limited to just unexpected medical debt and also 
covered elective services. These commenters and others stated their 
opinion that, even assuming a medical debt is unexpected, there are 
many consumer debts that are the result of unplanned events that are 
not the fault of the consumer and all such information is still 
pertinent for credit underwriting regardless of their underlying cause. 
Another commenter stated that even if medical debt is not a good 
indicator of a consumer's repayment risk because in many cases it is 
unavoidable or the result of an emergency, it does not alter the 
consumer's ability to repay even if relevant to a consumer's 
willingness to repay. One commenter stated that medical debt should not 
be treated differently from other kinds of consumer debt because it is 
taken on involuntarily, because consumers are aware that illness is 
inevitable and should be saving for such expenses.
    As explained above and in part VII, CFPA Section 1022(b) Analysis, 
available data implies that a substantial fraction of medical debt 
results from unplanned expenditures. The CFPB did not state in its 
proposal or mean to imply that all medical debt is the result of sudden 
events. However, as stated in the NPRM, the fact that much medical debt 
is unexpected means that, as to much medical debt, consumers had 
limited ability to understand and control costs or their timing, 
distinguishing such debt from other types of consumer debt. For 
example, as noted by a commenter, even when a hospital must make prices 
known to consumers under Federal law,\125\ reporting indicates that 
consumers may still have difficulty ascertaining the cost of their 
care.\126\ And, while consumers may also encounter a need to take on 
debt as a result of unexpected, non-medical events, the CFPB notes that 
medical debt is also unique in ways that limit its informational value, 
such as because of the prevalence of errors in such information and 
inconsistent reporting, as further addressed below and elsewhere in 
this preamble.
---------------------------------------------------------------------------

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

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

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

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

[[Page 3297]]

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

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

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

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

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

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

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

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

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

[[Page 3298]]

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

    \134\ Consumer Fin. Prot. Bureau, Market Snapshot: An Update on 
Third-Party Debt Collections Tradelines Reporting, at 16 (Feb. 
2023), https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf (as of Q1 2022, 57 percent of all tradelines were medical 
collections and were the most common collections type); Consumer 
Fin. Prot. Bureau, Market Snapshot: Third-Party Debt Collections 
Tradelines Reporting, at 12-13 (July 2019), https://files.consumerfinance.gov/f/documents/201907_cfpb_third-party-debt-collections_report.pdf (finding that 58 percent of collections 
tradelines in credit records from 2004 to 2018 were for medical 
debt); Consumer Fin. Prot. Bureau, Consumer credit reports: A study 
of medical and non-medical collections, at 5 (Dec. 2014), https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf (medical collections account 
for 52.1 percent of all collections tradelines).
    \135\ See Consumer Fin. Prot. Bureau, Market Snapshot: An Update 
on Third-Party Debt Collections Tradelines Reporting, at 12 n.9 
(Feb. 2023), https://files.consumerfinance.gov/f/documents/cfpb_market-snapshot-third-party-debt-collections-tradelines-reporting_2023-02.pdf (describing how medical tradelines often do 
not persist on consumer reports, how medical collections accounts 
are rarely marked as paid, and noting ``pay-to-delete'' practices 
used by debt collectors and debt buyers to pressure consumers into 
paying or settling debt).
    \136\ Consumer Fin. Prot. Bureau, Medical Debt Burden in the 
United States, at 26 (Feb. 2022), https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf.
---------------------------------------------------------------------------

    The CFPB did not receive any comments disputing that medical debt 
information is inconsistently reported. One commenter, however, stated 
that the CFPB's proposal would not resolve this issue and medical debt 
information is nonetheless an important data point for creditors. In 
response to this commenter, the CFPB notes that as explained in part 
VII.E.5, Availability of information on consumer reports used in 
underwriting, evidence shows that some medical collections reflect 
inaccurate billing practices, and their inconsistent inclusion on 
consumer reports adds only a noisy signal of consumers' ability to pay.
    In the proposal, the CFPB also stated that, fifth, many industry 
participants have reduced or stopped their reliance on information 
about medical debt, casting doubt on its value. The three NCRAs have 
stopped reporting medical collections that are under $500, less than a 
year old, or paid.\137\ And, the CFPB observed, large credit scoring 
companies are moving to models that completely or partially exclude 
medical collections.\138\ The CFPB also noted that it had learned from 
several small entity representatives during the SBREFA process that 
some creditors have stopped considering medical collections in their 
underwriting.\139\
---------------------------------------------------------------------------

    \137\ 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.
    \138\ One such credit score provider, VantageScore, has 
completely stopped factoring medical collections in the latest 
versions of its models due to lack of their predictiveness as 
compared with other accounts in collections. 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.
    \139\ See Comment from Arlington Cmty. Fed. Credit Union, Re: 
FCRA Proposals and Alternatives Under Consideration, at 2-3 (Nov. 6, 
2023), SBREFA Report app. A; Comment from First Sec. Bank & Tr., Re: 
CFPB's Outline of Proposals and Alternatives Under Consideration, 
Small Business Advisory Review Panel for Consumer Reporting 
Rulemaking, at 7 (Nov. 6, 2023), SBREFA Report app. A (bank does not 
consider medical collections unless aware the consumer has made 
periodic payment arrangements with a collection agency or medical 
establishment).
---------------------------------------------------------------------------

    Some commenters disagreed with the CFPB that these developments 
imply that the market likewise finds that medical debt information has 
limited value for credit underwriting. The commenters generally stated 
that the market actions indicate that the CFPB's proposal is 
duplicative and unnecessary. Some other commenters emphasized, however, 
that the NCRAs' actions were not about the predictiveness of 
information, but rather were meant to provide more time for health 
insurance reimbursements. Other commenters stated that the NCRAs' 
changes have left large medical debts on consumer reports, which the 
commenters said should be considered in credit underwriting. Commenters 
supporting the CFPB's proposal, however, stated the market changes have 
been insufficient and many Americans still have medical debt 
information on their consumer reports, emphasized that the national 
consumer reporting agencies' actions are voluntary and could be 
stopped, and observed that there are still older credit scores and 
metrics in use that do not have the same adjustments that reduce the 
amount of medical debt information on consumer reports.
    The CFPB disagrees with the commenters implying the market 
participant actions described in the proposal are not significant 
indicators it should take under consideration for the final rule. For 
example, the NCRAs' actions to remove medical debt collections with 
balances of less than $500 and paid medical collections on consumer 
reports, credit score providers FICO's and VantageScore's actions to 
reduce or remove consideration of medical debt collection information 
from their newer models, and changes by individual lenders represent a 
clear trend in the credit reporting and credit markets to reduce the 
weight of medical debt information for credit evaluation purposes. 
However, as noted by commenters, the NCRAs' actions are voluntary and 
could be reversed, and medical debt information still remains on 
consumer reports. Given the CFPB's finding, as noted above, that 
medical debt information has limited predictive value and its 
expectation that medical collections can be removed from underwriting 
models without significantly reducing their ability to predict serious 
delinquency if underwriting models continue to include other variables 
that are sufficiently predictive of delinquency risk, the CFPB 
concludes that it is no longer appropriate and necessary for creditors 
to consider medical debt information under a regulatory exception to 
the statutory creditor prohibition.
    Sixth, the CFPB also explained in the proposal that some States and 
some Federal agencies have also acted to limit creditors' access to, or 
ability to

[[Page 3299]]

consider, certain medical debt information. As an example, the CFPB 
noted that several States had prohibited, or had been considering 
prohibiting, the inclusion of consumer medical debt on consumer reports 
at the time of the NPRM.\140\ The CFPB stated that although such 
efforts were in their early stages, the CFPB was not aware of evidence 
that such actions had affected creditors' underwriting standards or 
that creditors have materially curtailed access to credit or tightened 
credit terms in those States. The CFPB also explained that some Federal 
government agencies had also been reviewing and modifying their 
underwriting practices to reduce or eliminate medical debt collections 
from consideration when evaluating whether a consumer will repay a 
loan.\141\ The CFPB stated that these changes by the States and by the 
Federal government indicate a growing awareness that medical debt 
information may have limited value for credit underwriting purposes. 
The CFPB also stated that consumer reporting agencies and creditors 
will already need to comply with these new laws and best practices and, 
given operational and business realities, may need to do so on a broad 
basis. The CFPB concluded that removing the financial information 
exception in Regulation V would create a uniform nationwide baseline 
consistent with these advancements.
---------------------------------------------------------------------------

    \140\ See Colo. Rev. Stat. section 5-18-109; N.Y. Pub. Health 
Law art. 49-A; 2024 Conn. Act 24-6; 2024 Va. Acts ch. 751. Since the 
NPRM was issued, several other states have passed similar laws. See 
2024 Cal. SB 1061; 2024 Minn. Ch. 332C; 2024 New Jersey A3681; 2024 
Ill. Pub. Act 103-0648.
    \141\ See 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/.
---------------------------------------------------------------------------

    Commenters opposing the rule disagreed with the CFPB that State and 
Federal actions related to medical debt also argue in favor of the 
CFPB's preliminary determination. Some such commenters said that the 
CFPB should not finalize its proposed rule because some States have 
already enacted reforms as to medical debt information and credit 
reporting. One commenter stated that the proposed rule, if finalized, 
could create confusion for small entities in States with such 
protections and the CFPB should clarify which law controls. One 
commenter supporting the proposed rule stated that the rule enhances 
some States' consumer protection efforts as to medical debt, such as 
those in New York, or provide protection for residents of states 
without such measures.
    Other commenters stated that changes on the Federal level on 
medical debt remove the need for any intervention by the CFPB, citing 
the passage of the No Surprises Act, changes to Regulation F (which 
implements the Fair Debt Collection Practices Act), and inquiries into 
medical credit cards and other medical payment products, among others. 
One commenter also stated that health insurance under the Affordable 
Care Act is more accessible than before and there currently are high 
rates of insurance coverage. One commenter stated that the CFPB's 
reference to actions by Freddie Mac and Fannie Mae to no longer 
consider medical collections in mortgage underwriting does not prove 
the CFPB's preliminary determination; the two entities, who are under 
conservatorship, were directed to make such changes by the Federal 
government and the changes were not based on research and analysis.
    The CFPB reaffirms its point in the proposal that the changes that 
have been made by the States and by the Federal government indicate 
that there is a growing awareness that medical debt information may 
have limited value for credit underwriting purposes. The CFPB agrees 
with commenters that the CFPB's proposal would facilitate such efforts. 
Further, contrary to some commenters' assertions, the CFPB believes 
that the actions to date, which are not uniform in their scope or 
execution, suggest that consumers would benefit from having a Federal, 
baseline standard for the creditors' treatment of medical debt 
information.
    Although not mentioned by the CFPB as part of the reasoning behind 
its preliminary determination, a few commenters stated the CFPB also 
claimed that the proposal will solve the issue of debt parking, which 
the commenters stated is not a real concern. In response, the CFPB 
notes that debt parking was not a focus of its proposal and was not 
cited as a one of the reasons underlying its preliminary determination. 
Likewise, debt parking is not one of the justifications for the final 
rule.
    In addition to disputing the specific points raised by the CFPB in 
support of its preliminary determination, some commenters also 
disagreed with the CFPB's preliminary determination that the financial 
information exception as to medical debt information is not consistent 
with the intent of the creditor prohibition to protect consumers' 
sensitive medical information. These commenters stated that current 
privacy protections are sufficient and that the CFPB had not considered 
or presented evidence of inappropriate practices by lenders under the 
current rule that warrant the change in policy. Commenters also stated 
that the FCRA does not delegate the power to change privacy protections 
to the CFPB; that the proposal might increase privacy risks, because it 
may require handling of medical information across more entities; and 
that consumers would have less privacy because of a likely increase in 
debt collection litigation as a result of the rule.
    With regard to these commenters' concerns about privacy, the CFPB 
observes that by enacting FCRA section 604(g)(2), Congress made a 
determination that all medical information--including medical debt 
information, as a type of medical information--is sensitive data 
warranting specific privacy protections in the form of the creditor 
prohibition. By removing the financial information exception, the CFPB 
is acting within its authority to remove an exception put in place by 
the predecessor Agencies and is facilitating Congress's intent to 
provide privacy protections in the manner it determined was appropriate 
to protect consumers' medical information.
    Some commenters also generally stated that the CFPB had not met the 
requirements of FCRA section 604(g)(5). One commenter stated that 
Congress had not granted the CFPB authority to further limit the use of 
medical information at all. And, instead, FCRA section 604(g)(5) 
authorizes the CFPB to allow more medical information to be considered. 
Another commenter stated that the CFPB had effectively ignored the 
statutorily required balancing process by largely ignoring legitimate 
needs for the information and concluding that use of medical debt 
information for purposes of assessing credit risk is virtually always 
an inappropriate purpose. One commenter supporting the rule, however, 
stated that the CFPB had clearly acted within its authority under FCRA 
section 604(g)(5) and had used reasoned decision-making in removing a 
regulatory exception, via notice and comment rulemaking. The commenter 
also stated that the CFPB's multiple research studies demonstrate that 
the CFPB's decision was well reasoned.
    The CFPB disagrees that it has not met the requirements to amend or 
remove an exception under FCRA section 604(g)(5). FCRA section 
604(g)(5) provides the CFPB with the authority to ``prescribe 
regulations that permit transactions'' under the creditor

[[Page 3300]]

prohibition in FCRA section 604(g)(2) or, in other words, establish 
exceptions to the prohibition.\142\ The CFPB is exercising that 
authority here by amending its existing regulation, 12 CFR 1022.30, 
that creates exceptions to the statutory creditor prohibition. In 
particular, the CFPB is amending the financial information exception by 
rescinding the financial information exception in most of its existing 
applications but retaining a version of the exception in Sec.  
1022.30(e)(1)(x), with revisions discussed later in this preamble. 
Logically, in addition to establishing regulations to permit creditors' 
consideration of more medical information, the CFPB likewise has 
authority to amend or rescind, partially or fully, previously 
promulgated exceptions to the creditor prohibition, if it determines 
that such an exception is not necessary and appropriate, consistent 
with the intent of the creditor prohibition to restrict the use of 
medical information for inappropriate purposes. When determining 
whether to amend or remove a regulatory exception, the CFPB carefully 
considers the underlying rationales as well as the policy and economic 
consequences of doing so, while taking into account the baseline 
obligations created by Congress. As explained above, the CFPB has 
carefully reviewed the evidence about medical debt information and its 
value for credit underwriting, which was not available at the time the 
predecessor Agencies promulgated the financial information exception, 
in consideration of the privacy purpose of the creditor prohibition. 
Its final determination is based upon this review.
---------------------------------------------------------------------------

    \142\ As explained below in part VI.B, commenters are also 
incorrect to assert that the CFPB lacks authority to prohibit 
creditors from obtaining or using financial aspects of medical 
information because FCRA section 604(g)(2) has a parenthetical 
cross-referencing FCRA section 605(a)(6).
---------------------------------------------------------------------------

    For the reasons above, the CFPB is finalizing its determination 
that it generally is not ``necessary and appropriate to protect 
legitimate operational, transactional, risk, consumer, and other 
needs'' for creditors to consider sensitive financial information 
concerning a consumer's medical debt for underwriting purposes. The 
CFPB also finds that creditors' consideration of such information under 
the existing financial information exception is not 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).\143\
---------------------------------------------------------------------------

    \143\ 15 U.S.C. 1681b(g)(5).
---------------------------------------------------------------------------

2. Medical Information Related to Expenses, Assets, and Collateral
Proposal
    The financial information exception currently permits a creditor to 
obtain and use medical information relating to expenses, assets, and 
collateral, including the value, condition, and lien status of a 
medical device that may be collateral to secure a loan. As the CFPB 
explained in the NPRM, medical expenses and medical debts are closely 
related, in that unpaid medical expenses often become medical debts. 
Because of the similarities between medical expenses and medical debts, 
the CFPB proposed to treat these categories of medical information the 
same. The CFPB also explained that medical information related to a 
consumer's assets and collateral generally refers to medical equipment 
serving as an asset or as collateral for a loan, which a creditor could 
potentially seize or anticipate could be liquidated to pay off a loan. 
The CFPB understood that such medical equipment is often necessary and 
potentially lifesaving. Because of the similarities between medical 
expenses and medical debts and the importance of medical assets and 
collateral to a consumer's well-being, the CFPB preliminarily 
determined in its proposal that it is not ``necessary and appropriate 
to protect legitimate operational, transactional, risk, consumer, and 
other needs'' for creditors to consider medical information relating to 
a consumer's expenses or assets and collateral.
    The CFPB sought comment on its proposed approach to removing the 
financial information exception for expenses, assets, and collateral, 
and expressed particular interest in receiving feedback from creditors 
and their representatives regarding whether they take medical devices 
as collateral or into consideration as assets that may be used by 
consumers to pay a future debt obligation.
Comments
    The CFPB received many comments related to its proposed approach to 
removing the financial information exception for expenses, assets, and 
collateral, most of which expressed support for the CFPB's proposal.
    Commenters expressed that as a consumer's medical debt has not been 
found to have predictive value as to a consumer's ability to repay a 
loan, the fact that a consumer has medical expenses or durable medical 
equipment is likewise unlikely to have predictive value.
    One commenter shared their opinion that all debt is relevant to 
creditworthiness, so medical equipment should not be shielded from 
repossession for failure to pay. However, the same individual commenter 
ultimately expressed support for the rule as proposed, explaining that 
the rule as proposed is the best solution given the complex nature of 
health care and medical billing practices.
    Many commenters expressed support for the removal of the financial 
information exception for collateral, characterizing their support for 
the rule as support for prohibiting debt collectors from taking medical 
devices as loan collateral, and protecting consumers from having their 
medical equipment such as wheelchairs or prosthetic limbs repossessed. 
Many commenters further indicated that the possibility that medical 
equipment could be used as collateral and consequently repossessed for 
a consumer's inability to pay was unreasonable.
    A comment from a coalition of several major national orthotic and 
prosthetic organizations in support of the proposal expressed concern 
that the rule is unclear as to whether a health care provider or 
supplier of medical devices would fall under the definition of 
``creditor'' for the purposes of determining whether they are entities 
that may not repossess a medical device under the rule. The same 
commenter also expressed that they were unaware of repossession of 
orthotics and prosthetics as a practice and elaborated that because 
many types of medical devices, including some orthotics and prosthesis, 
cannot be reused by other patients, holding such devices as collateral 
serves only to punish the patient. The CFPB did receive one comment 
from an attorney saying that she had personally seen medical devices 
being repossessed, but the CFPB did not hear evidence from other 
commenters of this being a widespread issue.
    Many commenters expressed that medical devices should be prohibited 
from serving as collateral for a loan. Commenters expressed that 
repossession of medical devices is a dangerous practice that limits or 
altogether prohibits individuals' mobility, productivity, and overall 
well-being. Commenters elaborated that this makes it even more 
difficult or perhaps impossible for consumers to ever pay their debts. 
Other commenters also explained the disparate impact using medical 
devices as collateral has on certain communities, particularly veterans 
and disabled individuals who

[[Page 3301]]

may be more likely to rely on medical devices.
Final Rule
    The CFPB understands that medical information related to a 
consumer's assets and collateral generally refers to medical equipment 
serving as an asset or as collateral for a loan, which a creditor may 
potentially seize or anticipate could be liquidated to pay off a loan. 
The CFPB also understands that such medical equipment is often 
necessary and potentially lifesaving. The CFPB has also not observed 
the repossession of medical devices as a typical practice in the 
market, despite the personal experience from one commenter, suggesting 
that there is likely to be low or non-existent costs or other burdens 
associated with the rule as it pertains to repossession of medical 
devices. Thus, given the importance of medical assets and collateral to 
a consumer's well-being and the apparent limited existence of this 
practice currently, the CFPB has determined that it is not ``necessary 
and appropriate to protect legitimate operational, transactional, risk, 
consumer, and other needs,'' or consistent with the intent of the 
creditor prohibition to restrict the use of medical information for 
inappropriate purposes, for creditors to consider medical information 
relating to a consumer's assets and collateral. For the reasons stated 
above, the CFPB finalizes as proposed, removing the financial 
information exception for expenses, assets, and collateral and related 
examples at previously existing Sec.  1022.30(d). The CFPB anticipates 
that under the final rule, creditors will not be able to obtain medical 
information for purposes of creating a security interest in medical 
devices, and consequently, typically will not use medical devices as 
collateral.\144\
---------------------------------------------------------------------------

    \144\ See, e.g., U.C.C. 9-203(b)(3).
---------------------------------------------------------------------------

    In response to the commenter expressing concern about whether 
health care providers and suppliers of medical devices fall under the 
definition of ``creditor'' for the purposes of the rule, this rule does 
not purport to modify the definition of ``creditor,'' which is defined 
in 12 CFR 1022.30(b)(2)(ii). Determining whether a health care provider 
or supplier of medical devices is a creditor is a fact-specific inquiry 
that depends on the facts and circumstances. In assessing their 
obligations under the rule, health care providers and suppliers of 
medical devices should look to the definition of ``creditor'' in 12 CFR 
1022.30(b)(2)(ii), which provides that the term has the same meaning as 
in section 702 of the ECOA. And, separately, the CFPB reminds health 
care providers and suppliers to look to final Sec.  1022.30 to 
determine their obligations as to obtaining or using medical 
information for credit eligibility determinations.
3. Medical Information Related to Income, Benefits, or the Purpose of 
the Loan
Proposal
    The financial information exception currently permits creditors to 
consider medical information related to income, benefits, and the 
purpose of the loan, including the use of the loan proceeds under 
certain conditions. The CFPB proposed to remove the financial 
information exception while retaining these elements of the exception 
that permit a creditor to consider medical information relating to 
income, benefits, and the purpose of the loan. In its proposal, the 
CFPB explained its preliminary determination that the elements of the 
exception relating to income, benefits, and the purpose of the loan are 
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. The CFPB explained that consumers whose primary 
source of income is disability benefits might not be able to obtain 
credit at all if creditors could not consider their income.\145\ And 
since creditors may be unwilling to underwrite if they lack information 
about the purpose of a loan, consumers might not be able to obtain 
needed credit unless creditors have access to that information.
---------------------------------------------------------------------------

    \145\ The CFPB notes that ECOA and Regulation B prohibit 
creditors from discriminating in any aspect of a credit transaction 
against an applicant because all or part of the applicant's income 
derives from a public assistance program, which includes but is not 
limited to Social Security disability income. 15 U.S.C. 1691(a)(2); 
12 CFR 1002.2(z), 1002.4(a); see also Regulation B comment 2(z)-3.
---------------------------------------------------------------------------

Comments
    The CFPB received a number of comments related to its approach to 
retaining elements of the financial information exception that permit a 
creditor to consider medical information relating to income, benefits, 
and the purpose of the loan. Most comments were from consumers 
expressing approval of the CFPB's proposal.
    One commenter, a professional association for physicians and 
medical students, stated that this aspect of the financial information 
exception was appropriate because it ensures that creditors can 
consider necessary financial information, such as income from 
disability or workers' compensation, without compromising the privacy 
and sensitivity of the consumer's medical information. The commenter 
elaborated that the proposed rule balances the need for accurate credit 
assessments with the protection of consumer privacy. Another commenter, 
citing a report by a nonpartisan research and policy institute, 
explained that a large percentage of Supplemental Security Income (SSI) 
beneficiaries rely on SSI benefits as their only source of income, and 
the CFPB's proposal ensures that these consumers can access credit and 
qualify for a loan.
    One commenter expressed concern about the potential for misuse of 
information obtained under proposed Sec.  1022.30(e)(1)(x). The 
commenter suggested that once a creditor becomes aware of information 
obtained under the exception, it may be difficult to measure bias or 
ensure the information is used in a permitted manner. Another 
commenter, a State insurance commissioner, expressed support for the 
CFPB's proposal, but similarly expressed concern about the lack of 
visibility into a credit reporting agency's use of this type of medical 
information.
    One commenter expressed concern that Sec.  1022.30(e) includes 
examples illustrating the exception as applied to medical information 
related to benefits and income but does not include examples 
illustrating the exception as applied to medical information related to 
the purpose of the loan.
Final Rule
    Except as discussed in as discussed in part VI.A, Consumer-
Authorized Transaction History below, the CFPB finalizes Sec.  
1022.30(e)(1)(x) as substantially proposed, with technical edits for 
renumbering. Final Sec.  1022.30(e)(1)(x)(A)(2), previously proposed 
Sec.  1022.30(e)(1)(x)(A), generally provides an exception for the use 
of medical information relating to income, benefits, or the purpose of 
the loan, including the use of proceeds. Section 1022.30(e)(1)(x)(A)(2) 
also provides examples of the types of financial information related to 
income and benefits relied upon as a source of repayment. Final Sec.  
1022.30(e)(1)(x)(B) and (C) provide that a creditor must use the 
medical information described in Sec.  1022.30(e)(1)(x)(A) in a manner 
and to an extent that is no less favorable than comparable, nonmedical 
information and that the creditor cannot take the consumer's physical, 
mental, or

[[Page 3302]]

behavioral health, condition or history, type of treatment, or 
prognosis into account.
    Regarding comments expressing concerns about transparency and the 
potential for misuse of information obtained under the rule, final 
Sec.  1022.30(e)(1)(x) restates the previously codified exception with 
a narrower scope. The CFPB is not aware of any concerns related to the 
consideration of medical information related to income, benefits, or 
purpose of the loan, and declines to make any further revisions.
    The CFPB also finalizes as proposed Example 7 in Sec.  
1022.30(e)(7), which illustrates a use of medical information related 
to long-term disability income. Regarding the comment about the need 
for examples illustrating when medical information may relate to the 
purpose of the loan, the commenter did not suggest language, and the 
CFPB declines to revise Sec.  1022.30(e) to include examples 
illustrating the exception as applied to medical information related to 
the purpose of the loan.

C. Limits on a Consumer Reporting Agency's Disclosure of Medical Debt 
Information

Proposal
    The CFPB proposed to add new Sec.  1022.38 to subpart D to address 
how a consumer reporting agency's medical debt information reporting 
responsibilities would be impacted by the proposal to remove the 
financial information exception for obtaining and using medical 
information in connection with any determination of the consumer's 
eligibility for credit. Proposed Sec.  1022.38 would have permitted a 
consumer reporting agency to include medical debt information in a 
consumer report furnished to a creditor for credit eligibility purposes 
only if the following criteria are met: (1) the consumer reporting 
agency has reason to believe the creditor intends to use the medical 
debt information in a manner not prohibited by Sec.  1022.30; and (2) 
the consumer reporting agency is not otherwise prohibited from 
furnishing to the creditor a consumer report containing the medical 
debt information, including by a State law that prohibits furnishing to 
the creditor a consumer report containing medical debt information.
    The CFPB also proposed a related amendment to remove the example in 
Sec.  1022.30(c)(3)(iii), which describes a creditor receiving medical 
information on a consumer report furnished by a consumer reporting 
agency. While there may be some instances where a consumer reporting 
agency may furnish to a creditor a consumer report containing medical 
information, the proposed amendments would limit those instances and 
render the example less instructive and potentially confusing. 
Therefore, the CFPB proposed to remove the example.
    The CFPB considered alternatives to its proposed approach to Sec.  
1022.38 but preliminarily determined that its rulemaking goals were 
best achieved through the proposed approach. For example, as discussed 
in the SBREFA Outline and the proposed rule, the CFPB considered 
mandating a delay in the furnishing and reporting of medical debt for a 
particular period of time, and not reporting or furnishing medical debt 
below a particular dollar amount.\146\ The CFPB also considered 
requiring consumer reporting agencies and medical information 
furnishers, upon receiving a dispute, to conduct an independent 
investigation to certify that a disputed medical debt is accurate and 
not subject to pending insurance disputes.\147\ The CFPB requested 
comment on all aspects of proposed Sec.  1022.38, including the 
alternatives discussed.
---------------------------------------------------------------------------

    \146\ SBREFA Outline at 19; 89 FR 51682, 51695 (June 18, 2024).
    \147\ Id. at 51696.
---------------------------------------------------------------------------

Comments
Proposed Sec.  1022.38 Generally
    A number of commenters expressed general support for proposed Sec.  
1022.38 and identified benefits of the proposal. For example, some 
commenters stated that proposed Sec.  1022.38 would stop debt 
collectors from using the credit reporting system as a payment coercion 
tactic and forcing consumers to pay debts that they may not owe. 
Commenters also explained that proposed Sec.  1022.38 would protect 
consumers' health privacy. See part VII, CFPA Section 1022(b) Analysis, 
for a more fulsome discussion of benefits.
    In addition, the CFPB received comments that appeared to be part of 
several comment submission campaigns in support of the proposed rule. 
Such comments typically advocated for finalizing the proposed rule.
    Other commenters expressed general opposition to proposed Sec.  
1022.38 and identified various categories of harms, including to 
consumers (e.g., increased healthcare costs, reduced access to medical 
care), medical providers (e.g., loss of income from non-payment, 
increased reliance on litigation), debt collectors (e.g., decrease in 
collectible accounts, increased collection costs), creditors (e.g., 
unable to assess the true credit risk of potential borrowers, increased 
reliance on litigation), insurance providers (e.g., consumers would be 
disincentivized from purchasing health insurance), and consumer 
reporting agencies (e.g., removal of medical debt from consumer reports 
would be complex and costly). One commenter noted that household 
surveys, court records, and information collected from providers will 
be increasingly important sources of data for tracking the prevalence 
of medical debt, as less of this debt appears on consumer reports. 
Another commenter noted that the transition to newer credit score 
models that exclude medical debt is not expected until the fourth 
quarter of 2025. See part VII, CFPA Section 1022(b) Analysis, for a 
more fulsome discussion of potential harms.
    The CFPB also received comments that appeared to be part of several 
comment submission campaigns opposing the proposed rule. Such comments 
typically identified potential harms and requested that the CFPB 
reconsider the proposed rule.
    Some commenters appear to have misunderstood the proposal as 
limiting the circumstances in which a consumer reporting agency can 
receive information about a consumer's medical information.
    A number of commenters stated that proposed Sec.  1022.38 is 
unnecessary because the recent market changes leave only unpaid medical 
debts greater than $500 on consumer reports, and the proposal fails to 
recognize the marketplace's ongoing self-corrections and innovation. At 
least one commenter pointed to the CFPB's Data Point as demonstrating 
that debts above $500 are associated with higher delinquency rates and 
should continue to be reported and considered in underwriting. Some 
commenters requested that the CFPB at least allow more time to evaluate 
whether the NCRAs' reporting changes from 2022 and 2023 will address 
the CFPB's concerns about medical debt.
    Some commenters questioned the CFPB's authority to promulgate Sec.  
1022.38. For example, commenters stated that FCRA section 604(g)(1)(C) 
affirmatively authorizes a consumer reporting agency to furnish a 
consumer report that contains such medical debt information if the 
information is coded to hide the identity of the provider or nature of 
services. Commenters therefore concluded that Congress's intent to 
permit consumer reporting agencies to furnish medical debt information 
is clear and the CFPB cannot supersede such a statutory authorization. 
At least one commenter stated that because FCRA section 604(g)(1)(C) 
affirmatively permits a

[[Page 3303]]

consumer reporting agency to provide medical information related to 
transactions, accounts or balances relating to debts arising from the 
receipt of medical services, products, or devices, the FCRA section 
621(e) general rulemaking authority, which is limited to those rules 
necessary and appropriate to administer and carry out the purposes and 
objectives of the FCRA, and to prevent evasions thereof or to 
facilitate compliance therewith, is insufficient to support proposed 
Sec.  1022.38. A commenter noted that Congress has attempted, but 
failed, to pass legislation to give CFPB the explicit authority to 
eliminate medical debt from consumer reports. In addition, commenters 
pointed to the congressional finding in the FCRA that the banking 
system is dependent upon fair and accurate credit reporting and stated 
that a consumer report that does not reflect significant debts owed by 
a consumer is, by definition, inaccurate. One commenter noted that 
Congress chose to promote the accuracy of information on consumer 
reports by expressly requiring furnishers to have reasonable procedures 
to ensure they provide complete and accurate information, and by 
enabling consumers to dispute the accuracy of specific items on their 
consumer reports, not by suppressing information.
    In addition, commenters stated that FCRA section 605(a) 
specifically identifies types of records that may not be included on a 
consumer report (unless an exception applies). They further stated that 
in 2018, Congress amended the list of items specifically excluded from 
consumer reports to include, under certain circumstances, information 
related to a veteran's medical debt. From this, the commenters 
concluded that Congress clearly articulated in the FCRA information 
that may not be included in a consumer report and considered the impact 
of medical debt reporting but chose not to exclude all categories of 
medical debt from consumer reports. Another commenter noted that on 
multiple occasions, Congress has amended the FCRA to regulate when, 
how, and to what extent medical information may be included in consumer 
reports and concluded that if Congress wanted to ban medical debt from 
consumer reports, it would have done so.
    Commenters also stated that the specific grants of rulemaking 
authority in FCRA section 604(g) do not provide the CFPB with authority 
to restrict account information included in consumer reports or to 
otherwise regulate how medical debt is reported.
    To be clear, the proposed rule did not purport to, and the final 
rule does not, prohibit furnishers from furnishing accurate medical 
debts to consumer reporting agencies. Section 1022.38 addresses how 
consumer reporting agencies' responsibilities, with respect to medical 
debt information, are impacted when creditors are prohibited from 
obtaining or using the medical debt information.
    As discussed above, the CFPB acknowledges the value of the 
voluntary consumer reporting changes by the three NCRAs that stopped 
the reporting of some, but not all, medical debt on a consumer report. 
However, the CFPB has determined that these types of changes do not do 
enough to protect the privacy of consumers' medical data during the 
credit underwriting process, nor do they resolve concerns about 
accuracy. Although these market changes have reduced the total number 
of medical collections tradelines reflected on consumer reports, their 
voluntary nature means there is some uncertainty about whether the 
changes could be reversed in the future, and, as discussed in part I.B, 
Market Background, Medical Debt and Consumer Reporting, 15 million 
Americans still have $49 billion in medical bills on their consumer 
reports even after the NCRAs' voluntary changes. A number of commenters 
share the CFPB's position that because the changes are voluntary and do 
not cover all amounts of medical debt, the permanence and broader 
effect of removing the financial information exception in this 
rulemaking is important. And, the fact that the CFPB has no evidence 
that the voluntary NCRA reporting changes have disrupted the market 
provides another basis for finalizing this rule, which builds upon 
those voluntary changes to provide expanded and permanent protections 
for consumers.
    Contrary to some commenters' assertions, FCRA section 604(g)(1)(C) 
does not affirmatively authorize a consumer reporting agency to furnish 
a consumer report containing medical information. FCRA section 
604(g)(1)(C) is a prohibition. FCRA section 604(g)(1)(C) states 
``Limitation on consumer reporting agencies. A consumer reporting 
agency shall not furnish . . . in connection with a credit . . . 
transaction . . . .'' FCRA section 604(g)(1)(C) prohibits a consumer 
reporting agency from furnishing, in connection with a credit 
transaction, a consumer report that contains medical debt information 
that is not anonymized (assuming the consumer has not consented to the 
furnishing of a report under FCRA section 604(g)(1)(B)). Such 
protections are necessary when creditors are lawfully permitted to 
obtain and use medical information, such as when an appropriate agency 
has used its delegated authority to create an exception to the general 
prohibition on creditors obtaining and using medical information as set 
forth in FCRA section 604(g)(2) and (5)(A). The protection in FCRA 
section 604(g)(1)(C) ensures that the medical information obtained or 
used by creditors would be anonymized to protect consumers' privacy. 
The fact that FCRA section 604(g)(1)(C) carves certain anonymized 
information out of the general prohibition in FCRA section 604(g)(1) 
does not immunize such anonymized information from restrictions 
contained in other provisions, such as FCRA section 604(a)'s 
permissible purpose restrictions or regulations issued under FCRA 
section 621(e).
    In addition, the fact that FCRA section 605(a) identifies some 
types of records that may not be included on a consumer report does not 
mean that the CFPB lacks authority to determine that other types of 
records also may not be included on a consumer report. To the contrary, 
when Congress gave the CFPB rule writing authority under the FCRA, it 
excepted only two specific provisions of the FCRA--sections 615(e) and 
628.\148\ By implication, with respect to every other provision of the 
FCRA, Congress intended the CFPB to be able to prescribe regulations as 
may be necessary or appropriate to administer and carry out the 
purposes and objectives of the FCRA, and to prevent evasions thereof or 
to facilitate compliance therewith.
---------------------------------------------------------------------------

    \148\ 15 U.S.C. 1681s(e)(1).
---------------------------------------------------------------------------

    Relatedly, the fact that Congress enacted a specific, narrow 
solution to address particular concerns with veterans' medical debt 
does not mean that Congress intended to preclude the CFPB from 
addressing a different type of problem, albeit also related to medical 
debt. This rulemaking is directly related to the prohibition on 
creditors obtaining or using medical information in connection with any 
determination of the consumer's eligibility for credit, also enacted by 
Congress. This rulemaking merely removes an unwarranted regulatory 
exception to that prohibition, and the result of the removal of the 
exception, in light of other provisions in the FCRA, is that medical 
debt information is now an additional type of record that cannot be 
included in a consumer report under certain circumstances.

[[Page 3304]]

    Finally, as discussed in the Final Rule section below, the CFPB is 
not relying on the specific grants of rulemaking authority in FCRA 
section 604(g) as authority for Sec.  1022.38.
Proposed Sec.  1022.38(a)
    The scope of proposed Sec.  1022.38 would have applied to any 
consumer reporting agency as defined in section 603(f) of the FCRA, 15 
U.S.C. 1681a(f). At least one commenter noted that where Congress 
restricted veterans' medical debt on consumer reports, the provision 
was limited to the NCRAs as defined under section 603(p) of the 
FCRA.\149\
---------------------------------------------------------------------------

    \149\ See 15 U.S.C. 1681c(a)(7) through (8).
---------------------------------------------------------------------------

    The CFPB is finalizing Sec.  1022.38(a) as proposed. Section 
1022.38(a) references the definition of consumer reporting agency in 
FCRA section 603(f) and reflects the coverage of existing Regulation V. 
Limiting the scope of Sec.  1022.38 to the NCRAs would not make sense 
because the permissible purpose provision in FCRA section 604(a)(3)(A), 
which supports the intervention, applies to consumer reporting agencies 
as that term is defined in FCRA section 603(f). Further, applying Sec.  
1022.38 to all consumer reporting agencies would facilitate compliance 
with the creditor prohibition in Sec.  1022.30(b) when creditors use 
consumer reports from consumer reporting agencies that are not NCRAs.
Proposed Sec.  1022.38(b)(1)
    Proposed Sec.  1022.38 would have permitted a consumer reporting 
agency to include medical debt information in a consumer report 
furnished to a creditor for credit eligibility purposes only if certain 
criteria are met. One criterion, in proposed Sec.  1022.38(b)(1), was 
that the consumer reporting agency has reason to believe the creditor 
is not prohibited from using the medical debt information under Sec.  
1022.30.
    Some commenters stated that the reason to believe standard in 
proposed Sec.  1022.38(b)(1) is too loose or vague of a standard to 
adequately protect consumers, noting that the same language in FCRA 
section 604(a) has been interpreted by courts to absolve consumer 
reporting agencies of liability if the user merely avers a permissible 
use. Commenters identified various solutions, including requiring 
consumer reporting agencies to have strict procedures to prevent 
including medical debt in a report unless the user is permitted to use 
medical information under Sec.  1022.30; replacing the reason to 
believe standard with a reasonable belief or actual knowledge standard; 
removing proposed Sec.  1022.38(b)(1); or adding an objective criterion 
to the reason to believe standard.
    Another commenter stated that the proposal to restrict the sharing 
of medical debt information is not necessary because, if the CFPB 
prohibits creditors from considering medical debt in making credit 
decisions, then consumer reporting agencies will neither collect nor 
share that information with creditors.
    The CFPB is finalizing Sec.  1022.38(b)(1) as proposed. The reason 
to believe standard in Sec.  1022.38(b)(1) is derived from the 
permissible purpose requirement in FCRA section 604(a)(3)(A). FCRA 
section 604(a)(3)(A) states that one of the circumstances under which a 
consumer reporting agency may furnish a consumer report is to a person 
which it has reason to believe intends to use the information in 
connection with a credit transaction involving the consumer on which 
the information is to be furnished and involving the extension of 
credit to the consumer. With respect to the comment about this 
provision being unnecessary in light of the prohibition on creditors' 
consideration of medical debt information in credit decisions, this 
intervention will facilitate compliance with Sec.  1022.30 by ensuring 
that consumer reporting agencies do not share information with 
creditors that creditors are prohibited from obtaining or using. If, in 
response to the prohibition on creditors obtaining or using medical 
debt information in Sec.  1022.30, consumer reporting agencies would 
not collect or share consumers' medical debt information as the 
commenter asserts, then there should be no compliance burden or 
industry concerns associated with this provision.
Proposed Sec.  1022.38(b)(2)
    The second criterion, in proposed Sec.  1022.38(b)(2), was that the 
consumer reporting agency is not otherwise prohibited from furnishing 
to the creditor a consumer report containing the medical debt 
information, including by a State law that prohibits furnishing to the 
creditor a consumer report containing medical debt information. The 
purpose of proposed Sec.  1022.38(b)(2) was to make clear that proposed 
Sec.  1022.38 does not override any other prohibition regarding the 
furnishing of consumer reports.
    At least one commenter stated that the CFPB failed to comply with 
Federal regulations governing incorporation by reference. And 
relatedly, the commenter noted that incorporating 50 different State 
laws into Federal law undermines the FCRA's goal of uniform credit-
reporting standards.
    Some commenters asserted that State laws that regulate what 
information may or may not be included on a consumer report are 
preempted by the FCRA and that the proposal violates the Tenth 
Amendment because CFPB does not have the authority to enforce State 
laws (or determine whether or not they are preempted by the FCRA). The 
commenters stated that proposed Sec.  1022.38(b)(2) would have the 
effect of making a violation of State law into a violation of this 
rule.
    Other commenters expressed support for proposed Sec.  
1022.38(b)(2). These commenters stated that Regulation V should not be 
interpreted to allow consumer reporting agencies to violate State laws 
governing medical information, and appreciated the CFPB's 
acknowledgment that states can implement additional consumer 
protections.
    The CFPB is finalizing Sec.  1022.38(b)(2) with amendments. The 
criterion set out in final Sec.  1022.38(b)(2) requires the consumer 
reporting agency to have 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 is not, in final 
Sec.  1022.38(b)(2), incorporating by reference State laws, deeming a 
violation of State law to be a violation of the FCRA, or otherwise 
affecting the enforcement of State laws, as some commenters asserted 
the proposed language would have done. As revised, final Sec.  
1022.38(b)(2) merely ensures that, independent of the prohibition in 
Sec.  1022.30, a consumer reporting agency would generally still be 
prohibited from furnishing a consumer report containing medical debt 
information to a creditor who is legally prohibited from obtaining or 
using the medical debt information. FCRA section 604(a)(3)(A) permits a 
consumer reporting agency to furnish a consumer report to a person 
which it has reason to believe intends to use the information in 
connection with a credit transaction involving the consumer. Under the 
final rule, a consumer reporting agency would not have reason to 
believe that a creditor who is legally prohibited from obtaining or 
using medical debt information intends to use that information in 
connection with a credit transaction. Laws within the scope of Sec.  
1022.38(b)(2) include applicable State laws that prohibit a

[[Page 3305]]

creditor from obtaining or using medical debt information.\150\
---------------------------------------------------------------------------

    \150\ See 87 FR 41042 (July 11, 2022) (describing the FCRA's 
limited preemptive scope). Whether the FCRA or any other Federal law 
preempts any particular State law is beyond the scope of this 
rulemaking.
---------------------------------------------------------------------------

Requests To Add Provisions
    Some commenters requested that the CFPB add additional provisions 
to Sec.  1022.38. For example, one commenter requested a safe harbor 
for credit unions that are unintentionally in possession of information 
that they are no longer permitted to obtain or use. The commenter was 
concerned about the security and operational risk that would be 
experienced by a credit union if a consumer reporting agency furnishes 
medical debt information to a credit union that the credit union is not 
permitted to obtain or use. Alternatively, the commenter recommended 
that the CFPB not finalize the proposed rule.
    A number of commenters suggested that the CFPB expand the rule to 
also prohibit the inclusion of medical debt on consumer reports used 
for employment or tenant screening. Other commenters suggested that the 
CFPB expand the rule to prohibit the inclusion of medical debt on 
consumer reports altogether. One commenter requested that the CFPB 
prohibit consumer reporting agencies from reporting medical debt 
incurred by individuals under the age of 18. The commenter also 
requested that the CFPB prohibit data furnishers from reporting to 
consumer reporting agencies medical debts of minors, particularly those 
under state wardship.
    A commenter suggested that the CFPB amend the rule to require 
consumer reporting agencies to screen medical information for 
compliance with already existing non-discrimination language-access 
protections. The commenter stated that such an amendment would 
incentivize the industry to safeguard health consumers.
    A commenter recommended that the CFPB require consumer reporting 
agencies to establish a robust appeal process for consumers to address 
complaints and grievances should consumer reporting agencies 
erroneously or purposefully include their medical debt information in 
consumer reports provided to potential creditors.
    One commenter requested that the CFPB monitor heath care providers' 
billing, pricing, and collection practices, to make sure consumers are 
not paying more or denied care under the new rules.
    For the reasons discussed herein, the CFPB is not revising proposed 
Sec.  1022.38 in response to these requests. The commenter's concern 
prompting a request for a safe harbor is addressed by the statutory 
rule of construction in Sec.  1022.30(c)(1). Section 1022.30(c)(1) 
provides that a creditor does not obtain medical information in 
violation of the prohibition if it receives medical information 
pertaining to a consumer in connection with any determination of the 
consumer's eligibility, or continued eligibility, for credit without 
specifically requesting medical information. The CFPB's proposed 
removal of the example in Sec.  1022.30(c)(3)(iii), which describes a 
creditor receiving medical information on a consumer report furnished 
by a consumer reporting agency, may have created confusion. The CFPB 
proposed to remove this example because the proposed amendments would 
have limited the circumstances under which a consumer reporting agency 
could permissibly furnish a consumer report containing medical debt 
information, rendering the example less instructive and potentially 
confusing. Even though the CFPB is finalizing the removal of Sec.  
1022.30(c)(3)(iii), it would still be the case that if a creditor 
receives, on a consumer report, unsolicited medical debt information, 
the creditor would not have obtained medical information in violation 
of the prohibition as provided by the statutory rule of construction in 
existing Sec.  1022.30(c)(1).
    The CFPB declines to expand the rule to cover medical debt on 
consumer reports used for employment or tenant screening, or for all 
uses. The requests to cover other uses or to prohibit the reporting of 
medical debt information based on a consumer's age fall outside the 
scope of this rule. The request to prohibit data furnishers from 
reporting to consumer reporting agencies medical debts of minors also 
falls outside the scope of this rule. This final rule merely removes an 
exception, promulgated under FCRA section 604(g)(2) and (5), that 
permitted creditors to obtain and use a consumer's medical information 
in connection with a determination of eligibility, or continued 
eligibility, for credit. Under the final rule, a creditor will no 
longer be able to obtain or use medical information related to a 
consumer's medical debt in connection with any determination of the 
consumer's eligibility, or continued eligibility, for credit, unless 
one of the specific exceptions in final Sec.  1022.30(e) applies. 
Relatedly, final Sec.  1022.38 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. Therefore, final Sec.  1022.38 governs only consumer 
reporting agencies' actions and covers only medical debt information 
contained in a consumer report furnished to a creditor for credit 
eligibility purposes.
    The commenter's request to require consumer reporting agencies to 
screen medical information for compliance with already existing non-
discrimination language-access protections is also outside the scope of 
this targeted rulemaking.
    The CFPB appreciates the suggestion to require consumer reporting 
agencies to establish a robust appeals process for consumers to address 
complaints and grievances. The CFPB is not implementing such a process 
as part of this rulemaking but will monitor consumer reporting 
agencies' compliance with Sec.  1022.38.
    The CFPB acknowledges the suggestion to monitor health care 
providers' billing, pricing, and collection practices, to make sure 
consumers are not paying more or denied care once the rule is 
implemented. The CFPB currently engages in the monitoring of markets 
within its authority and will continue to do so.
Alternatives
    The CFPB considered alternatives to proposed Sec.  1022.38, 
including mandating a delay in the furnishing and reporting of medical 
debt for a particular period of time, and not reporting or furnishing 
medical debt below a particular dollar amount; and requiring consumer 
reporting agencies and medical information furnishers, upon receiving a 
dispute, to conduct an independent investigation to certify that a 
disputed medical debt is accurate and not subject to pending insurance 
disputes. The CFPB solicited comment on these identified alternatives.
    Some of the alternatives considered by the CFPB would have been 
similar to the voluntary reporting changes made by the NCRAs in 2022 
and 2023, but would have had an expanded scope (i.e., apply to all 
consumer reporting agencies) and permanent duration (i.e., be issued as 
an amendment to Regulation V). Some commenters noted the similarities 
and stated that the NCRA reporting changes are sufficient to address 
the concerns raised by the CFPB.
    At least one commenter stated that the proposal fails to consider 
less expensive alternatives such as implementing a

[[Page 3306]]

waiting period before medical debt can be reported.
    Several commenters offered various suggestions regarding reporting 
accuracy and dispute procedures in response to the CFPB's request for 
comment on alternatives to the proposal. For example, commenters 
suggested that the CFPB allow only legitimate and verified debts to be 
reported to consumer reporting agencies (i.e., establish guidelines for 
medical billing companies, healthcare providers, and collection 
agencies for reporting medical debt); use enforcement actions on 
businesses that provide inaccurate information; improve the accuracy 
and transparency of the medical billing process; and improve the 
consumer dispute resolution process.
    Commenters also suggested a number of other alternatives to the 
proposal. For example, at least one commenter suggested that the CFPB 
permit positive credit reporting of medical debt information. Another 
commenter expressed a somewhat opposing position, stating that the CFPB 
should have considered allowing for the deletion of only paid medical 
debt from consumer reports.
    A commenter suggested that the CFPB permit only the account owner, 
such as hospitals or medical debt purchasers, to report medical debt to 
consumer reporting agencies, rather than collection agencies, to reduce 
consumer distress and improve the accuracy of balance audits. Other 
commenters suggested that the CFPB prohibit furnishers from reporting a 
medical debt as long as the consumer makes minimum payments toward the 
debt.
    A commenter suggested the CFPB could instead strengthen Regulation 
F to improve communication protocols to ensure that they are clear, 
compassionate, and supportive to consumers.
    Commenters suggested that the CFPB differentiate between patients 
who are unwilling to pay for the services provided and those who are 
genuinely unable to do so. For example, a commenter suggested that the 
CFPB could require a doctor or medical practice to have the patient or 
guarantor fill out a form and if they meet certain metrics, the debt 
should not be reported. Another commenter suggested the CFPB allow 
consumer reporting agencies to report medical debt incurred by 
commercially insured health plan beneficiaries for cost-sharing 
obligations on insurer or health plan adjudicated amounts of between 
$100-1,000.
    One commenter suggested that, in lieu of finalizing the proposed 
rule, the CFPB should promote financial literacy among consumers 
regarding medical debt and provide better resources for consumers to 
understand their medical bills.
    One commenter suggested that the CFPB allow medical debt to remain 
on consumer reports, but give it much less weight than other debts.
    The CFPB is not adopting any alternatives to the proposal. As 
discussed in the proposed rule and the SBREFA outline, and noted above, 
the CFPB did consider mandating a delay in the furnishing and reporting 
of medical debt for a particular period of time, which would have been 
similar to one of the NCRA's recent reporting changes.\151\ However, 
the CFPB has determined that these types of changes by themselves do 
not do enough to protect the privacy of consumers' medical data during 
the credit underwriting process, as mandated by the FCRA.
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    \151\ SBREFA Outline at 19; 89 FR 51682, 51695 (June 18, 2024).
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    The CFPB also notes that consumer reporting agencies are already 
subject to accuracy and dispute resolution requirements and the CFPB 
has played an active role in this space. For example, FCRA section 
607(b) requires consumer reporting agencies to follow reasonable 
procedures to assure maximum possible accuracy of the information 
concerning the consumer. In addition, the CFPB has published multiple 
advisory opinions on FCRA issues, including on accuracy 
requirements,\152\ and the CFPB is continuing to consider a possible 
rulemaking to improve the dispute process for consumers under the 
FCRA.\153\ The CFPB also has engaged in supervision \154\ and 
enforcement \155\ activity with respect to consumer reporting agencies 
and furnishers to ensure their compliance with the FCRA's accuracy and 
dispute requirements, and has filed multiple amicus briefs relating to 
the FCRA's accuracy and dispute requirements.\156\
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    \152\ See, e.g., https://www.consumerfinance.gov/about-us/newsroom/cfpb-addresses-inaccurate-background-check-reports-and-sloppy-credit-file-sharing-practices/ (background check AO); https://files.consumerfinance.gov/f/documents/cfpb_name-only-matching_advisory-opinion_2021-11.pdf (name-only matching AO).
    \153\ See https://mobile.reginfo.gov/public/do/eAgendaViewRule?pubId=202404&RIN=3170-AB24 (Unified Agenda entry 
listing disputes as long-term action item).
    \154\ See, e.g., https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-32_2024-04.pdf.
    \155\ See, e.g., https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-td-bank-to-pay-28-million-for-breakdowns-that-illegally-tarnished-consumer-credit-reports/ (TD Bank); https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-toyota-motor-credit-to-pay-60-million-for-illegal-lending-and-credit-reporting-misconduct/ (Toyota Motor Credit); https://www.consumerfinance.gov/about-us/newsroom/cfpb-ftc-take-actions-against-transunion-illegal-rental-background-check-and-credit-reporting-practices/ 
(TransUnion).
    \156\ See, e.g., https://www.consumerfinance.gov/about-us/blog/the-law-requires-companies-to-delete-disputed-unverified-information-from-consumer-reports/ (Suluki); https://www.consumerfinance.gov/compliance/amicus/briefs/nelson-v-experian-information-solutions-inc/ (Nelson).
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    As discussed in part IV.B, Removal of the Financial Information 
Exception to the Creditor Prohibition on Obtaining or Using Medical 
Information, the available evidence suggests that creditors can 
underwrite sufficiently to maintain a responsible lending operation 
without paid or unpaid medical debt information. The CFPB therefore 
concludes that an exception allowing creditors to consider paid medical 
debt information is not necessary or appropriate to protect legitimate 
operational, transactional, risk, consumer, and other needs. In 
addition, permitting paid or unpaid medical debt information to be 
included on consumer reports furnished to creditors would undermine the 
consumer privacy protections provided by this rule. With respect to the 
comment supporting positive credit reporting, the CFPB does not have 
any evidence that paid medical debt collection items are treated 
positively in any lending models.
    The CFPB declines to amend the scope of this rule to prohibit 
certain parties from furnishing to consumer reporting agencies medical 
debt information. This rule removes an exception that pertains to 
creditors' use of medical debt information, and addresses how consumer 
reporting agencies' responsibilities, with respect to medical debt 
information, are impacted by the removal of the financial information 
exception now that creditors generally do not have a permissible 
purpose for consumer reports containing medical debt information.
    With respect to the comment suggesting that CFPB instead strengthen 
Regulation F, the CFPB notes that it has done substantial work to 
strengthen Regulation F. In October 2020, the CFPB issued a final rule 
implementing the Fair Debt Collection Practices Act (FDCPA), addressing 
topics such as communications in connection with debt collection and 
prohibitions on harassment or abuse, false or misleading 
representations, and unfair practices in debt collection.\157\ In 
December 2020, the CFPB issued a final rule amending

[[Page 3307]]

Regulation F to provide additional requirements regarding validation 
information and disclosures provided at the outset of debt collection 
communications, prohibit suits and threats of suits regarding time-
barred debt, and identify actions that must be taken before a debt 
collector may report information about a debt to consumer reporting 
agencies.\158\ Most recently, in October 2024, the CFPB issued an 
advisory opinion to remind debt collectors of their obligation to 
comply with the FDCPA and Regulation F's prohibitions on false, 
deceptive, or misleading representations or means in connection with 
the collection of any medical debt and unfair or unconscionable means 
to collect or attempt to collect any medical debts.\159\
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    \157\ 85 FR 76734 (Nov. 30, 2020).
    \158\ 86 FR 5766 (Jan. 19, 2021).
    \159\ 89 FR 80715 (Oct. 4, 2024).
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    The CFPB also declines to implement the suggestion to differentiate 
between consumers who are unwilling to pay for the services provided 
and those who are genuinely unable to do so. These types of policies 
would undermine the consumer privacy protections provided by this rule, 
impose significant compliance burdens, and be difficult to administer 
and enforce.
    The CFPB has done considerable work to promote financial literacy, 
and will continue to do so. However, consumer education will not 
address the principal concern solved by this rulemaking--that 
information about medical debt in credit underwriting is not 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, and 
as a result, does not warrant an exception to the medical information 
privacy protections established by Congress.
    Finally, the CFPB declines the suggestion to allow medical debt to 
remain on consumer reports, but give it much less weight than other 
debts. Not only would such a policy be difficult to administer and 
enforce, but it also does not address the principal concern solved by 
this rulemaking--that information about medical debt in credit 
underwriting is not 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, and as a result, does not 
warrant an exception to the medical information privacy protections 
established by Congress.
Final Rule
    For the reasons discussed in this part IV.C, Limits on a Consumer 
Reporting Agency's Disclosure of Medical Debt Information, the CFPB is 
finalizing Sec.  1022.38 with amendments to Sec.  1022.38(b)(2). New 
Sec.  1022.38 to subpart D addresses how a consumer reporting agency's 
medical debt information reporting responsibilities are impacted when 
creditors are prohibited from obtaining or using medical debt 
information. 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 consumer reporting agency 
(1) has reason to believe the creditor intends to use the medical debt 
information in a manner not prohibited by Sec.  1022.30; and (2) 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. Relatedly, the CFPB is finalizing the proposed removal of 
the example in Sec.  1022.30(c)(3)(iii) which describes a creditor 
receiving medical information on a consumer report furnished by a 
consumer reporting agency.
    FCRA section 604, entitled Permissible purposes of consumer 
reports, identifies an exclusive list of permissible purposes for which 
consumer reporting agencies may provide consumer reports.\160\ The 
statute states that a consumer reporting agency may furnish consumer 
reports under these circumstances ``and no other.'' \161\ One such 
circumstance, covered by FCRA section 604(a)(3)(A), permits a consumer 
reporting agency to furnish a consumer report to a person which it has 
reason to believe ``intends to use the information in connection with a 
credit transaction involving the consumer on whom the information is to 
be furnished and involving the extension of credit to, or review or 
collection of an account of, the consumer'' (credit permissible 
purpose).\162\
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    \160\ 15 U.S.C. 1681b(a) (providing that, ``[s]ubject to 
subsection (c), any consumer reporting agency may furnish a consumer 
report under the following circumstances and no other'').
    \161\ Id. Other sections of the FCRA identify additional limited 
circumstances under which consumer reporting agencies are permitted 
or required to disclose certain information to government agencies. 
See 15 U.S.C. 1681f, 1681u, 1681v; see also, e.g., FTC v. Manager, 
Retail Credit Co., Miami Beach Branch Off., 515 F.2d 988, 994-95 
(D.C. Cir. 1975) (holding that 15 U.S.C. 1681s(a) authorizes the FTC 
to obtain consumer reports in FCRA enforcement investigations). 
Further, the Debt Collection Improvement Act of 1996, Pub. L. 104-
134, 110 Stat. 1321, tit. III, section 31001(m)(1), 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).
    \162\ 15 U.S.C. 1681b(a)(3)(A).
---------------------------------------------------------------------------

    Final Sec.  1022.38(b)(1) addresses how consumer reporting 
agencies' responsibilities under FCRA section 604(a)(3)(A) are impacted 
by the removal of the financial information exception and related 
amendments to Sec.  1022.30. As discussed in part IV.B, Removal of the 
Financial Information Exception to the Creditor Prohibition on 
Obtaining or Using Medical Information, the CFPB is finalizing the 
proposal to remove the financial information exception in Sec.  
1022.30(d). The result of removing the financial information exception 
is that a creditor will be prohibited from obtaining or using medical 
debt information--a subcategory of medical information--in connection 
with any determination of the consumer's eligibility for credit under 
the general prohibition in Sec.  1022.30(b), unless a specific 
exception for obtaining and using medical information in Sec.  
1022.30(e) applies to the medical debt information. Under the final 
rule, a creditor who is legally prohibited from obtaining or using 
medical debt information in connection with a determination of the 
consumer's eligibility or continued eligibility for credit does not 
have a permissible purpose for a consumer report containing that 
information; the creditor could not plausibly intend to use that 
information in connection with a credit transaction. Similarly, a 
consumer reporting agency would not have reason to believe that a 
creditor who is legally prohibited from obtaining or using the medical 
debt information intends to use the information in connection with a 
credit transaction involving the consumer.\163\ The CFPB therefore 
finalizes Sec.  1022.38(b)(1) to explain the impact of the credit 
permissible purpose provision in FCRA section 604(a)(3)(A) on the FCRA 
section 604(g)(2) creditor prohibition as implemented in final Sec.  
1022.30.
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    \163\ 15 U.S.C. 1681b(a)(3)(A).
---------------------------------------------------------------------------

    The same is true under the final rule for any other legal 
prohibition under which creditors may neither obtain nor use medical 
debt information. Thus, the CFPB determines that amending proposed 
Sec.  1022.38(b)(2) to include a similar provision to final Sec.  
1022.38(b)(1), to cover other scenarios in which a creditor is legally 
prohibited from obtaining or using medical debt information, is 
warranted. Regardless of the source of the prohibition, under the final 
rule, if a creditor is legally

[[Page 3308]]

prohibited from obtaining or using medical debt information, a creditor 
does not have a permissible purpose for a consumer report containing 
that information; a creditor cannot plausibly intend to use that 
information in connection with a credit transaction. Final Sec.  
1022.38(b)(2) explains the impact of the credit permissible purpose 
provision in FCRA section 604(a)(3)(A) on any legal prohibition on 
creditors obtaining or using medical debt information. Final Sec.  
1022.38(b)(2) ensures that, independent of the prohibition in Sec.  
1022.30, a consumer reporting agency would generally still be 
prohibited from furnishing a consumer report containing medical debt 
information to a creditor who is legally prohibited from obtaining or 
and using the medical debt information.
    Section 621(e) of the FCRA authorizes the CFPB to issue regulations 
as ``necessary or appropriate to administer and carry out the purposes 
and objectives of [the FCRA], and to prevent evasions thereof or to 
facilitate compliance therewith.'' \164\ The CFPB has determined that 
the limits on a consumer reporting agency's disclosure of a consumer's 
sensitive medical debt information to a creditor who is legally 
prohibited from obtaining or using such information are necessary or 
appropriate to administer and carry out the purposes and objectives of 
the FCRA, and to prevent evasions or to facilitate compliance.\165\ In 
particular, the limitations on consumer reporting agencies in Sec.  
1022.38(b)(1) would markedly facilitate compliance for creditors by 
ensuring that creditors do not receive from consumer reporting agencies 
medical debt information that they are not permitted to obtain or use 
under FCRA section 604(g)(2) and Sec.  1022.30. If consumer reporting 
agencies continued to furnish to creditors, in connection with 
eligibility determinations, consumer reports containing medical debt 
information, creditors would need to screen out such information to 
comply with the creditor prohibition in FCRA section 604(g)(2) and 
Sec.  1022.30. Screening out medical debt information may be cumbersome 
for creditors, especially those that use automated underwriting 
processes. On the other hand, consumer reporting agencies could more 
easily implement automatic processes that remove medical debt 
information provided by medical information furnishers from those 
reports that are requested for credit eligibility determinations 
because medical information furnishers are required to identify 
themselves to consumer reporting agencies.\166\ At least one commenter 
questioned this assertion, but the CFPB notes that the NCRAs have 
recently implemented reporting changes to remove certain medical debt 
information from consumer reports and therefore have shown they are 
capable of creating such infrastructure.\167\
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    \164\ See CFPA section 1088(a)(10)(E) (15 U.S.C. 1681s(e)).
    \165\ See 15 U.S.C. 1681s(e)(1).
    \166\ See 15 U.S.C. 1681s-2(a)(9).
    \167\ 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.
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    The CFPB has also determined that Sec.  1022.38(b) is necessary and 
appropriate to administer and carry out the purposes and objectives of 
the FCRA, especially that of ``need[ing] to insure that consumer 
reporting agencies exercise their grave responsibilities with fairness, 
impartiality, and a respect for the consumer's right to privacy.'' 
\168\ Medical information is uniquely sensitive and intimate 
information, and it thus advances the purposes and objectives of the 
FCRA to protect consumers' privacy by limiting the circumstances under 
which consumer reporting agencies may furnish medical debt information.
---------------------------------------------------------------------------

    \168\ See 15 U.S.C. 1681(a)(4).
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D. Example To Comply With Applicable Requirements of Local, State, or 
Federal laws

Proposal
    During the SBREFA process, several financial institutions, 
furnisher small entity representatives, and debt collectors expressed 
concern about how the proposal under consideration to remove the 
financial information exception in Sec.  1022.30(d) and prohibit 
consumer reporting agencies from including medical debt collections 
tradelines on consumer reports furnished to creditors for credit 
eligibility determinations would interact with repayment ability 
determination requirements under the Truth in Lending Act (TILA) and 
Regulation Z for mortgage loans and credit cards.\169\ Stakeholders 
stated that these laws require creditors to consider all of a 
consumer's current debt obligations, such that the proposal under 
consideration would impede their ability to make the required 
determination in compliance with Federal law. A small entity 
representative recommended that the CFPB consider (1) stating what 
creditors should tell consumers regarding whether medical debt 
information should be disclosed on applications for credit, and (2) 
providing to creditors information about any limitations on financial 
institutions' use of consumer-provided medical information for 
underwriting.
---------------------------------------------------------------------------

    \169\ SBREFA Report at 36.
---------------------------------------------------------------------------

    In the NPRM, the CFPB proposed to eliminate current Sec.  
1022.30(d). The CFPB preliminarily found that the financial information 
exception was not necessary and appropriate to protect legitimate 
operational, transactional, risk, consumer, and other needs (including 
administrative verification purposes) as set forth in current Sec.  
1022.30(d). However, the CFPB preliminarily determined to not eliminate 
other exceptions, including the exception in Sec.  1022.30(e)(1)(ii) 
for medical information necessary to comply with applicable local, 
State, or Federal laws, such as Regulation Z's ability-to-repay or pay 
requirements. In response to comments during the SBREFA process, the 
CFPB proposed an example in proposed Sec.  1022.30(e)(6) to direct 
creditors and card issuers that are creditors regarding how to obtain 
and use medical information provided by the consumer in compliance with 
TILA and Regulation Z, as set forth in Sec.  1022.30(e)(1)(ii), for 
purposes of compliance with the ability-to-repay rule under Sec.  
1026.43(c) for closed-end mortgages, the repayment ability rule under 
Sec.  1026.34(a)(4) for open-end, high-cost mortgages, and the ability-
to-pay rule under Sec.  1026.51(a) for open-end (not home-secured) 
credit card accounts.
    Under existing Sec.  1022.30(c)(1), a creditor does not violate the 
prohibition on obtaining medical information in Sec.  1022.30(b) if the 
creditor receives medical information pertaining to a consumer in 
connection with the creditor's determination of the consumer's 
eligibility for credit without specifically requesting such 
information. For example, if a consumer applies for a mortgage loan and 
the creditor has not specifically requested medical information on the 
application, but asks for all current debts or

[[Page 3309]]

obligations, and the consumer self-discloses by providing medical 
information in the form of a monthly medical payment plan, the creditor 
does not violate the prohibition on obtaining medical information. In 
this circumstance, under Sec.  1022.30(e)(1)(ii), the creditor would be 
permitted to use this information by considering the existence and the 
amount of the medical payment plan as required in considering certain 
factors under Sec.  1026.43(c)(2), such as the current debt 
obligations, consumer's monthly debt-to-income ratio, and residual 
income, in making the repayment ability determination required under 
Sec.  1026.43(c)(1). Proposed Sec.  1022.30(e)(6) also would have 
provided that, in accordance with Sec.  1026.43(c)(3)(iii), the 
creditor would not be required to independently verify the existence 
and amount of the consumer's monthly medical payment plan if the 
consumer's application states a current debt, even if that debt is not 
shown in the consumer report. This is also consistent with Regulation Z 
comment 43(c)(3)-6 describing a situation where a consumer, through the 
application, provides a creditor with information on a debt obligation 
that is not listed on a consumer report. Therefore, the creditor would 
not violate the prohibition on obtaining or using medical information 
in Sec.  1022.30(b) if the creditor obtains and uses medical 
information disclosed by the consumer on their application as an 
ongoing payment obligation in response to a general inquiry about debts 
or obligations.
    Proposed Sec.  1022.30(e)(6) would have explained that a creditor 
(for mortgage loans) or card issuer (for credit cards) relying on the 
specific exception for compliance with applicable laws at Sec.  
1022.30(e)(1)(ii) is not permitted to obtain or use medical information 
from a consumer report. In the proposed rule, the CFPB preliminarily 
determined that the creditor or card issuer can comply with the 
applicable laws using the information provided by the consumer on the 
application, including any medical information received from the 
consumer in response to a general inquiry about debts or obligations; 
therefore, it would not be necessary or appropriate for a creditor or 
card issuer to use medical information contained in a consumer report 
in order to comply with the applicable laws. As explained in part IV.C, 
Limits on a Consumer Reporting Agency's Disclosure of Medical Debt 
Information, the CFPB also believed it would be administratively 
difficult for consumer reporting agencies to determine which 
information in a consumer's credit file is necessary for a particular 
creditor's compliance with the requirement to make a repayment ability 
determination and which information is not. In the context of 
creditors' obligations to make repayment ability determinations under 
Regulation Z, determining the medical debt information that would be 
relevant to ability-to-repay or pay rules, as well as the 
administrative burdens of segmenting this information out, is 
impractical for a consumer reporting agency to undertake. For the 
reasons discussed in the NPRM, the CFPB preliminarily found that 
preventing creditors from purposefully obtaining--and under new Sec.  
1022.38, consumer reporting agencies from furnishing--medical 
information on consumer reports for credit eligibility purposes will 
both ease burdens on consumer reporting agencies and prevent attempts 
by creditors to evade the rule by requesting consumer reports in the 
hopes of learning indirectly the same sensitive medical information the 
rule prohibits creditors from soliciting directly under the guise of 
compliance with the ability-to-repay or pay rules.
    In the proposed rule, the CFPB preliminarily determined that 
creditors would not need to begin obtaining medical information from 
consumers under the proposed rule if they do not already do so. For 
example, the CFPB did not intend the NPRM to change any existing law or 
guidance regarding the extent to which creditors may rely on consumer 
reports to assess consumers' current obligations in complying with 
repayment ability determination requirements.\170\
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    \170\ See, e.g., Regulation Z comment 51(a)(1)(i)-7 (``A card 
issuer may consider the consumer's current obligations based on 
information provided by the consumer or in a consumer report.''); 
see also Sec.  1026.43(c)(3)(iii) (``[I]f a creditor relies on a 
consumer's credit report to verify a consumer's current debt 
obligations and a consumer's application states a current debt 
obligation not shown in the consumer's credit report, the creditor 
need not independently verify such an obligation.'')
---------------------------------------------------------------------------

    The CFPB requested feedback on this aspect of the proposed rule and 
whether that proposal would assist a creditor or card issuer in making 
its repayment ability determination under TILA/Regulation Z. The CFPB 
also sought comment on whether amendments should be made to Sec.  
1022.30(e)(1)(ii) to reflect the language in proposed Sec.  
1022.30(e)(6)--providing that a creditor or card issuer may not obtain 
or use medical information from a consumer reporting agency to comply 
with the ability-to-repay rule under 12 CFR 1026.43(c) for closed-end 
mortgages, the repayment ability rule under 12 CFR 1026.34(a)(4) for 
open-end, high-cost mortgages, or the ability-to-pay rule under 12 CFR 
1026.51(a) for open-end (not home-secured) credit card accounts--or if 
the language in proposed Sec.  1022.30(e)(6) is sufficient to explain 
how creditors can comply with the repayment ability determination 
requirements under TILA/Regulation Z.
Comments
    Many industry commenters and several individual commenters 
submitted comments indicating that the NPRM contradicts TILA's and 
Regulation Z's ability-to-repay requirements. One industry commenter 
asserted that the proposed rule is likely to create compliance 
challenges with regard to TILA and Regulation Z, which require 
creditors to make a reasonable, good faith determination of a 
consumer's ability to repay any residential mortgage loans. Another 
industry commenter asserted that the CFPB has the responsibility to 
create rules regarding ability-to-repay requirements for mortgage 
lending in TILA and the CFPB's own rules require among other things, 
that a creditor consider all of a borrower's outstanding liabilities at 
the time of loan origination. This commenter asserted that (1) the NPRM 
places the burden of reporting medical debt on the consumer, who would 
be falsely representing their application if the information is 
material and omitted, yet the CFPB is intending to protect consumers 
from this disclosure by banning it from the consumer reports furnished 
by the national consumer reporting agencies; and (2) under the CFPB's 
proposed rule, creditors would have no way of verifying whether medical 
debt liabilities disclosed by a consumer (or lack thereof) were in fact 
accurate. Another industry commenter asserted that the NPRM would 
conflict with TILA, which requires the reasonable and good-faith 
determination that the consumer has the ability to repay before a 
mortgage loan is made.
    One consumer reporting agency asserted that the CFPB in the NPRM 
did not adequately address industry concerns regarding creditors' 
ability to assess a borrower's ability to repay. This commenter 
asserted that it is not adequate to just allow lenders to ask the 
borrower directly for all current debts, and the borrower may include 
medical debt information in response. This commenter asserted that 
consumers might decline to include the information, and even if 
consumers provided information, creditors would be unable to verify its 
accuracy.
    One trade group commenter representing banks asserted that (1)

[[Page 3310]]

banks would face significant potential uncertainty about compliance and 
liability if the final rule is unclear on how to comply with the 
mortgage ability-to-pay rules in Regulation Z; and (2) the CFPB must 
provide additional assurances regarding the inclusion or exclusion of 
medical debt information from mortgage-related calculations.
    Two industry trade group commenters representing banks and other 
financial institutions urged the CFPB to clarify that creditors are 
permitted to verify medical debt information received from the consumer 
in response to a general inquiry about debts or obligations using 
reliable third-party records that are not the credit report. These 
commenters also urged the CFPB to clarify that a creditor is permitted 
to consider debts listed on a consumer report that are not obviously 
medical debts. In this regard, the commenters urged the CFPB to amend 
Example 6 to provide that a creditor or card issuer is not required to 
independently verify that a debt listed on a consumer report is for 
purposes other than medical debt. Another industry commenter urged the 
CFPB to clarify that a creditor that considers a consumer's FICO score 
or a report of credit report attributes that could encompass medical 
debt does not violate the proposed prohibition on obtaining or using 
medical debt for credit eligibility determinations.
    Also, an industry commenter representing credit unions noted that 
the CFPB and banking regulators have previously encouraged lenders to 
evaluate alternative data in making credit decisions, as evidenced by 
the CFPB's 2017 ``Request for Information Regarding Use of Alternative 
Data and Modeling Techniques in the Credit Process.'' By restricting 
access to medical debt information, this commenter asserted that the 
CFPB would be limiting the very type of alternative data it has 
previously endorsed.
    Several industry commenters also raised concerns that the proposed 
rule could increase exposure to enforcement action by other Federal 
agencies, and violations of State laws, related to the consumer's 
ability to repay. One commenter advocating for small entities argued 
that (1) a large medical debt may interfere with a consumer's ability 
to repay; (2) by not considering it, a consumer may become overextended 
and suffer financial embarrassment; and (3) small entities are 
concerned that if they do not consider the consumer's ability to repay 
and the consumer faces financial embarrassment, the small entity may be 
exposed to an enforcement action by other Federal agencies. One trade 
group representing community bankers asserted that the NPRM would 
create an irreconcilable regulatory contradiction between what the 
banking regulators require and what the CFPB will be preventing and 
prohibiting. This commenter indicated that it agrees with these other 
banking regulators because complete information and the accurate 
calculation of a borrower's ability to repay is needed to make prudent 
lending decisions that benefit both the bank and the borrower. One 
credit union trade group asserted that (1) credit unions are already 
required to accurately determine their member's ability-to-repay as a 
risk management requirement; and (2) the proposed rule creates an 
irreconcilable regulatory contradiction between what the financial 
regulators require and what the CFPB prohibits.
    Many industry commenters and several individual consumer commenters 
also asserted that banning medical debt from being included in a 
consumer report would harm both consumers and creditors. They asserted 
that the proposed rule could lead to incomplete or inaccurate 
assessments of a borrower's ability to repay, potentially resulting in 
either overly restrictive lending practices or an increased risk of 
defaults due to approving loans for consumers who may not be able to 
afford them when all debts are considered. These comments are discussed 
in more detail in part VII, CFPA Section 1022(b) Analysis.
    Several consumer group commenters, on the other hand, questioned 
industry concerns that the NPRM, if adopted, would contradict the 
requirements in TILA or Regulation Z. In particular, one of these 
consumer group commenters asserted that, following enactment of 
Colorado's law restricting medical debt on credit reports, there have 
been no reports of the other negative consequences in Colorado 
predicted by the debt collection industry's hired economist, such as 
increased financing for unqualified borrowers, decreased access for 
credit-qualified borrowers, difficulties in repairing credit scores, or 
conflicts with the ability-to-repay requirement in Regulation Z. 
Several other consumer group commenters and several individual 
commenters also asserted that medical debts are not a good predictor of 
general creditworthiness, nor representative of an individual's ability 
to repay debts.
Final Rule
    For the reasons discussed herein, the CFPB is finalizing Example 6 
as proposed 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. The CFPB also has determined that 
Example 6 provides sufficient information for how creditors may comply 
with both the ability-to-repay or pay requirements in Regulation Z with 
respect to mortgages and credit card accounts and the changes in this 
final rule with respect to use of medical information. Final Example 6 
describes a scenario where a consumer applies for a mortgage loan 
subject to Regulation Z Sec.  1026.43(c) or Sec.  1026.34(a)(4), or an 
open-end (not home-secured) credit card account subject to Regulation Z 
Sec.  1026.51(a). In this scenario, the application does not 
specifically request medical information, but the consumer provides 
medical information on the application in response to a general inquiry 
about debts or obligations. Final Example 6 explains that the creditor 
or the card issuer is permitted under Sec.  1022.30(e)(1)(ii) to use 
such medical information in connection with any determination of the 
consumer's eligibility, or continued eligibility, for credit only to 
the extent required by the applicable Federal law and implementing 
regulation. Final Example 6 also explains that a creditor or card 
issuer is not permitted to obtain or use any medical information from a 
consumer reporting agency under Sec.  1022.30(e)(1)(ii) to comply with 
the ability-to-repay rule under Regulation Z Sec.  1026.43(c) for 
closed-end mortgages, the repayment ability rule under Regulation Z 
Sec.  1026.34(a)(4) for open-end, high-cost mortgages, or the ability-
to-pay rule under Regulation Z Sec.  1026.51(a) for open-end (not home-
secured) credit card accounts, because the creditor or card issuer can 
comply with those rules using information provided by the consumer. 
Consistent with the proposed rule, the CFPB has determined that 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; therefore, it would not be 
necessary or appropriate for a creditor or card issuer under Sec.  
1022.30(e)(1)(ii) to use medical information contained in a consumer 
report in order to comply with the applicable laws.
    The final rule revises Example 6 from the proposal, however, to 
make clear that this example only relates to the exception under Sec.  
1022.30(e)(1)(ii), and a creditor or card issuer may obtain and use 
medical information for purposes of

[[Page 3311]]

Regulation Z's ability-to-repay or pay determinations pursuant to other 
exceptions in Sec.  1022.30(e), as applicable. See parts IV.B.3, 
Medical Information Related to Income, Benefits, or the Purpose of the 
Loan, and VI.A, Consumer-Authorized Transaction History. The CFPB has 
determined that this final rule does not conflict with the use of 
alternative data in complying with Regulation Z's ability-to-repay or 
pay requirements. For instance, if a consumer authorizes a creditor to 
access transaction information from a Regulation E account, a 
Regulation Z credit card, or facilitation of payments from a Regulation 
E account or Regulation Z credit card, as the creditor might obtain 
through the exception under Sec.  1022.30(e)(1)(x)(A)(1), and that 
transaction information happens to contain medical information, such as 
payments on a medical payment plan, the creditor is permitted under 
Sec.  1022.30(e)(1)(ii) to use such medical information in connection 
with any determination of the consumer's eligibility, or continued 
eligibility, for credit only to the extent required by the applicable 
Federal law and implementing regulation, and is permitted to use such 
medical information under Sec.  1022.30(e)(1)(x) to the extent the 
creditor satisfies the additional requirements of that exception stated 
in Sec.  1022.30(e)(1)(x)(B) and (C).
    With respect to the ability-to-repay requirements in Regulation Z 
Sec.  1026.43(c), final Example 6 also contains additional information 
on the interplay between the ability-to-repay requirements in 
Regulation Z Sec.  1026.43(c) and final Sec.  1022.30(e)(1)(ii). Again, 
under this scenario discussed in final Example 6, the creditor has not 
specifically requested medical information on the application, but the 
consumer provides information on a current debt obligation, such as a 
monthly medical payment plan, that is medical information. For 
mortgages subject to Regulation Z Sec.  1026.43(c), creditors typically 
ask consumers on applications to disclose their current debt 
obligations/liabilities, but the applications do not specifically 
request medical information.\171\ To the extent that consumers provide 
medical information in response to this general request for debt 
information, creditors generally are required to consider such medical 
debt information under Sec.  1026.43(c)(2).\172\ Final Example 6 
explains that the creditor is permitted under Sec.  1022.30(e)(1)(ii) 
to consider the existence and the amount of the medical payment plan as 
required in Regulation Z Sec.  1026.43(c)(2) in considering factors 
under Regulation Z Sec.  1026.43(c)(2), such as the current debt 
obligations, consumer's monthly debt-to-income ratio, and residual 
income, in making the repayment ability determination required under 
Regulation Z Sec.  1026.43(c)(1). In this circumstance, final Example 6 
explains that the creditor would not be required to independently 
verify the existence and amount of the monthly medical payment plan, as 
provided for under Regulation Z Sec.  1026.43(c)(3)(iii) and comment 
43(c)(3)-6, describing a situation in which a consumer provides a 
creditor with information on a debt obligation that is not listed on a 
consumer report. As discussed above, two industry trade group 
commenters urged the CFPB to clarify that creditors are permitted under 
Sec.  1022.30(e)(1)(ii) to verify medical debt information received 
from the consumer in response to a general inquiry about debts or 
obligations using reliable third-party records that are not the credit 
report. However, while Regulation Z Sec.  1026.43(c)(3) generally 
requires creditors to use reasonably reliable third party records to 
verify any information the creditor relies upon under Regulation Z 
Sec.  1026.43(c)(2) to make the repayment ability determination 
required by Regulation Z Sec.  1026.43(c)(1), Regulation Z Sec.  
1026.43(c)(3)(iii) and comment 43(c)(3)-6 clarify that if a creditor 
relies on a consumer's credit report to verify a consumer's current 
debt obligations and a consumer's application states a current debt 
obligation not shown in the consumer's credit report, the creditor need 
not independently verify such an obligation. Consistent with final 
Sec.  1022.38, medical debt information generally will not appear on 
credit reports. Accordingly, creditors may not rely on the exception in 
Sec.  1022.30(e)(1)(ii) to obtain and use medical information to 
independently verify such medical debt obligation. A creditor, however, 
may obtain and use medical information to verify such medical debt 
obligations pursuant to other exceptions in Sec.  1022.30(e), as 
applicable.\173\
---------------------------------------------------------------------------

    \171\ See, e.g., Fannie Mae, Uniform Residential Loan 
Application (Form 1003), https://singlefamily.fanniemae.com/delivering/uniform-mortgage-data-program/uniform-residential-loan-application (last visited Nov. 25, 2024).
    \172\ See 12 CFR 1026.43(c)(2), (3)(iii); Regulation Z comment 
43(c)(3)-6.
    \173\ Section 307 of the Economic Growth, Regulatory Relief, and 
Consumer Protection Act (EGRRCPA), among other things, directs the 
CFPB to prescribe ability-to-repay rules for Property Assessed Clean 
Energy (PACE) financing. Public Law 115-174, 132 Stat. 1296, 1347 
(2018). The CFPB issued a final rule on December 17, 2024. As 
finalized, the PACE rule applies the existing framework of 
Regulation Z Sec.  1026.43(c) to PACE transactions in the same 
manner as the framework applies to other closed-end mortgages, with 
adjustments to account for the unique nature of PACE financing.
---------------------------------------------------------------------------

    The CFPB notes that with respect to Regulation Z Sec.  
1026.34(a)(4) for open-end, high-cost mortgages, situations also may 
arise where the creditor has not specifically requested medical 
information on the application, but the consumer provides information 
on a current debt obligation, such as a monthly medical payment plan, 
that is medical information. For mortgages subject to Regulation Z 
Sec.  1026.34(a)(4), creditors typically ask consumers on applications 
to disclose their current debt obligations/liabilities, but the 
applications do not specifically request medical information.\174\ To 
the extent that consumers provide medical information in response to 
this general request for debt information, creditors generally are 
required to consider such medical debt information under Sec.  
1026.34(a)(4). In complying with Regulation Z Sec.  1026.34(a)(4), 
comment 34(a)(4)(ii)(B)-1 discusses the scenario where a consumer lists 
an obligation on an application but the credit report does not reflect 
such obligation. Comment 34(a)(4)(ii)(B)-1 makes clear that the 
creditor is responsible for considering such an obligation under 
Regulation Z Sec.  1026.34(a)(4), but the creditor is not required to 
independently verify the obligation. Thus, a creditor is permitted 
under Sec.  1022.30(e)(1)(ii) to consider the existence and the amount 
of the medical payment plan as required in Sec.  1026.34(a)(4) in 
making the repayment ability determination required under Regulation Z 
Sec.  1026.34(a)(4). The CFPB notes, however, that because Regulation Z 
Sec.  1026.34(a)(4) and comment 34(a)(4)(ii)(B)-1 do not require 
creditors to independently verify a debt obligation that a consumer 
provides to a creditor that is not listed on a consumer report, 
creditors may not rely on the exception in Sec.  1022.30(e)(1)(ii) to 
obtain and use medical information to independently verify such medical 
debt obligation. A creditor, however, may obtain and use medical 
information to verify such medical debt obligations pursuant to other 
exceptions in Sec.  1022.30(e), as applicable.
---------------------------------------------------------------------------

    \174\ Fannie Mae, Uniform Residential Loan Application (Form 
1003), https://singlefamily.fanniemae.com/delivering/uniform-mortgage-data-program/uniform-residential-loan-application (last 
visited Nov. 25, 2024).
---------------------------------------------------------------------------

    With respect to the ability-to-pay rule under Regulation Z Sec.  
1026.51(a) for open-end (not home-secured) credit

[[Page 3312]]

card accounts, the CFPB notes that card issuers typically do not ask 
consumers on applications to disclose their debt obligations. Instead, 
card issuers typically obtain a consumer's debt obligations from a 
consumer report. Consistent with the NPRM, the CFPB has determined that 
creditors would not need to begin obtaining medical information from 
consumers under the final rule if they do not already do so. For 
example, the CFPB does not intend the final rule to change any existing 
law or guidance regarding the extent to which creditors may rely on 
consumer reports to assess consumers' current obligations in complying 
with repayment ability determination requirements. Specifically, 
Regulation Z comment 51(a)(1)(i)-7 provides that a card issuer may 
consider the consumer's current obligations based on information 
provided by the consumer or in a consumer report. Thus, a card issuer 
may continue to rely on the consumer report to obtain information about 
a consumer's current obligations and is not required under Sec.  
1026.51(a)(1) to request information from the consumer on the 
application about their debt obligations. The CFPB has determined that 
this is true even though a consumer report under this final rule will 
not contain information about a consumer's medical debt obligations. 
Further, as with the ability-to-repay provisions discussed above, 
because Sec.  1026.51(a)(1) does not require card issuers to verify any 
current debt obligations that may be listed on an application, a card 
issuer may not rely on the exception in Sec.  1022.30(e)(1)(ii) to 
obtain and use medical information to independently verify a medical 
debt obligation listed on a consumer's application. A card issuer, 
however, may obtain and use medical information to verify such medical 
debt obligations pursuant to other exceptions in Sec.  1022.30(e), as 
applicable.
    The CFPB declines to amend Example 6 to clarify that creditors and 
card issuers are permitted to consider debts listed on a consumer 
report for purposes of the ability-to-repay or pay requirements in 
Regulation Z that are not obviously medical debts and are not required 
to independently verify that a debt listed on a consumer report is for 
purposes other than medical debt. The CFPB also declines to clarify 
that creditors or card issuers that consider a consumer's FICO score or 
a report of credit report attributes that could encompass medical debt 
do not violate the proposed prohibition on obtaining or using medical 
information for credit eligibility determinations. The CFPB has 
determined that this additional guidance is not necessary. The 
restriction in Sec.  1022.30(b) only applies to medical information, 
and creditors and card issuers must consider the definition of 
``medical information'' as defined in Sec.  1022.3(k) to determine if 
particular information meets that definition.
    With respect to ability-to-repay or pay requirements imposed by 
other Federal agencies, and State laws, the CFPB notes that final Sec.  
1022.30(e)(1)(ii) permits a creditor to obtain and use medical 
information pertaining to a consumer in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit to comply with applicable requirements of local, State, or 
Federal laws. The CFPB did not receive comments from other Federal 
regulators or State regulators indicating that the proposed rule was in 
conflict with ability-to-repay or pay requirements imposed by other 
Federal agencies or State laws, as applicable. The CFPB also is not 
aware of any reported negative consequences of State laws generally 
limiting consumer reporting agencies from reporting medical debt on 
credit reports (e.g., Colorado), such as conflicts with the ability-to-
repay or pay requirement in Regulation Z. Also, the CFPB is not aware 
of any ability-to-repay or pay requirements of other regulators or 
State laws that specifically require a creditor to obtain medical 
information from consumer reports. Thus, a creditor or card issuer can 
comply with the applicable laws using any medical 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; therefore, it would not be necessary or 
appropriate under Sec.  1022.30(e)(1)(ii) for a creditor or card issuer 
to use medical information contained in a consumer report in order to 
comply with the applicable laws.

V. Effective Date

    The CFPB proposed an effective date for this final rule of 60 days 
after publication in the Federal Register in accordance with the 
Administrative Procedure Act, which generally requires that rules be 
published not less than 30 days before their effective dates.\175\ The 
CFPB received eight comments from industry, government, trade 
association, and non-profit stakeholders on the proposed effective 
date. Several of these commenters argued that the proposed 60-day 
implementation period is unfeasible and that businesses would require 
more time to adjust to the changes to the FCRA. More specifically, five 
commenters stated that the proposed rule's changes to FCRA compliance 
would require small entities to train employees, obtain legal advice, 
and invest time and resources into complying with the rule. Industry 
and government stakeholders provided a range of alternative effective 
dates for the CFPB to consider ranging from 12 to 36 months while a 
non-profit commenter expressed support for the proposed effective date. 
Additionally, one trade association commenter advocated for a phase-in 
period to the rule.
---------------------------------------------------------------------------

    \175\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------

    The CFPB has considered these comments and determines to finalize 
the effective date as proposed. The CFPB finds that the compliance 
costs to creditors will be low since creditors will likely need to do 
very little to comply with the rule to the extent that creditors 
currently only utilize medical debt information provided through 
consumer reports, which the CFPB understands is creditors' main source 
of medical debt information. In such cases, so long as the consumer 
reporting agency providing the consumer report has complied with the 
rule, no medical debt information would be conveyed to the creditor, 
unless the consumer reporting agency has reason to believe the creditor 
intends to use the medical debt information in a manner not prohibited 
by the creditor prohibition. Creditors who currently obtain and use 
medical debt information (and other prohibited medical information) 
from other sources will need to establish controls to ensure that they 
do not obtain or use the medical debt information in a manner 
prohibited by the rule. Consumer reporting agencies will need to make 
coding changes to exclude data identified as medical information from 
consumer reports sent to creditors. However, the CFPB expects this to 
be a relatively simple coding change, particularly for the NCRAs and 
the consumer reporting agencies that obtain consumer reports from NCRAs 
for resale because the NCRAs already limit their reporting of medical 
collections. In addition, consumer reporting agencies may have already 
scoped out this kind of coding change to comply with reforms in several 
States. Thus, the rule will take effect 60 days after publication in 
the Federal Register.

[[Page 3313]]

VI. Other Comments

A. Consumer-Authorized Transaction History

    In the NPRM, the CFPB noted that consumer reporting agencies could 
incur additional compliance costs if medical information furnishers do 
not notify consumer reporting agencies of their status as required by 
FCRA section 623(a)(9), and, similarly, that creditors could incur 
additional compliance costs if they use consumer reports that contain 
medical debt information notwithstanding Sec.  1022.38.
    Several commenters raised concerns along these lines about the 
proposal's interaction with the CFPB's Required Rulemaking on Personal 
Financial Data Rights (PFDR Rule), which could result in transmission 
of medical information that is not identified as such.\176\ 
Specifically, a bank trade association commented that prohibiting 
creditors from considering medical debts and expenses could impede the 
development of cashflow underwriting, which considers the general 
inflows and outflows from a consumer's depository account. This 
commenter highlighted cashflow underwriting's value for expanding 
credit to underserved populations and argued that limiting the use of 
medical debt information could restrict the predictive power of this 
method. And an industry trade association commented that the proposal 
could pose challenges for data aggregators in the open banking system 
because no clear mechanism exists for identifying medical debt 
accounts. This commenter recommended that the CFPB require data 
providers to identify when a consumer is authorizing access to a 
medical account.
---------------------------------------------------------------------------

    \176\ Required Rulemaking on Personal Financial Data Rights, 89 
FR 90838 (Nov. 18, 2024), https://files.consumerfinance.gov/f/documents/cfpb_personal-financial-data-rights-final-rule_2024-10.pdf.
---------------------------------------------------------------------------

    The CFPB is modifying the proposal to better allow consumers to 
authorize access to their accounts containing medical information for 
cashflow underwriting purposes. Final Sec.  1022.30(e)(1)(x)(A)(1) 
provides, in part, that a creditor may consider medical information 
that is 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. This new provision is independent of the PFDR Rule and 
applies in situations where the PFDR Rule does not apply to the 
consumer-authorized access.
    As the CFPB has recognized in the PFDR Rule and elsewhere,\177\ the 
use of cashflow data in underwriting offers substantial benefits to 
consumers, especially consumers who have a limited credit history or do 
not have a credit file with a nationwide consumer reporting agency. For 
example, among consumers who do have credit scores, a study by 
FinRegLab found that cash-flow underwriting can help identify consumers 
who have low traditional credit scores but are actually a low credit 
risk for lenders.\178\ Allowing creditors to consider cashflow data may 
increase access to credit or lower prices for consumers. But, as 
discussed above in connection with debts owed to third-party lenders, 
it is not operationally feasible for creditors or consumer reporting 
agencies to easily identify transactions that pertain to a medical 
debt. Without either the ability to easily filter out medical-debt 
transactions, or the ability to consider medical debts or expenses, 
creditors would be unable to fully assess the outflows from a 
consumer's account. Accordingly, the CFPB has determined that it is 
necessary and appropriate to protect legitimate operational, 
transactional, risk, consumer, and other needs, including permitting 
actions necessary for administrative verification purposes, and 
consistent with FCRA's intent to restrict the use of medical 
information for inappropriate purposes, to allow creditors to consider 
medical information included in the transaction history of a consumer's 
account with the consumer's authorization.
---------------------------------------------------------------------------

    \177\ See, e.g., Alexei Alexandrov, Alyssa Brown, & Samyak Jain, 
Consumer Fin. Prot. Bureau, Looking at credit scores only tells part 
of the story--cashflow data may tell another part (July 2023), 
https://www.consumerfinance.gov/about-us/blog/credit-scores-only-tells-part-of-the-story-cashflow-data/.
    \178\ FinRegLab, The Use of Cash-Flow Data in Underwriting 
Credit (July 2019), https://finreglab.org/wp-content/uploads/2019/07/FRL_Research-Report_Final.pdf.
---------------------------------------------------------------------------

    Final Sec.  1022.30(e)(1)(x)(A)(1)'s exception applies to medical 
information contained in an account for a consumer financial product or 
service described in 12 CFR 1033.111(b)(1) through (3). 12 CFR 
1033.111(b) provides a definition of ``covered consumer financial 
product or service'' for purposes of the PFDR Rule. This term means a 
consumer financial product or service, as defined in 12 U.S.C. 5481(5), 
that is: (1) A Regulation E account, which means an account, as defined 
in Regulation E, 12 CFR 1005.2(b); (2) A Regulation Z credit card, 
which means a credit card, as defined in Regulation Z, 12 CFR 
1026.2(a)(15)(i); or (3) Facilitation of payments from a Regulation E 
account or Regulation Z credit card, excluding products or services 
that merely facilitate first party payments.\179\ Such accounts include 
checking accounts, savings accounts, digital wallets, and other 
accounts that provide data about a consumer's income, expenses, and 
spending. This transaction data is generally the type of data that 
financial institutions would need to access to engage in cashflow 
underwriting.
---------------------------------------------------------------------------

    \179\ As the PFDR Rule explains, a ``first party payment'' is 
``a transfer initiated by the payee or an agent acting on behalf of 
the underlying payee.'' 89 FR 90838, 90990 (Nov. 18, 2024) (to be 
codified at 12 CFR 1033.111(b)(3)). ``First party payments include 
payments initiated by loan servicers.'' Id.
---------------------------------------------------------------------------

    Final Sec.  1022.30(e)(1)(x)(A)(1) also specifies that the medical 
information must have been accessed with the consumer's authorization. 
The PFDR Rule establishes authorization procedures for third parties 
seeking to access consumer data for purposes such as cashflow 
underwriting. As described in detail in the PFDR Rule, these 
authorization procedures and obligations are designed to ensure that 
consumers understand the data access they are authorizing and are able 
to exercise meaningful control with respect to such access.\180\ 
Accordingly, a creditor satisfies final Sec.  1022.30(e)(1)(x)(A)(1)'s 
requirement that it obtain medical information ``with the consumer's 
authorization'' if it accesses consumer data following procedures that 
comply with--or in situations not covered by the rule, conform to--the 
PFDR Rule.
---------------------------------------------------------------------------

    \180\ See id. at 90920-50.
---------------------------------------------------------------------------

    The CFPB declines to require data providers or data aggregators to 
identify medical accounts. To the extent that the accounts discussed by 
the commenter are covered by the PFDR Rule because they are Regulation 
E accounts, Regulation Z credit cards, or payment facilitation products 
and services, final Sec.  1022.30(e)(1)(x)(A)(1) allows consumers to 
authorize access to the cashflow data from such accounts. To the extent 
such accounts fall outside the coverage of the PFDR Rule, such a 
requirement is beyond the scope of this rulemaking. The CFPB notes, 
however, that nothing in this rule or the PFDR Rule prevent industry 
from developing such an identification system.

B. FCRA Section 605(a)(6)--Information Excluded From Consumer Reports: 
Name, Address, and Telephone Number of any Medical Information 
Furnisher

    Industry commenters asserted that the creditor prohibition in FCRA 
section 604(g)(2) does not prohibit creditors from obtaining or using 
financial

[[Page 3314]]

aspects of medical information because FCRA section 604(g)(2) has a 
parenthetical cross-referencing FCRA section 605(a)(6). Specifically, 
commenters contended that the parenthetical cross-referencing FCRA 
section 605(a)(6) has the effect of allowing creditors to obtain or use 
medical information so long as it is restricted or reported using codes 
that do not reveal the specific provider or the nature of such 
services, products, or devices. This reading of FCRA section 604(g)(2) 
is contrary to the approach that the CFPB's predecessor agencies used 
when initially creating the provisions of Regulation V being repealed 
in this final rule; they expressly stated that ``Section 604(g)(2) of 
the FCRA prohibits creditors from either obtaining or using medical 
information pertaining to a consumer in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit.'' \181\ In fact, were the commenters' position the correct 
reading, industry would have no need for the regulatory exemptions 
being repealed in this final rule--at least with respect to medical 
information in consumer reports that is treated in the manner required 
under 15 U.S.C. 1681c(a)(6), which the CFPB understands constitutes the 
bulk of the medical information that creditors consider in connection 
with credit-eligibility determinations. In full, FCRA section 604(g)(2) 
reads: ``Limitation on creditors. Except as permitted pursuant to 
paragraph (3)(C) or regulations prescribed under paragraph (5)(A), a 
creditor shall not obtain or use medical information (other than 
medical information treated in the manner required under section 
1681c(a)(6) of this title [i.e., section 605(a)(6) of the FCRA]) 
pertaining to a consumer in connection with any determination of the 
consumer's eligibility, or continued eligibility, for credit.'' \182\
---------------------------------------------------------------------------

    \181\ 70 FR 70664, 70664 (Nov. 22, 2005).
    \182\ 15 U.S.C. 1681b(g)(2) (emphasis added).
---------------------------------------------------------------------------

    The CFPB believes that commenters misunderstand the plain text, 
context, and history of FCRA sections 604(g)(2) and 605(a)(6), which 
were enacted via two separate provisions of the FACT Act. Properly 
understood, the relevant sections of the FACT Act--sections 411 and 
412--contemplate two separate mechanisms, regulating two different 
types of entities and on two different prescribed schedules, for 
ensuring protections for consumers' medical information in the 
financial system: (1) the limitation on creditors' use of medical 
information in underwriting under FCRA section 604(g)(2), subject to 
exceptions the Agencies might authorize in a final rule to be issued 
six months after the enactment of the FACT Act, and (2) the requirement 
under FCRA section 605(a)(6) that consumer reporting agencies mask 
certain information in consumer reports, to take effect fifteen months 
after the enactment of the FACT Act.
    First, FACT Act section 411,\183\ titled ``Protection of Medical 
Information in the Financial System,'' added the bulk of FCRA section 
604(g)--including the creditor prohibition--but did not add a 
parenthetical cross-referencing FCRA section 605(a)(6). FACT Act 
section 411 required the Agencies to issue final regulations by six 
months after the enactment of the FACT Act and tethered the effective 
date of the creditor prohibition in FCRA section 604(g)(2) to those 
regulations.\184\
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    \183\ FACT Act section 411(a), 117 Stat. 1999-2001.
    \184\ FACT Act section 411(d), 117 Stat. 2002 (providing that 
FCRA section 604(g)(2), as enacted in FACT Act section 411(a), shall 
take effect on the later of (1) 90 days after the Agencies' issuance 
of final regulations under FCRA section 604(g)(5), or (2) the date 
specified in such final regulations). Although FACT Act section 
411(a) required the Agencies to issue regulations under FCRA section 
604(g)(5) by six months after the FACT Act's December 4, 2003 
enactment, they did not publish interim final rules under FCRA 
section 604(g)(5) until June 10, 2005. See Fair Credit Reporting 
Medical Information Regulations, 70 FR 33958 (June 10, 2005); see 
also Fair Credit Reporting Medical Information Regulations, 70 FR 
70664 (Nov. 22, 2005) (subsequent final rule).
---------------------------------------------------------------------------

    Second, FACT Act section 412,\185\ titled ``Confidentiality of 
Medical Contact Information in Consumer Reports,'' added several 
complementary provisions related to how consumer reporting agencies are 
to identify and appropriately protect medical information on consumer 
reports. FACT Act section 412 added FCRA section 623(a)(9), requiring 
persons whose primary business is providing medical services, products, 
or devices (or their agents or assignees) and who furnish information 
to consumer reporting agencies to notify the agencies of their status 
as medical information furnishers.\186\ FACT Act section 412 authorized 
the FTC to ``issu[e] model guidance or prescribe[e] reasonable policies 
and procedures, as necessary'' to ensure that a medical information 
furnisher notifies the consumer reporting agencies of its status.\187\ 
Then, FACT Act section 412 added FCRA section 605(a)(6), which 
generally prohibits consumer reporting agencies from reporting to any 
third parties (i.e., not just creditors) the ``name, address, and 
telephone number of any medical information furnisher'' that has 
notified the agency of its status, unless ``such name, address, and 
telephone number'' are restricted or reported using codes for 
confidentiality.\188\ In conjunction with this new requirement for 
consumer reporting agencies, FACT Act section 412 inserted in FCRA 
section 604(g)(1) and (g)(2), as ``technical and conforming 
amendments,'' the parentheticals cross-referencing FCRA section 
605(a)(6).\189\ Recognizing that medical information furnishers and 
consumer reporting agencies would need time for implementation, 
Congress stated that the ``amendments made by [FACT Act section 412] 
shall take effect at the end of the 15-month period beginning on the 
date of enactment of this Act.'' \190\
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    \185\ FACT Act section 412, 117 Stat. 2002-03.
    \186\ FACT Act section 412(a), 117 Stat. 2002.
    \187\ FACT Act section 412(e), 117 Stat. 2003.
    \188\ FACT Act section 412(b), 117 Stat. 2002. FCRA section 
605(a)(6) exempts from its restrictions consumer reports ``provided 
to an insurance company for a purpose relating to engaging in the 
business of insurance other than property and casualty insurance.'' 
Id. (15 U.S.C. 1681c(a)(6)(B)).
    \189\ FACT Act section 412(f), 117 Stat. 2003.
    \190\ FACT Act section 412(g), 117 Stat. 2003. Before the text 
of FCRA section 604(g)(2), as set forth in FACT Act section 411(a), 
itself took effect, the FACT Act section 412(f) ``technical and 
conforming'' amendment inserted in FCRA section 604(g)(2) the 
parenthetical cross-referencing FCRA section 605(a)(6). Congress 
contemplated that the text of FCRA section 604(g)(2) set forth in 
FACT Act section 411(a) could take effect within approximately nine 
months after the enactment of the FACT Act (i.e., before the FACT 
Act section 412(f) ``technical and conforming'' amendment adding the 
parenthetical referring to FCRA section 605(a)(6) would take 
effect)--but Congress also provided that FCRA section 604(g)(2) 
could take effect later, i.e., if the Agencies specified a later 
date in their final regulations. See FACT Act section 411(a), 117 
Stat. 2001 (requiring Agencies to issue final regulations under FCRA 
section 604(g)(5) within six months of the FACT Act's enactment); 
FACT Act section 411(d), 117 Stat. 2002 (providing that FCRA section 
604(g)(2), as set forth in FACT Act section 411(a), could take 
effect on the later of 90 days after issuance of final regulations 
under FCRA section 604(g)(5) or the date specified in those final 
regulations).
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    Commenters appear to posit an unlikely and odd legislative maneuver 
whereby Congress simultaneously passed a law and repealed it in 
substantial part when commenters assert that the parenthetical cross-
referencing FCRA section 605(a)(6) (added by FACT Act section 412) in 
large part negates the creditor prohibition in FCRA section 604(g)(2) 
(added by FACT Act section 411). As noted above, the two sections of 
the FACT Act contemplate two separate mechanisms, regulating two 
different types of entities and on two different prescribed schedules, 
for ensuring protections for consumers' medical information in the 
financial system. Accordingly, as Congress indicated by designating the 
parenthetical in FCRA section 604(g)(2) a ``technical and conforming 
amendment,'' the

[[Page 3315]]

parenthetical reference to ``medical information treated in the manner 
required under section 605(a)(6)'' is nothing more than an 
acknowledgment in the first mechanism that the second exists. In other 
words, Congress anticipated that the Agencies would be considering 
regulatory exceptions in their upcoming regulations, and to ensure that 
any of the Agencies' upcoming regulatory exceptions under FACT Act 
section 411 would also be consistent with the separate ``name, address, 
and telephone number'' confidentiality provisions of FACT Act section 
412, Congress added a cross-reference. This cross-reference serves to 
emphasize that if the Agencies' upcoming regulations included 
regulatory exceptions to the creditor prohibition in FCRA section 
604(g)(2), creditors would nonetheless still be prohibited from 
obtaining or using a consumer report containing the ``name, address, 
and telephone number'' of a health care provider unless such name, 
address, and telephone number are restricted or reported using codes 
for confidentiality.
    Commenters' interpretation of the parenthetical, which was added 
through FACT Act section 412, would swallow much of the creditor 
prohibition that Congress added through FACT Act section 411. Contrary 
to commenters' assertion, the parenthetical merely ensures consistency 
between FACT Act section 411 and section 412, so that--notwithstanding 
any agency regulation creating regulatory exceptions to the creditor 
prohibition--consumer reports containing medical information obtained 
or used by creditors would restrict the ``name, address, and telephone 
number'' of a health care provider or otherwise report using codes for 
confidentiality. Besides ensuring the confidentiality of the ``name, 
address, and telephone number,'' FACT Act section 412 does not 
otherwise change the broad creditor prohibition in FCRA section 
604(g)(2), which Congress added through FACT Act section 411. As 
recognized by the prudential regulators, FCRA ``section 604(g)(2) 
prohibits all creditors from obtaining or using key financial 
information that is also medical information in the credit underwriting 
process,'' and ``[s]ection 604(g) does not contain any specific 
statutory exception to this broad [creditor] prohibition.'' \191\ 
Commenters are thus incorrect to assert that the creditor prohibition 
that Congress added through FACT Act section 411 distinguishes between 
financial and non-financial aspects of medical information; rather, the 
only exceptions are exceptions pursuant to regulatory determinations 
under FCRA section 604(g)(3)(C) (by the FTC, Federal banking agencies, 
NCUA, or applicable State insurance authority) or pursuant to 
regulations under FCRA section 604(g)(5) (by the Federal banking 
agencies and NCUA).\192\
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    \191\ 70 FR 33958, 33962 (June 10, 2005).
    \192\ Id. Congress subsequently (through the CFPA) transferred 
to the CFPB primary regulatory authority for the FCRA. Pub. L. 111-
203, 124 Stat. 1955, 2004 (2010). See also 15 U.S.C. 1681b(g)(3)(C), 
(5)(A).
---------------------------------------------------------------------------

C. Implications for Other Laws

    Some commenters supporting the proposed rule stated that the rule 
would help to further strengthen existing consumer protections provided 
by other laws, such as the FDCPA \193\ and the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA).\194\ Several 
commenters opposing the proposed rule stated that the rule 
unnecessarily duplicates or overlaps with these and other Federal 
statutes and regulations addressing debt collection, abusive conduct, 
privacy issues, discrimination, and consumer credit eligibility.\195\ 
These laws are discussed below and include, among others, the Patient 
Protection and Affordable Care Act \196\ and the No Surprises Act.\197\ 
Some commenters also went further and stated that the proposed rule is 
in conflict with some provisions of other laws. For example, commenters 
asserted that the proposed rule may cause creditors to violate ECOA 
\198\ if, in lieu of medical debt information, potential creditors rely 
more heavily on non-medical debt information about consumers that is 
less predictive and potentially biased. Commenters also contended that 
the proposed rule would require handling of sensitive information 
across multiple entities in violation of the HIPAA and the Gramm-Leach-
Bliley Act (GLBA) \199\ and would impede creditors' ability to make 
repayment ability determinations required under TILA and Regulation Z. 
Another commenter asserted that the proposed rule does not comport with 
CFPB enforcement actions related to abusive acts or practices. With 
respect to HIPAA, some commenters stated that the proposed rule would 
conflict with HIPAA's provisions permitting covered entities (such as 
health care providers) to use and disclose protected health 
information, with certain limits and protections, for treatment, 
payment, and health care operations activities. Another commenter 
asserted that the proposed rule contradicts bankruptcy law generally, 
under which a bankruptcy filer is required to pay back at least some 
portion of their debt.
---------------------------------------------------------------------------

    \193\ 15 U.S.C. 1692 et seq.
    \194\ Pub. L. 104-191, 110 Stat. 1936 (1996).
    \195\ Comments regarding State laws, and responses thereto, are 
discussed in part IV.C, Limits on a Consumer Reporting Agency's 
Disclosure of Medical Debt Information, above.
    \196\ Pub. L. 111-148, 124 Stat. 119 (2010).
    \197\ Pub. L. 116-260, div. BB, tit. I, 134 Stat. 2758 (2020).
    \198\ 15 U.S.C. 1691 et seq.
    \199\ 15 U.S.C. 6801 et seq.
---------------------------------------------------------------------------

    The FDCPA and the CFPB's implementing regulation, Regulation F, 12 
CFR part 1006, govern certain activities of debt collectors, as that 
term is defined in the FDCPA. Among other things, the FDCPA and 
Regulation F prohibit debt collectors from engaging in unfair, 
deceptive, or abusive conduct when collecting or attempting to collect 
debts and require debt collectors to make certain disclosures to 
consumers in debt collection. Effective November 30, 2021, a new 
provision of Regulation F requires 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.\200\
---------------------------------------------------------------------------

    \200\ See 12 CFR 1006.30(a).
---------------------------------------------------------------------------

    The HIPAA and the Department of Health and Human Services' (HHS) 
implementing regulations \201\ also limit or regulate the use, 
collection, and sharing of certain health information. Among other 
things, the HIPAA, as implemented by HHS regulations, sets national 
standards for the protection of individually identifiable health 
information by health plans, health care clearinghouses, and health 
care providers, as well as the security of electronic protected health 
information.
---------------------------------------------------------------------------

    \201\ See 45 CFR parts 160 and 164.
---------------------------------------------------------------------------

    The Patient Protection and Affordable Care Act revised section 
501(r) of the Internal Revenue Code such that non-profit hospitals may 
lose their non-profit tax status if they fail to evaluate patients for 
eligibility for financial assistance before the hospital takes certain 
types of collection actions.\202\
---------------------------------------------------------------------------

    \202\ See 26 U.S.C. 501(r)(6).
---------------------------------------------------------------------------

    The No Surprises Act protects participants, beneficiaries, and 
enrollees in group health plans and group and individual health 
insurance coverage from surprise medical bills when they receive, under 
certain circumstances, emergency services, non-emergency services from 
nonparticipating providers at participating health care facilities, and 
air ambulance services from nonparticipating providers of air ambulance 
services.\203\ In addition, the

[[Page 3316]]

No Surprises Act, among other things, requires certain health care 
facilities and providers to disclose Federal and State patient 
protections against balance billing and sets forth complaint processes 
with respect to potential violations of the protections against balance 
billing and out-of-network cost sharing.\204\ The No Surprises Act also 
includes certain protections for uninsured (or self-pay) individuals 
from surprise medical bills.\205\ Several Federal agencies have 
published rules implementing the No Surprises Act.\206\
---------------------------------------------------------------------------

    \203\ See Requirements Related to Surprise Billing; Part I, 86 
FR 36872 (July 13, 2021). The protections against surprise billing 
also apply to health benefits plans offered by carriers under the 
Federal Employees Health Benefits (FEHB) Act. See 5 U.S.C. 8901(p).
    \204\ See Requirements Related to Surprise Billing; Part I, 86 
FR 36872 (July 13, 2021).
    \205\ See Requirements Related to Surprise Billing; Part II, 86 
FR 55980 (Oct. 7, 2021).
    \206\ See, e.g., id. (interim final rule issued by Office of 
Personnel Management; Internal Revenue Service, Department of the 
Treasury; Employee Benefits Security Administration, Department of 
Labor; Centers for Medicare and Medicaid Services, Department of 
Health and Human Services); Requirements Related to Surprise 
Billing; Part I, 86 FR 36872 (July 13, 2021) (same).
---------------------------------------------------------------------------

    ECOA and the CFPB's implementing regulation, Regulation B, 12 CFR 
part 1002, make it illegal for a creditor to discriminate against an 
applicant in any aspect of a credit transaction on the basis of race, 
color, religion, national origin, sex (including sexual orientation and 
gender identity), marital status, or age (provided the applicant has 
the capacity to contract), on the fact that all or part of the 
applicant's income derives from a public assistance program, or on the 
fact that the applicant has in good faith exercised any right under the 
Consumer Credit Protection Act.\207\ The general rule stated in Sec.  
1002.4(a) ``covers, for example, application procedures, criteria used 
to evaluate creditworthiness, administration of accounts, and treatment 
of delinquent or slow accounts.'' \208\
---------------------------------------------------------------------------

    \207\ 15 U.S.C. 1691(a); 12 CFR 1002.4(a); 86 FR 14363 (Mar. 16, 
2021).
    \208\ Regulation B comment 4(a)-1.
---------------------------------------------------------------------------

    The GLBA and the CFPB's implementing regulation, Regulation P, 12 
CFR part 1016, require financial institutions subject to the CFPB's 
jurisdiction to provide their customers with notices concerning their 
privacy policies and practices, among other things. They also place 
certain limitations on the disclosure of nonpublic personal information 
to nonaffiliated third parties, and on the redisclosure and reuse of 
such information. Other parts of the GLBA, as implemented by 
regulations and guidelines of certain other Federal agencies (e.g., the 
Federal Trade Commission's Safeguards Rule and the prudential 
regulators' Safeguards Guidelines), set forth standards for 
administrative, technical, and physical safeguards with respect to 
financial institutions' customer information.
    TILA \209\ and the CFPB's implementing regulation, Regulation Z, 12 
CFR part 1026, impose disclosure and other requirements on creditors. 
For example, TILA and Regulation Z generally prohibit creditors from 
making mortgage loans unless they make a reasonable and good faith 
determination that the consumer will have the ability to repay the 
loan. TILA and Regulation Z also contain ability-to-pay requirements 
for credit cards.
---------------------------------------------------------------------------

    \209\ 15 U.S.C. 1601 et seq.
---------------------------------------------------------------------------

    Commenters provided no evidence that the proposed rule would 
conflict with other Federal laws. For example, while they pointed to 
HIPAA implementing regulations permitting covered entities, such as 
health care providers, to furnish payment information to consumer 
reporting agencies, they did not address the fact that the proposed 
rule would not have imposed any obligations or restrictions on 
furnishers. Nor would the rule unnecessarily duplicate or overlap with 
other laws; to the contrary, issuing this final rule will effectuate a 
congressionally enacted restriction on creditors' utilization of 
medical information and further strengthen consumer protections. 
Moreover, Sec.  1022.30(e)(1)(ii) permits a creditor to obtain and use 
medical information pertaining to a consumer in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit to comply with applicable requirements of local, State, or 
Federal laws. For example, how to obtain and use medical information 
provided by the consumer in compliance with TILA and Regulation Z, as 
set forth in Sec.  1022.30(e)(1)(ii), is discussed in part IV.D, 
Example to Comply With Applicable Requirements of Local, State, or 
Federal laws, above. With respect to the CFPB's pending enforcement 
actions, as referenced by a commenter, the CFPB notes that enforcement 
actions alleging unfair, deceptive, or abusive acts or practices under 
the CFPA are tethered to their particular facts and circumstances.

D. Other Comments Regarding Legal Authority

    Industry commenters asserted that the CFPB lacked authority to 
issue this rule, arguing that the rule constituted a matter of vast 
economic and political significance subject to the ``major questions'' 
doctrine. Industry commenters also contended that reliance on the words 
``necessary and appropriate'' in Congress's delegations of authority to 
the CFPB does not provide an intelligible principle to guide agency 
action and would violate the ``nondelegation'' doctrine.
    Consistent with the discussion above, the CFPB has the legal 
authority to implement this rule. First, the CFPB has determined that 
the FCRA authorizes it to issue this rule and that the rule does not 
run afoul of the major questions doctrine. The rule merely (1) amends 
(including by revoking in substantial part) a discretionary exemption 
previously issued under expressly conferred rulemaking authority, 
thereby giving effect to a congressionally enacted restriction on 
creditors' utilization of medical information, and (2) prohibits 
consumer reporting agencies from providing creditors information that 
they cannot consider in underwriting in any event. Far from 
``claim[ing] the power to resolve a matter of great political 
significance,'' \210\ the CFPB here is removing a discretionary, 
insufficiently supported regulatory barrier to the implementation of an 
express statutory restriction on creditors obtaining or using medical 
information in connection with lending decisions. As the discussion of 
the rule's benefits and costs in part VII.E, Potential Benefits and 
Costs to Consumers and Covered Persons, demonstrates, the rule will not 
``involve[] hundreds of billions of dollars of impact,'' as have other 
rules triggering the major questions doctrine.\211\ Nor is this a case 
in which an agency has ``claim[ed] to discover in a long-extant statute 
an unheralded power.'' \212\ Instead, the rule here returns to FCRA 
section 604(g)(2) the effect it would have had if the Agencies had not 
adopted the financial information exception. Further, Congress itself 
recognized that the CFPB has ``comparative expertise'' \213\ to make 
the determination at the heart of this rulemaking: It expressly 
provided that the CFPB may determine whether an exemption like the 
financial information exception is ``necessary and appropriate to 
protect legitimate operational, transactional, risk, consumer, and 
other needs'' related to consumer-credit transactions.\214\ The rule 
thus does not have the hallmarks of a regulation

[[Page 3317]]

potentially subject to the major questions doctrine.
---------------------------------------------------------------------------

    \210\ West Virginia v. EPA, 597 U.S. 697, 743 (2022) (Gorsuch, 
J., concurring).
    \211\ Mayfield v. Dep't of Labor, 117 F.4th 611, 616 (5th Cir. 
2024).
    \212\ West Virginia, 597 U.S. at 724 (majority opinion) 
(citation omitted).
    \213\ Id. at 729 (citation omitted).
    \214\ 15 U.S.C. 1681b(g)(5).
---------------------------------------------------------------------------

    Second, the CFPB has determined that this rule does not run afoul 
of the nondelegation doctrine, which provides that it is 
unconstitutional for Congress to delegate its legislative powers to an 
actor in another branch of government, such as an executive agency. The 
consensus articulation that has emerged in Supreme Court jurisprudence 
is that Congress does not impermissibly delegate legislative authority 
if the statute contains an ``intelligible principle'' to guide the 
relevant actor in exercising its statutory authority.\215\ Under this 
standard, the Court has upheld broad delegations, such as ``to regulate 
in the `public interest,' '' ``to set `fair and equitable' prices and 
`just and reasonable' rates,'' and ``to issue whatever air quality 
standards are `requisite to protect the public health.' '' \216\ Here, 
Congress's delegations of authority to the CFPB, in FCRA sections 
604(g)(5) and 621(e), and CFPA section 1022(b)(1), meet that standard.
---------------------------------------------------------------------------

    \215\ See, e.g., Whitman v. Am. Trucking Ass'ns, 531 U.S. 457, 
472 (2001) (quoting J.W. Hampton, Jr., & Co. v. United States, 276 
U.S. 394, 409 (1928)).
    \216\ Gundy v. United States, 588 U.S. 128, 146 (2019) 
(plurality opinion).
---------------------------------------------------------------------------

VII. CFPA Section 1022(b) Analysis

    The CFPB has considered the potential benefits, costs, and impacts 
of the rule. In the proposal, the CFPB requested comment on the impact 
analysis, as well as submissions of additional data that could inform 
its consideration of the impacts of the proposed rule. The CFPB has 
incorporated the information provided by commenters in the analysis and 
estimates that follow. This section contains an analysis of the 
benefits and costs of the rule for consumers, consumer reporting 
agencies, creditors, and other entities, such as health care providers 
and debt collectors.

A. Statement of Need

    The FCRA supports the fairness, accuracy, and privacy of personal 
information in consumer reporting. Among the protections in the FCRA 
for consumers' medical information, FCRA section 604(g)(2) generally 
restricts creditors from obtaining or using medical information in 
connection with credit eligibility determinations, absent a regulatory 
exception. FCRA section 604(g)(5) requires that the CFPB determine that 
any such exception be necessary and appropriate and consistent with the 
intent of FCRA section 604(g)(2) to restrict the use of medical 
information for inappropriate purposes. The CFPB is also authorized 
under section 621(e) of the FCRA to issue regulations as may be 
necessary or appropriate to administer and carry out the purposes and 
objectives of the FCRA, and to prevent evasions thereof or to 
facilitate compliance therewith. The CFPB anticipates that the rule 
will enhance consumer privacy by removing the financial information 
exception at Sec.  1022.30(d) that currently permits creditors to 
consider medical debt information and medical information about 
expenses, assets, and collateral, among other types of medical 
information, in underwriting decisions under certain circumstances.
    Medical debt is prevalent in the United States, with 20 percent of 
households reporting that they had medical debt in 2022.\217\ 
Reflecting this prevalence, medical collections have recently comprised 
the majority of credit collection tradelines found on consumer 
reports.\218\ Like other information on consumer reports, medical 
collections information may be used by creditors to assess a consumer's 
ability to handle credit obligations.
---------------------------------------------------------------------------

    \217\ Consumer Fin. Prot. Bureau, CFPB Estimates $88 Billion in 
Medical Bills on Credit Reports (Mar. 1, 2022), https://www.consumerfinance.gov/about-us/newsroom/cfpb-estimates-88-billion-in-medical-bills-on-credit-reports/.
    \218\ Consumer Fin. Prot. Bureau, Medical debt burden in the 
United States, at 5 (Mar. 1, 2022), https://www.consumerfinance.gov/data-research/research-reports/medical-debt-burden-in-the-united-states/.
---------------------------------------------------------------------------

    Medical collections may result from unplanned expenditures, making 
medical collections information on consumer reports a potentially noisy 
or inaccurate signal of a consumer's ability to meet credit 
obligations. In the United States, high health care prices, uneven 
insurance coverage, complex health insurance networks, and cost-sharing 
features of health insurance may cause unexpected or chronic illnesses 
to result in large medical bills for individual consumers. Due to 
opaque medical pricing and billing practices, consumers often do not 
know the cost of medical services at the time those services are 
incurred, and may receive medical bills that they are uncertain they 
actually owe.\219\ Some consumers are unable to pay these bills on 
time, and some of these past-due medical bills eventually become 
medical collections.
---------------------------------------------------------------------------

    \219\ See 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/.
---------------------------------------------------------------------------

    Multiple consumer advocates and at least one researcher submitted 
comments agreeing with the CFPB's understanding of how many consumers 
acquire medical debt, though one individual stated that only a fraction 
of medical debt is the result of an unavoidable emergency. The CFPB 
understands that 72 percent of consumers with medical debt reported 
that the debt originated from a one-time or short-term medical expense, 
such as for treatment from an accident or a single hospital stay, 
implying that a substantial fraction of medical debt results from 
unplanned expenditures.\220\
---------------------------------------------------------------------------

    \220\ 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/.
---------------------------------------------------------------------------

    Another factor that potentially makes medical collections an 
imprecise signal is that they are unevenly reported. Many health care 
providers allow debt collectors to furnish to consumer reporting 
agencies, while others do not. Because of this, it is possible for 
consumers' medical debt in collections to be included unevenly on 
consumer reports, potentially leading to different financial outcomes. 
While a consumer could theoretically be able to factor this into their 
decision when selecting a health care provider, it is more likely that 
a consumer is not aware of which health care providers furnish and 
usually does not choose a health care provider based solely on a health 
care provider's collection policies, if they consider them at all.\221\
---------------------------------------------------------------------------

    \221\ Noam M. Levey, Hundreds of Hospitals Sue Patients or 
Threaten Their Credit, a KHN Investigation Finds. Does Yours?, KFF 
Health News (Dec. 21, 2022), https://kffhealthnews.org/news/article/medical-debt-hospitals-sue-patients-threaten-credit-khn-investigation/.
---------------------------------------------------------------------------

    When creditors base underwriting decisions on information that is 
unevenly reported and potentially erroneous, an economic tradeoff 
arises. Creditors balance the probabilities of making two types of 
error when deciding whether to lend to consumers. The first type of 
error occurs when creditors lend to consumers who are unable to repay 
the loan. The second type of error occurs when creditors choose not to 
lend to consumers who are able and willing to repay. Creditors lose 
potential revenues when they decline credit for consumers with reported 
medical collections. Similarly, consumers, who would have benefitted 
from access to credit, also lose from being denied credit because of 
reported medical collections.
    The likelihood of making each of these types of error is affected 
by the informativeness of the signal medical collections provide to 
creditors. When medical collections are reported for debts that do not 
exist (for instance,

[[Page 3318]]

because medical bills have been paid by insurance) and are prevalent, 
using this information will tend to increase the likelihood of the 
second type of error, without reducing the likelihood of the first type 
of error. In that situation, creditors who use medical collection 
information would benefit from not considering this information in 
their credit decisions. When medical collections are reported on the 
basis of debts that may in fact impair consumers' future repayment and 
are prevalent, creditors would experience a reduction in revenue if 
they do not consider medical collections in their credit decisions, due 
to an increase in the likelihood of the first type of error. As a 
result, whether creditors would benefit from not being able to consider 
medical collections in their credit decisions is an empirical question. 
As discussed in part XII, Technical Appendix, empirical analysis 
suggests that, on balance, preventing creditors from using medical 
collection information in credit decisions would result in creditors 
extending credit to more consumers without diminishing the average 
performance of newly opened credit accounts.
    As noted by a researcher commenter, credit scores that exclude or 
underweight medical debt were created in response to market demand, but 
market forces have not yet driven creditors to cease using medical debt 
information in underwriting. The CFPB agrees that if creditors could in 
fact benefit from disregarding medical debt information when making 
credit decisions, one would expect that creditors would have abandoned 
the practice out of their own profit motive. While, as discussed above, 
the industry has trended in this direction in recent years, the 
transition has not occurred fully, or quickly. The CFPB hypothesizes 
that the nexus of current contracts, expectations, and institutional 
structures that govern creditors' behavior prevents markets from moving 
to a potentially better equilibrium outcome. For instance, the market 
for mortgages is heavily driven by the secondary market for those 
loans. Similar factors likely drive creditor behavior in other consumer 
loan markets. Mortgage originators must follow underwriting practices 
that are expected by buyers in the secondary market, or they will not 
be able to securitize their loans. Since consideration of medical debt 
information has been expected by the market (if only implicitly through 
the use of commercially available credit scores), it is difficult for 
any one firm to move away from using that information, even if doing so 
would not increase risks for investors.\222\
---------------------------------------------------------------------------

    \222\ Loretta J. Mester, Fed. Rsrv. Bank of Phila., What's the 
Point of Credit Scoring?, Bus. Rev., at 6 (Sept./Oct. 1997), https://www.philadelphiafed.org/-/media/frbp/assets/economy/articles/business-review/1997/september-october/brso97lm.pdf.
---------------------------------------------------------------------------

    The rule would generally prohibit creditors from considering 
medical debt information from consumer reports in underwriting 
decisions. Consequently, the incentive for medical debt holders and 
collectors to furnish to consumer reporting agencies would decrease. As 
a result, the rule would enhance consumers' privacy with respect to 
their medical information, while also reducing the likelihood that the 
uneven reporting of medical collections would affect credit outcomes. 
While the rule would reduce the amount, though not necessarily the 
quality, of information on which creditors can base underwriting 
decisions, the CFPB expects that, over time, those credit scoring 
models that currently use medical collections would be adjusted to 
reweight the remaining information on consumer reports. In the long 
run, the expected adjustments to credit scoring models may help markets 
move toward a more efficient allocation of credit.
    Adjustments to credit scoring models may result in credit being 
extended to more consumers who are able and willing to repay their 
credit obligations. This may allow consumers to benefit from increased 
access to credit and creditors to increase overall revenues. Moreover, 
since medical collections tradelines on consumer reports are prone to 
error, removing medical debt from consumer reports could reduce the 
need for dispute resolution, potentially saving time and resources for 
consumers, consumer reporting agencies, and furnishers of medical debt 
information.

B. Baseline for Consideration of Costs and Benefits

    The impact analysis compares the rule's potential benefits and 
costs against a baseline in which the CFPB takes no regulatory action. 
This baseline includes existing Federal and State law and current 
furnishing practices. Under the baseline, creditors are generally 
allowed to consider medical collections information on consumer reports 
in underwriting decisions due to the financial information exception at 
Sec.  1022.30(d).
    Over the last few years, the three NCRAs implemented several 
changes in the consumer reporting of medical debt. In September 2017, 
as part of a settlement with 31 State attorneys general, the NCRAs 
implemented a 180-day waiting period before including furnished medical 
collections on consumer reports.\223\ In July 2022, the NCRAs 
voluntarily extended the waiting period from 180 days to one year and 
removed all paid medical collections from consumer reports. Finally, in 
April 2023, the NCRAs voluntarily removed both paid and unpaid medical 
collections under $500 from consumer reports.\224\
---------------------------------------------------------------------------

    \223\ Press Release, Atty. Gen's. Off., State of Ohio, Attorney 
General DeWine Announces Major National Settlement with Credit 
Reporting Agencies, (May 20, 2015), https://www.ohioattorneygeneral.gov/Media/News-Releases/May-2015/Attorney-General-DeWine-Announces-Major-National-S.
    \224\ Fredric Blavin et al., Urban Wire, Urban Inst., Medical 
Debt Was Erased from Credit Records for Most Consumers, Potentially 
Improving Many Americans' Lives (Nov. 2, 2023), https://www.urban.org/urban-wire/medical-debt-was-erased-credit-records-most-consumers-potentially-improving-many.
---------------------------------------------------------------------------

    A researcher commenter cited research showing that these voluntary 
NCRA reporting changes disproportionately benefited consumers in census 
tracts that had higher average incomes or had larger white shares of 
the population. The commenter stated that disparities in credit access 
persist for consumers who live in lower-income or non-white 
communities. The CFPB agrees and its own research has reached similar 
findings.\225\
---------------------------------------------------------------------------

    \225\ Ryan Sandler & Zachary Blizard, Consumer Fin. Prot. 
Bureau, Recent Changes in Medical Collections on Consumer Credit 
Records Data Point, at 4 (Mar. 2024), https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf.
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    It is the CFPB's understanding that health care providers and debt 
collectors they contract with currently use three types of collection 
practices to collect medical debt, often in combination: contacting 
consumers by mail, phone, or other means; debt collection litigation; 
and furnishing medical collections information to consumer reporting 
agencies. The impact analysis considers how health care providers and 
debt collectors may respond to the rule by increasing their use of the 
first two collection practices if furnishing becomes a less effective 
means of inducing payment.
    The evolving landscape of State laws and consumer reporting 
practices may change medical collections reporting in the absence of 
the rule, affecting the baseline. The voluntary changes recently 
implemented by the NCRAs could be reversed at any time, and such 
reversals would tend to amplify the impacts of the rule.

[[Page 3319]]

    In the current state of the world, creditors are generally allowed 
to consider medical debt information in underwriting decisions, 
including medical collections information found on consumer reports. 
Some recently passed State laws establish when medical collections 
information originating from these States can be furnished to consumer 
reporting agencies or included on consumer reports.\226\ As a result of 
their voluntary reporting changes, the only medical collections that 
the NCRAs currently include in their consumer reports are those that: 
(1) are more than one year past due, (2) are for collection amounts 
greater than $500, and (3) are unpaid, in addition to those that (4) 
would not violate State laws that restrict or prohibit consumer 
reporting of medical collections. By August 2023, after the voluntary 
NCRA changes were fully implemented but before most of the State-level 
changes took effect, an estimated 5 percent of consumers had medical 
collections on their consumer reports.\227\ The rule removes these 
remaining medical collections from, and generally prohibits future 
medical collections from being included in, consumer reports provided 
to creditors.
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    \226\ See, e.g., Colo. Rev. Stat. section 5-18-109; N.Y. Pub. 
Health Law art. 49-A; 2024 Conn. Act 24-6; 2024 Va. Acts ch. 751.
    \227\ Ryan Sandler & Zachary Blizard, Consumer Fin. Prot. 
Bureau, Recent Changes in Medical Collections on Consumer Credit 
Records Data Point, at 3 (Mar. 2024), https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf.
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C. Data and Evidence

1. Primary Sources
    The CFPB's analysis of costs, benefits, and impact is informed by 
data from a range of sources. As discussed in part III.A, when the 
interventions discussed in this rule were part of the broader Consumer 
Reporting Rulemaking, the CFPB convened a Small Business Review 
Advisory Panel in October 2023 to gather input from small businesses. 
The discussions at the panel meetings and the comment letters submitted 
by small entity representatives during this process were presented in a 
Panel Report completed in December 2023. The CFPB also invited and 
received feedback on the proposals under consideration from other 
stakeholders, including stakeholders who were not small entity 
representatives. The impact analysis is further informed by academic 
research, reports on research by industry and trade groups, 
practitioner studies, and comment letters received by the CFPB. Where 
used, these specific sources are cited in this analysis.
    The CFPB also used its own Consumer Credit Information Panel (CCIP) 
to estimate the potential impacts of the proposed rule on consumers and 
creditors. The CCIP is a 1-in-50, nationally representative sample of 
deidentified consumer reports from one of the three NCRAs. The data 
allowed the CFPB to conduct analyses of the effect of medical 
collections information on the success of a consumer's application for 
credit (determined by whether a creditor's inquiry following such an 
application led to the origination of a credit account or, in other 
words, inquiry success) and future credit account delinquencies. Such 
analyses are useful for quantifying the rule's potential impacts to 
consumers and creditors. Because the CCIP data are drawn from consumer 
reports from a single NCRA and because medical collections are unevenly 
reported, the data might not contain all medical collections that exist 
in the United States.
    To quantify health care providers' exposure to unpaid medical 
bills, the CFPB used data from the Hospital Cost Reporting Information 
System (HCRIS), which is administered by the Centers for Medicare and 
Medicaid Services. The HCRIS data contain annual cost reports filed by 
Medicare-certified hospitals in the United States. The data comprise 
information on hospitals, their revenues, operating costs, and bad debt 
expenses not reimbursable by Medicare. While almost all hospitals file 
these cost reports, the data do not include unpaid medical debts owed 
to health care providers that are not hospitals.\228\
---------------------------------------------------------------------------

    \228\ Nat'l Pub. Radio, Nursing homes are suing friends and 
family to collect on patients' bills (July 28, 2022), https://www.npr.org/sections/health-shots/2022/07/28/1113134049/nursing-homes-are-suing-friends-and-family-to-collect-on-patients-bills.
---------------------------------------------------------------------------

    Due to these data limitations, the analysis presented in this part 
generally provides a qualitative discussion of the rule's costs and 
benefits and includes quantitative estimates whenever possible.
    Multiple commenters, including at least one bank trade association, 
consumer reporting agency trade association, and consumer reporting 
agency, as well as multiple debt collectors and researchers, stated 
that the CFPB did not adequately gather data and estimate impacts in 
the proposed rule. The CFPB uses available data, economic reasoning, 
and evidence provided by commenters to justify its conclusions in the 
below impact analysis. The Supreme Court has acknowledged that 
executive branch decision-making relies on imperfect data, and ``[t]he 
APA [Administrative Procedure Act] imposes no general obligation on 
agencies to conduct or commission their own empirical or statistical 
studies.'' \229\ In this rule the CFPB has gone beyond the minimum 
requirements of the APA and section 1022(b)(2)(B) of the CFPA by 
conducting its own statistical study, documented in the Technical 
Appendix.
---------------------------------------------------------------------------

    \229\ FCC v. Prometheus Radio Project, 592 U.S. 414, 427 (2021).
---------------------------------------------------------------------------

2. ACA International Survey
    The CFPB requested data that can be used to quantify the analysis 
of impacts, or submission of studies that contain relevant estimates 
that can be used in the analysis of impacts. The CFPB received a 
research report commissioned by a debt collection industry trade 
association which critiqued several elements of the analysis in the 
proposal and introduced some new evidence. The CFPB discusses the 
findings of that report (referred to as the Report) below.\230\
---------------------------------------------------------------------------

    \230\ Andrew R. Nigrinis, Economic Analysis of the Consumer 
Financial Protection Bureau's Prohibition on Creditors and Consumer 
Reporting Agencies Concerning Medical Information (Regulation V) 
(July 2024), https://policymakers.acainternational.org/wp-content/uploads/2024/07/AndrewNigrinisEconomicAnalysis-CFPB-FCRA-NPRM-July2024.pdf. The Report was included as an exhibit to a comment by 
the debt collector trade association commenter, and also submitted 
by its author in his individual capacity.
---------------------------------------------------------------------------

    The Report documents the results of a survey of members of ACA 
International, a debt collector trade association, executed in two 
``waves'' which surveyed different samples of 19 debt collectors, for a 
total of 38 surveyed debt collectors across both waves. The first wave 
of the survey was fielded in the last two months of 2023 and the second 
wave of the survey was fielded in May 2024. Both waves asked about 
medical debt referrals and collections in the first and second quarters 
of 2022 and 2023, as well as in the fourth quarter of 2023.\231\ The 
surveys also requested the debt collectors' predicted changes in 
medical debt collection rates if they were no longer permitted to use 
consumer reporting as a debt collection practice. Broadly, the surveyed 
debt collectors reported lower referrals and collected amounts in 2023 
than in 2022 and reported lower expected medical debt collection rates 
if consumer reporting was not permitted. The CFPB does not find the 
results of this survey

[[Page 3320]]

to be reliable evidence of the likely effects of the rule.
---------------------------------------------------------------------------

    \231\ The Report does not describe how respondents to the first 
wave of the survey provided data for the fourth quarter of 2023 when 
they were surveyed before the end of that quarter.
---------------------------------------------------------------------------

    Beyond specific concerns about the results of the surveys in the 
Report, which the CFPB describes below, the CFPB notes that the surveys 
do not appear to have been representative of the debt collection 
industry. The Report does not provide information on how these debt 
collectors were selected for the surveys, and it is unlikely that these 
38 debt collectors are representative of the 2,100 members of ACA 
International, much less representative of debt collectors 
overall.\232\ The Report does not provide data on the states in which 
the 38 debt collectors are located in, but rather the states in which 
the debt collectors' referring ``client accounts'' (which the CFPB 
assumes to mean health care providers) are located. Across both 
surveys, nearly 47 percent of the client accounts held by surveyed debt 
collectors--almost half--were located in California. In contrast, data 
from the 2017 Economic Census indicate that only around 10 percent of 
collection agencies were located in California.\233\ The survey 
responses are not weighted to be more representative of debt collection 
nationwide. The overrepresentation of California medical debt may be 
especially likely to bias the inferences drawn from the surveys, as the 
CFPB understands that California's consumer protections that impact the 
debt collection industry are more robust than those in other 
states.\234\ Additionally, just under 12 percent of survey respondents' 
client accounts were from Southern states, but medical debt is heavily 
concentrated in Southern states. Ninety-nine of the 100 counties with 
the largest shares of adults with medical collections are located in 
the South, as described in research cited by the Report.\235\ The 
survey is unlikely to be representative of debt collectors in the South 
who may be more likely to have medical debt as a large share of their 
portfolio. As such, although the CFPB discusses the specific arguments 
of the Report that are based on its survey of ACA International 
members, on balance the CFPB determines that this survey does not 
provide reliable evidence that can be relied upon to evaluate the 
benefits, costs and impacts of this final rule.
---------------------------------------------------------------------------

    \232\ ACA Int'l, ACA International Advocacy Fact Sheet, at 5 
(2022), https://www.acainternational.org/wp-content/uploads/2022/WI/Advocacy-Booklet-May2022-FINAL.pdf.
    \233\ See U.S. Census Bureau, 2017 Economic Census Data, https://www.census.gov/programs-surveys/economic-census/year/2017/economic-census-2017/data.html (last revised Feb. 27, 2024).
    \234\ California imposed new conditions on the sale of hospital 
medical debt to debt buyers in 2022, including that the hospital has 
either found the patient ineligible for financial assistance (income 
above 400 percent of the Federal poverty level and annual out-of-
pocket costs at the hospital lower than the lesser of 10 percent of 
the patient's current family income or the patient's family income 
in the prior 12 months) or found the patient has not responded to 
attempts to offer financial assistance for 180 days. A previous law 
prohibits collection actions before 150 days after initial billing 
if the patient lacks coverage or may have high medical costs. See 
2021 Cal. AB 1020. In addition, after this survey was performed, 
California's governor signed a law on September 24, 2024 to pass its 
own prohibition on credit reporting agencies including medical debts 
in consumer credit reports. SB 1061.
    \235\ Frederic Blavin et al., Urban Inst., Brief: Which County 
Characteristics Predict Medical Debt? (June 15, 2022), https://www.urban.org/research/publication/which-county-characteristics-predict-medical-debt.
---------------------------------------------------------------------------

    The Report includes aggregated dollar amounts of medical debt 
referred to debt collectors from health care providers (``referrals'') 
and total collections recovered, as reported by the 38 survey 
respondents. The Report indicates that, for survey respondents, there 
were more referrals to debt collectors by health care providers in 2023 
than in 2022, though the Report does not discuss whether this 
difference is statistically significant. The Report interprets this 
result as showing that consumers have lowered willingness to pay their 
medical bills after the voluntary NCRA reporting changes were completed 
in April 2023.
    Setting aside the issue of representativeness discussed above, the 
CFPB finds that the increase in medical collection referrals among 
survey respondents documented in the Report is not likely due to the 
voluntary changes by the NCRAs in 2022 and 2023. First, the Report does 
not account for growth in health care costs. National health 
expenditure spending grew by 4.1 percent in 2022 and was expected to 
grow by 7.5 percent in 2023.\236\ This would explain much of the growth 
in referral amounts between 2022 and 2023 by itself. The data in the 
Report also show indications of seasonality, which the Report makes no 
effort to adjust for. That is, referrals may be routinely higher in the 
winter compared to the spring, such that the Report's comparison of the 
referrals in the second quarter of 2022 to the first quarter of 2023 
primarily captures this seasonal change. Indeed, the Report shows that 
referral amounts are much closer to the 2022 amounts by the fourth 
quarter of 2023. Additionally, the Report finds that referrals fell 
between June 2022 and December 2023 in the South, where medical debt is 
more prevalent than other regions. If there were declines in referral 
amounts because of the voluntary NCRA reporting changes, they would 
have been more likely to occur in the fourth quarter of 2023 than in 
the second quarter, because the removal of debts under $500 from 
consumer reports did not occur until April 2023, but this is not what 
the data show. Given these concerns, the CFPB determines that it cannot 
rely upon the Report as evidence that health care provider referrals 
were impacted by the voluntary NCRA reporting changes, and thus would 
be likely to be impacted by this final rule.
---------------------------------------------------------------------------

    \236\ Ctrs. for Medicare & Medicaid Servs., NHE Fact Sheet, 
https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/nhe-fact-sheet (last modified Sep. 
10, 2024).
---------------------------------------------------------------------------

    The Report constructed collection rates by dividing the aggregate 
collection data by the aggregate referral data for each debt collector, 
in each quarter. The Report provided median collection rates in each 
quarter by geographic region and for the United States overall. 
Collection rates are similar across the first two quarters of 2022 and 
the first quarter of 2023, but there appears to be a sizable reduction 
in the median collection rate in the second quarter of 2023, falling to 
11.7 percent from 14.5 percent in the second quarter of 2022. 
Collection rates fell to 9.6 percent by the fourth quarter of 
2023.\237\ The Report interprets this as showing that consumers were 
receiving a message that medical debts do not need to be paid during 
this time period.
---------------------------------------------------------------------------

    \237\ The text of the Report compares the first quarter of 2022 
to the fourth quarter of 2023. As discussed above in this final 
rule, the CFPB would expect and the Report shows significant 
seasonality in debt collection, such that comparing the first 
quarter of one year to the fourth quarter of another year is likely 
to pick up this seasonal variation, rather than any impacts of the 
voluntary changes by the NCRAs. As such, the CFPB focuses on the 
comparison between the second quarter of 2022 and the second quarter 
of 2023.
---------------------------------------------------------------------------

    Despite the surveys' methodological flaws outlined above, taking 
the data of the Report at face value, the CFPB does not agree with the 
interpretation that consumers were more likely to believe that medical 
debts do not need to be paid in the second quarter of 2023, in 
comparison to the second quarter of 2022. Instead, the CFPB expects 
that this change in the collection rate is, in large part, the result 
of the removal of medical debts under $500. After medical debts under 
$500 could no longer be reported to the NCRAs as of April 2023, debt 
collectors may have prioritized alternative mechanisms for collecting 
older debts under $500 which, absent the voluntary change, they may 
have collected through collection tools including consumer reporting. 
This change in debt collection practices may have temporarily reduced 
collection rates until debt collectors

[[Page 3321]]

implemented equally effective practices for debts under $500, or until 
debt collectors changed the types of debt for which they accept 
referrals, as debt collectors could choose not to service debt that 
they expect would only be collectable with the use of consumer 
reporting. The CFPB expects there may be a similar temporary reduction 
in collection rates under the rule.
    The Report also summarizes debt collectors' subjective expectations 
as to how a cessation of consumer reporting of medical debts would 
impact collection rates, using survey responses from the debt collector 
respondents.\238\ The CFPB does not find these results to be a reliable 
way of estimating the likely impacts of this final rule. The CFPB does 
not believe that the respondents to the survey of ACA members possessed 
any means to provide a precise numerical forecast of the effect of the 
proposal on collection rates. Instead, the survey responses convey the 
subjective, qualitative opinions of the surveyed debt collectors, who 
have a financial interest in overestimating the costs of the proposal 
(to the extent that higher estimated costs reduce the likelihood that 
the proposal is finalized). While qualitative views can be valid, it is 
not appropriate to treat these as quantitative measures that can be 
aggregated and used to calculate median and mean values, as the Report 
does. The Report indicates that the median debt collector expected the 
collection rate \239\ to decrease by 2.0 percent if debt collectors 
ceased consumer reporting.\240\ In the South, where the highest 
concentrations of medical collections occur, the median expected change 
was 1.0 percent.
---------------------------------------------------------------------------

    \238\ The CFPB notes that the rule would not prevent debt 
collectors from furnishing medical debt information which could be 
included on consumer reports sent to landlords, employers, other 
debt collectors, or consumers, so these estimates may overestimate 
the impact of the rule.
    \239\ Though the Report describes this as a ``liquidation 
rate'', it appears to be equivalently measured as the dollar amount 
collected divided by the dollar amount referred, which the Report 
also describes as a ``collection rate.'' The CFPB uses ``collection 
rate'' throughout its discussion.
    \240\ The CFPB focuses on responses from the later wave of the 
survey documented in the Report, as this took place after the 
voluntary changes by the NCRAs and some recent changes in State 
laws, and thus is closer to the baseline.
---------------------------------------------------------------------------

    The Report argues that, if anything, the subjective estimates of 
the ACA International survey respondents understate the likely impact 
of the proposed rule. The Report states that respondents' expected 
reductions in collection rates were comparable to estimates from the 
Nevada Hospital Association (NHA) of the likely impact of Nevada State 
legislation that would prevent medical debts from being included on 
consumer reports for at least 60 days. The Report states that because 
the proposed rule would instead prevent medical debts from ever being 
included on consumer reports, respondents' estimates in response to the 
survey should have been higher than the NHA estimates. However, the 
Report misstated the requirements of the Nevada legislation. This State 
law requires debt collectors to provide written notification to a 
consumer 60 days before they take any action, not just consumer 
reporting, to collect a medical debt.\241\ This State law is not 
equivalent to the final rule and the CFPB does not interpret the NHA 
estimate as implying that ACA International survey respondents 
underestimated the impacts of the rule.
---------------------------------------------------------------------------

    \241\ Br. for the Nev. Hosp. Ass'n as Amicus Curiae, Aargon 
Agency, Inc. v. O'Laughlin, 70 F.4th 1224 (9th Cir. 2023), https://www.acainternational.org/wp-content/uploads/2022/04/Dkt-13-Motion-to-file-Amicus-Curiae-Brief-Amicus-Curiae-Brief.pdf (filed Apr. 12, 
2022).
---------------------------------------------------------------------------

    The Report uses its survey of ACA International members and 
publicly available data sources to estimate the impact of the rule on 
the aggregate amount of recoverable medical debt. The Report uses 
estimates for the existing stock of medical debt that would be impacted 
by the rule, as well as the flow of new medical debt. The CFPB does not 
find these estimates to be reasonable, as described below.
    The Report assumes that the aggregate amount of medical debt that 
would be impacted by the rule is about $220 billion, based on an 
estimate from the Kaiser Family Foundation (KFF) of the total amount of 
medical debt outstanding. The CFPB estimates that approximately $50 
billion in medical collections is currently included on consumer 
reports.\242\ The CFPB expects that the stock of medical debt that is 
not included on consumer reports comprises debt that is at least seven 
years old and therefore cannot be included on a consumer report under 
the FCRA, debt that is not subject to consumer reporting because of 
NCRA policies or the preferences of the debt holder, and debt that may 
be eligible for consumer reporting but is not reported because the debt 
holder expects that reporting would not sufficiently increase the 
likelihood of payment. Recovery rates of debts that fall into these 
three categories will not be directly affected by the rule, so the 
CFPB's $50 billion estimate is a better approximation of the relevant 
inventory of medical debt.
---------------------------------------------------------------------------

    \242\ See Ryan Sandler & Zachary Blizard, Consumer Fin. Prot. 
Bureau, Recent Changes in Medical Collections on Consumer Credit 
Records Data Point, at 4 (Mar. 2024), https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf.
---------------------------------------------------------------------------

    To estimate the annual flow of medical debt that newly appears on 
consumer reports, the Report cited Kluender et al. (2021), which found 
that 13 percent of consumers incurred medical debt, with a mean value 
of $2,396, in 2020.\243\ The Report used an estimate of 258.3 million 
adults in the United States and concluded that new medical debt accrues 
at a rate of $80.46 billion per year. Though the Report used the KFF 
total inventory of medical debt to estimate the stock of medical debt, 
it used medical collections information provided on consumer reports to 
estimate the flow of medical debt. The CFPB agrees with the Report's 
decision to use medical collections included on consumer reports, as 
this reflects the portion of medical debt that will be impacted by the 
rule. However, the data from 2020 are outdated and do not reflect the 
amount of medical debt that is included on consumer reports at this 
rule's baseline. The CFPB assumes that the ratio between the stock and 
flow of consumers with medical collections included on consumer reports 
would have remained unchanged between 2020 and 2023, even though the 
stock and flow would have both responded to the voluntary NCRA 
reporting changes. Using evidence from Kluender et al. (2021), the CFPB 
finds that this flow-to-stock ratio was 0.73 in 2020.\244\ The CFPB 
found that in June 2023, 15.6 million consumers had medical collections 
on their consumer reports.\245\ Applying the ratio from Kluender et al. 
(2021) allows the CFPB to estimate that 11.4 million consumers incur 
medical collections on their consumer reports each year. The CFPB 
assumes that this flow of medical collections would be of similar 
dollar amounts to the stock of medical collections because Kluender et 
al. (2021) found that the difference between flow and stock medical 
collections was just $29.\246\ The CFPB found that the average amount 
of a medical collection

[[Page 3322]]

on a consumer report in June 2023 was $3,148.70.\247\ Therefore, the 
CFPB estimates that new medical debt in collections that appears on 
consumer reports accrues at an annual rate of approximately $36 
billion.\248\
---------------------------------------------------------------------------

    \243\ Raymond Kluender et al., Medical Debt in the US, 2009-
2020, JAMA (July 20, 2021), https://jamanetwork.com/journals/jama/fullarticle/2782187.
    \244\ See id. at Tbl.
    \245\ Ryan Sandler & Zachary Blizard, Consumer Fin. Prot. 
Bureau, Recent Changes in Medical Collections on Consumer Credit 
Records Data Point (Mar. 2024), https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf.
    \246\ See Raymond Kluender et al., Medical Debt in the US, 2009-
2020, at Tbl., JAMA (July 20, 2021), https://jamanetwork.com/journals/jama/fullarticle/2782187.
    \247\ Ryan Sandler & Zachary Blizard, Consumer Fin. Prot. 
Bureau, Recent Changes in Medical Collections on Consumer Credit 
Records Data Point (Mar. 2024), https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf.
    \248\ This estimate is not equivalent to the annual flow of 
medical debt because most medical debt is not included on consumer 
reports and, since June 2022, medical debt must be at least one year 
past due before it can be added to a consumer report. Instead, this 
estimate provides the annual flow of medical debt that newly appears 
on a consumer report.
---------------------------------------------------------------------------

    The Report next applies the mean expected change in the collection 
rate for the debt collectors included in its surveys, estimating that 
there would be an 8 percent reduction in expected collection rates. The 
CFPB understands that the median better approximates the expected 
impact of the rule because it reduces the influence of outlier survey 
responses, and further expects that the results from the second wave of 
the survey better reflect conditions under the baseline because debt 
collectors had ample time to understand and respond to the NCRA 
reporting changes. Therefore, though the CFPB disagrees that these 
survey responses are informative as described above, the CFPB uses a 2 
percent reduction in collection rates in its estimation of the change 
in recoverable medical debt under the rule below.
    The Report applies an 8 percent reduction in expected collection 
rates to the entire stock and flow of estimated medical debt, which 
assumes that medical debt has a 100 percent expected collection rate at 
baseline. This is contrary to evidence in the Report, which showed that 
the median collection rate was just 9.6 percent amongst survey 
respondents in the most recent quarter for which they were surveyed. 
Therefore, the Report's 8 percent reduction in the collection rate 
should have been applied to the Report's estimated collection rate, 
which would find that collection rates would fall from 9.6 percent to 
8.8 percent under the rule.\249\
---------------------------------------------------------------------------

    \249\ Though the Report exclusively describes survey 
respondents' expectations for the change in collection rates under 
the proposal in percent terms, it is possible that survey 
respondents interpreted this request in percentage point terms 
instead. In this case, the collection rate would be expected to fall 
from 9.6 percent to 1.6 percent.
---------------------------------------------------------------------------

    The Report uses a present value of growing perpetuity formula to 
estimate the indefinite loss of recoverable medical debt under the 
rule. The Report assumes a 5.11 percent discount rate and a 4.1 percent 
annual growth rate to estimate that there would be a $654.87 billion 
loss in recoverable medical debt over an infinite time horizon.
    The CFPB produces its own estimate for the aggregate loss in 
recoverable medical debt under the rule based on the evidence provided 
in the Report. The CFPB uses a 2 percent change in the collection rate, 
such that collection rates would fall from 9.6 percent to 9.4 percent 
under the rule, as well as its estimates for the stock and flow of 
medical debt, $50 billion and $36 billion, respectively. The CFPB uses 
the Report's 4.1 percent annual growth rate but assumes a 2 percent 
discount rate, as recommended by the Office of Management and Budget 
(OMB) in their guidance to regulatory agencies for cost and benefit 
analyses.\250\ Additionally, the CFPB only considers a 10-year time 
horizon, as OMB has no guidance for the discount rate in an infinite 
horizon.\251\ Applying a standard discounted cash flow formula, the 
CFPB estimates a reduction in recoverable medical debt of approximately 
$900 million under the rule.\252\
---------------------------------------------------------------------------

    \250\ Off. of Mgmt. & Budget, OMB Circular No. A-4 (Nov. 9, 
2023), https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf.
    \251\ The OMB's long-term estimates only go so far as 150 years, 
with increasingly smaller discount rates. Off. of Mgmt. & Budget, 
OMB Circular No. A-4 Appendix (Nov. 9, 2023), https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4Appendix.pdf.
    \252\ If the survey respondents' expected change in collection 
rates under the proposal is provided as a percentage point change, 
instead of a percent change, then the collection rate in this 
estimate would fall from 9.6 percent to 7.6 percent under the 
proposal. The estimate for the 10-year reduction in recoverable 
medical debt in this scenario is approximately $8 billion.
---------------------------------------------------------------------------

    The Report interprets its estimate of the reduction in collection 
rates under the proposed rule as the cost for health care providers, 
rather than for medical debt holders overall. Many health care 
providers sell medical debt to debt buyers, who then retain the legal 
right to collect on the debt. The CFPB is not aware of the portion of 
medical debt that is held by health care providers but understands that 
the aggregate estimates of the reduction in medical debt recoverable 
under the rule would only partially impose direct costs on health care 
providers.
3. Brevoort and Kambara (2014)
    In the proposed rule, the CFPB cited previous CFPB research by 
Brevoort and Kambara (2014), which showed that medical collections 
tradelines are less predictive of serious delinquency than nonmedical 
collections.\253\ This research showed that, holding credit scores 
constant, a consumer who has more medical collections than nonmedical 
collections may be less likely to become seriously delinquent within 
two years than a consumer with more nonmedical than medical 
collections.
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    \253\ 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 Kenneth P. Brevoort & 
Michelle Kambara, Are All Collections Equal? The Case of Medical 
Debt, 11:4 J. Credit Risk, at 73-97 (Dec. 2015).
---------------------------------------------------------------------------

    Multiple commenters, including a bank trade association, a consumer 
reporting agency trade association, a debt collector trade association, 
a health care provider, a NCRA, a researcher, and an individual, 
disputed the relevance of this research to the proposed rule. A NCRA 
commenter analyzed its own data in response to Brevoort and Kambara 
(2014) and found that consumers with medical collections have 
delinquency rates that are at least 8 percent higher than consumers 
with nonmedical collections. The commenter did not state whether it 
held other consumer characteristics constant while making this 
comparison. The commenter further found that adding medical collections 
to a model with nonmedical collections increased predictive fit by 34 
percent. However, the commenter did not provide any details about the 
other variables included in this model. The CFPB expects that a model 
with few variables would experience a large increase in predictive fit 
from the addition of most consumer report characteristics: if the model 
does not perform well at baseline, there is ample margin for predictive 
fit to improve. This does not imply that medical collections would 
increase predictive fit by 34 percent, or at all, in models used for 
credit scoring or credit eligibility determinations.
    Broadly, the CFPB agrees that Brevoort and Kambara (2014) would be 
more relevant to the rule if it were updated with more recent data or 
included some additional analyses as suggested by commenters. Since the 
impact of the rule derives from the prohibition on reporting of medical 
collections, the CFPB conducted new research, described in the 
Technical Appendix to the NPRM and included below in part XII, that 
isolated the effect of reporting from other effects that the presence 
of medical collections may have on consumers' financial outcomes. Based 
on this research, the CFPB expects that medical collections can be

[[Page 3323]]

removed from underwriting models without significantly reducing their 
ability to predict serious delinquency if underwriting models continue 
to include other variables that are sufficiently predictive of 
delinquency risk. The Technical Appendix shows that medical collections 
reporting likely reduces access to credit and creditor revenue.

D. Coverage of the Rule

    Part VIII.B.4 provides a discussion of the estimated number and 
types of entities potentially affected by the rule.

E. Potential Benefits and Costs to Consumers and Covered Persons

    The CFPB assessed the potential benefits and costs of the rule 
using the data and evidence described above, as well as comments 
submitted in response to the proposal. Based on the information 
available, the CFPB concludes that the rule is likely to confer a 
number of benefits, and limited costs, on consumers and covered 
persons. In brief, the CFPB expects that consumers will experience 
increased access to credit and a reduction in the use of consumer 
reporting to induce payment of medical collections, including those 
that may be inaccurate. The CFPB expects that the marginal loans 
provided under the rule would be similarly profitable to those that 
creditors provide at baseline, leading to increased revenue for 
creditors. The CFPB does not expect that consumers would be 
significantly less likely to pay their bills under the rule, and as a 
result, expects limited impacts on the revenues of health care 
providers and debt collectors. All potential benefits and costs are 
described in more detail below.
1. Consumer Willingness To Pay Medical Bills
    Consumers facing debt collection attempts may pay or settle debts 
to remove the tradelines from their consumer reports, as medical 
collections are removed from the NCRAs' consumer reports when 
paid.\254\ Previous research from the CFPB found evidence indicating 
that some consumers may act to remove medical collections from their 
consumer reports when they plan to apply for a mortgage.\255\ This 
suggests that furnishing can be an effective tool for inducing payment 
of debts. To the extent this is true, the rule could reduce consumers' 
willingness to pay those medical debts that would or might be sent to 
collections and ultimately be furnished at baseline.
---------------------------------------------------------------------------

    \254\ Bus. Wire, Equifax, Experian, and TransUnion Support U.S. 
Consumers with Changes to Medical Collection Debt Reporting (Mar. 
18, 2022).
    \255\ Alyssa Brown & Eric Wilson, Consumer Fin. Prot. Bureau, 
Consumer Credit and the Removal of Medical Collections from Credit 
Reports (Apr. 2023), https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-removal-medical-collections-from-credit-reports_2023-04.pdf.
---------------------------------------------------------------------------

    Several health care providers, debt collectors, consumers, health 
care trade associations, the SBA Office of Advocacy, and at least one 
researcher and one credit union, stated that, with fewer repercussions 
for medical debt, consumers would not pay their medical debts under the 
proposed rule. Several debt collectors, at least one healthcare 
provider and one debt collection trade association stated that, because 
consumer willingness to pay medical bills would be lower under the 
proposed rule, there would be decreased recoveries and revenue for debt 
collectors and health care providers as a result. Multiple debt 
collector commenters provided specific estimates for expected 
reductions in recovery rates and revenues. At least one debt collector 
commenter and at least one health care provider stated that they expect 
a revenue decline close to 9 percent because of decreased recovery. A 
debt collector commenter in the SBREFA process stated that there would 
be a significant decrease in the number of individuals with overdue 
medical debt who take proactive steps to resolve their accounts as a 
result of the proposed rule. In contrast, a consumer advocate commenter 
stated that consumers would be more likely to pay, even partially, if 
the proposed rule reduced coercive collection tactics. Another consumer 
advocate commenter stated that consumers would still pay their medical 
debts and there would be limited revenue impacts to health care 
providers, because health care providers and debt collectors have other 
strategies for inducing payment besides furnishing medical debt 
information to consumer reporting agencies.
    The CFPB acknowledges that if consumers are no longer concerned 
that medical collections will appear on their consumer report when they 
are seeking credit, they may have less incentive to pay their medical 
collections. However, the CFPB expects that only a few consumers would 
pay their medical collections in response to consumer reporting or the 
threat of consumer reporting under the baseline, but would not pay 
their medical collections in response to alternative collection 
mechanisms under the rule. This is because at the baseline most 
consumers with medical debt face little consequence from furnishing of 
a medical collections tradeline, for several reasons. For one, 
consumers would need to have medical collections over $500, as medical 
collections tradelines below $500 are suppressed at baseline. Also, 
consumers who have medical collections generally have fairly low credit 
scores, which already constrain their access to credit.\256\ As such, 
further reducing scores through the furnishing of medical collections 
may not have a meaningful impact on access to credit. The CFPB cannot 
precisely estimate the number of consumers who would be disincentivized 
to pay medical collections due to the rule, but at baseline fewer than 
5 percent of consumers have medical collections, and as a result the 
share of consumers who would be disincentivized to pay is quite small, 
since it must necessarily be less than 5 percent.\257\
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    \256\ The average credit score for consumers with medical 
collections in June 2023 was 582. See Ryan Sandler & Zachary 
Blizard, Consumer Fin. Prot. Bureau, Recent Changes in Medical 
Collections on Consumer Credit Records Data Point (Mar. 2024), 
https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf.
    \257\ Ryan Sandler & Zachary Blizard, Consumer Fin. Prot. 
Bureau, Recent Changes in Medical Collections on Consumer Credit 
Records Data Point, at 3-4 (Mar. 2024), https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf.
---------------------------------------------------------------------------

    Multiple debt collectors, at least one health care provider, a 
credit union trade association, and an individual consumer commented 
that the proposed rule would encourage consumers to ignore eligibility 
for enrollment in support programs that help patients pay medical 
bills, including patient financing programs and other forms of 
financial assistance, because there would no longer be consequences for 
unpaid medical bills. The CFPB does not expect that consumers will 
respond to the rule by ignoring financial assistance. Consumers will 
remain liable for their medical debts, and it is implausible that 
removing the prospect of future consumer reporting will lead to many 
consumers forgoing support that would help them pay these debts.
    The rule is unlikely to substantially impact aggregate revenue for 
health care providers, as most health care revenue does not consist of 
consumers paying their bills after receiving treatment. The vast 
majority of health care providers' revenues comes from insurance (e.g., 
Medicare, Medicaid, private insurance) and other third-party payers. 
Indeed, out-of-pocket spending by consumers at baseline only accounts 
for about 12 percent of personal health care

[[Page 3324]]

expenditures.\258\ This means that there is less margin for consumers 
that do not pay their bills to have a significant impact on personal 
health care expenditures.
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    \258\ The CFPB calculated this estimate by dividing the 
aggregate amount of out-of-pocket spending in 2020 by the aggregate 
amount of personal health care expenditures in 2020. Personal health 
care expenditures represent health expenses directly related to 
patient care, such as hospital care, physicians' and dentists' 
services, prescription drugs, eyeglasses, and nursing home care, and 
accounts for the largest shares of total national health 
expenditures. See Ctrs. for Medicare & Medicaid Servs., Health 
Expenditures by state of provider: summary tables (ZIP), https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/nhe-fact-sheet (last modified Sept. 10, 
2024); Ctrs. for Medicare & Medicaid Servs., National Health 
Expenditures 2022 Highlights (Dec. 13, 2023), https://www.cms.gov/newsroom/fact-sheets/national-health-expenditures-2022-highlights; 
Nat'l Ctr. for Health Stat., U.S. Ctrs. for Disease Control & 
Prevention, Health Care Expenditures, https://www.cdc.gov/nchs/hus/topics/health-care-expenditures.htm (last reviewed Aug. 2024).
---------------------------------------------------------------------------

    Indeed, as at least one debt collector commenter stated, recovery 
rates for medical collections are already low on accounts with 
outstanding balances. In the proposal, the CFPB estimated that 
approximately 2.5 percent of medical collection accounts are recovered 
by debt collectors who furnish medical collections information to the 
NCRAs, based on the share of medical collections tradelines marked as 
paid on consumer reports before these tradelines were removed by the 
NCRAs in 2022.\259\ The CFPB requested comment or data submissions that 
could better approximate the share of medical debts placed with debt 
collectors that are ultimately recovered. Two commenters stated that 
historical recovery rates on bad medical debts were between 18.2 and 
24.8 percent but did not cite a source for this statistic.\260\ 
Multiple health care provider commenters stated that they expected bad 
debt liquidation to fall by 10.9 percent under the proposed rule. The 
commenters stated that this estimation was based on updated research 
from 2024 but did not provide a citation or supporting evidence.
---------------------------------------------------------------------------

    \259\ Approximately 2.5 percent of medical collections were 
marked as paid in the five years before paid medical collections 
were removed from consumer reports in June 2022. 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/.
    \260\ This range appears to come from a model form letter 
provided to debt collectors and healthcare providers by a consumer 
reporting industry trade group, but that form letter also does not 
cite a source for the statistic. See Meduit, CFPB Proposed 
Regulation Comment Samples (Aug. 2024), https://www.cdiaonline.org/wp-content/uploads/2024/08/Meduit.pdf. However, this is consistent 
with other industry sources on bad debt recovery rates for medical 
debt. See, e.g., MD Clarity, RCM Metrics Bad Debt Recovery Rate, 
https://www.mdclarity.com/rcm-metrics/bad-debt-recovery-rate (last 
visited May 22, 2024). According to a Healthcare Financial 
Management Association (HFMA) report, the industry expectation is 
health care providers will recover only 30 percent of amounts billed 
after discharge. Healthcare Fin. Mgmt. Ass'n, Address Patient 
Financial Risk in Pre-Service to Boost Revenue and Earn Loyalty 
(July 12, 2018), https://www.hfma.org/revenue-cycle/financial-counseling/61208/.
---------------------------------------------------------------------------

    The CFPB notes that the relevant quantity for this analysis is not 
the recovery rate on medical debts overall, which includes debts that 
are paid after patient outreach by the medical provider and other 
collection methods that will still be available under the rule. 
Instead, the relevant quantity is the recovery rate for medical debts 
that are placed with a debt collector and furnished to a consumer 
reporting agency. While the CFPB does not have a precise estimate of 
this quantity, clearly this will be less than the recovery rate for bad 
debts overall, as some debts are furnished only after other collection 
methods have failed. However, the CFPB acknowledges that the 2.5 
percent figure from the cited 2022 research report seems low. From its 
market monitoring activities, the CFPB is aware that debt collectors 
have often engaged in a ``pay for delete'' practice, under which they 
offer to consumers to remove a debt collections tradeline in exchange 
for making payment. To the extent this occurred prior to the 
implementation of the voluntary NCRA removal of paid medical 
collections from consumer reports in 2022, there was a possibility that 
medical collections tradelines that were in fact paid would never be 
marked paid on consumers' credit reports, leading to an undercount of 
medical collections tradelines that were ever paid. Using evidence 
provided in comments, the CFPB believes that 25 percent is a 
conservative estimate of the baseline recovery rate for medical debts 
overall, while the baseline recovery rate for medical debts that are 
furnished to a consumer reporting agency is less than 25 percent.
    Because recovery rates are low at baseline, even if all consumers 
with medical debt would not pay their medical debt in collections under 
the rule, health care providers' overall costs would not be greatly 
increased. The CFPB's analysis of hospital-level cost reports from the 
Healthcare Provider Cost Reporting Information System (HCRIS) provided 
by the Centers for Medicare and Medicaid Services (CMS) indicates that 
72 percent of hospitals had non-Medicare bad debt expenses in 
2021.\261\ The CFPB's analysis showed that these bad debt expenses on 
average represent about 6 percent of total costs in 2021 for hospitals 
that had non-Medicare bad debt. Assuming that health care providers 
achieve a 25 percent recovery rate and bad debt expenses account for 6 
percent of total costs at baseline, the CFPB estimates that bad debt 
expenses would rise to at most 8 percent of total costs on average. 
However, this is almost certainly an overestimate for the increase in 
bad debt costs to health care providers. Bad debt recovery rates almost 
certainly will not decrease to zero, since health care providers will 
continue to use other collection practices, such as patient outreach, 
phone calls and other communications by debt collectors, and debt 
collection litigation.
---------------------------------------------------------------------------

    \261\ 2021 is the latest year for which the cost report data are 
available. Hospitals classify medical bills as bad debt expenses 
when they determine that consumers are unlikely to repay. Non-
Medicare bad debt consists of past-due medical bills from patients 
who are not Medicare beneficiaries. See Am. Hosp. Ass'n, 
Uncompensated Hospital Care Cost Fact Sheet (Feb. 2022), https://www.aha.org/fact-sheets/2020-01-06-fact-sheet-uncompensated-hospital-care-cost and Ctrs. for Medicare & Medicaid Servs., 
Hospital Provider Cost Report Data Dictionary (Dec. 13, 2023), 
https://data.cms.gov/resources/hospital-provider-cost-report-data-dictionary.
---------------------------------------------------------------------------

    A debt collector trade association submitted the results from a 
poll of 165 health care providers who attended a webinar. The results 
showed that 8 percent of the polled health care providers estimated a 
less than 6 percent reduction in their revenue as a result of the 
proposed rule, 23 percent estimated a 6 to 10 percent reduction, 36 
percent of respondents expected a 10 to 15 percent decrease in revenue, 
17 percent of respondents expected a 15 to 20 percent decrease, and 16 
percent of the respondents expected a loss in revenue greater than 20 
percent.
    One health care provider stated that, if patients do not pay, it 
would experience an annual impact of $10 million on its business and 
predicted that it would close within 6 months as its margins are 
extremely tight. At least one health care provider stated that 
reimbursement is already low because reimbursements from Medicare and 
commercial payers that follow the Medicare fee schedule have dropped 44 
percent over the past 10 years. One debt collector trade association 
commenter stated that the CFPB has not studied what the impact of the 
rule will be on Medicare co-pays and deductibles if consumers stop 
paying their medical bills.
    The CFPB notes that the above comments regarding health care 
provider revenue and bill payment rates

[[Page 3325]]

implicitly assume that consumers will stop paying medical bills or will 
no longer be required to pay these bills. As discussed above, this is 
not a reasonable assumption. Consistent with existing practice, many 
consumers will be charged at point of sale or have to pay an 
outstanding bill to continue to be a patient at a non-emergency health 
care provider. Consumers will continue to be legally responsible for 
their medical bills, and all other methods of collection that are 
available at baseline will remain available under the rule. Indeed, 
most consumers with medical debt do not have medical collections 
tradelines on their consumer reports as discussed above, and, even 
though medical debts do not appear on their consumer reports, those 
consumers are still responsible for their debts and often pay those 
debts if they have the financial means to do so. And the CFPB has no 
evidence to conclude that patients are regularly engaging in strategic 
non-payment of medical bills--as opposed to non-payment due to 
financial distress or error. The CFPB calculated potential reductions 
in recoverable medical debt in this final rule based on the total 
amount of medical collections on consumer reports not because this is a 
likely or plausible outcome, but rather because this calculation places 
an upper bound on the potential costs to health care providers stemming 
from the rule.
    The CFPB acknowledges that there has been no study of the impact of 
the rule on Medicare co-pays and deductibles specifically. However, if 
anything, the CFPB expects that consumers with Medicare coverage will 
be less impacted by the rule because they are less likely to have 
medical debt than other populations.\262\
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    \262\ Roughly half as many adults aged 65 and older had medical 
or dental debt relative to adults aged 50 to 64, which may be due to 
the nearly universal Medicare coverage among adults aged 65 and 
older. Alex Cottrill et al., Kaiser Fam. Found., What are the 
consequences of health care debt among older adults? (July 26, 
2024), https://www.kff.org/medicare/issue-brief/what-are-the-consequences-of-health-care-debt-among-older-adults/.
---------------------------------------------------------------------------

    Multiple health care provider and debt collector commenters stated 
that hospitals have low operating margins, such that a small reduction 
in payments could force hospitals to only provide profitable services, 
or to close their doors. The CFPB understands that some hospitals and 
other health care providers may have low operating margins (nearly half 
of hospitals are nonprofits) \263\ and recognizes that significant 
revenue reductions can theoretically result in the closure of some 
health care providers. As indicated above, the CFPB does not share 
commenters' views on the magnitude of these revenue reductions, or that 
these revenue reductions would not be offset by other business 
adjustments.
---------------------------------------------------------------------------

    \263\ W. Pete Welch et al., U.S. Dep't of Health & Hum. Servs., 
Ownership of Hospitals: An Analysis of Newly-Released Federal Data & 
A Method for Assessing Common Owners (Aug. 2023), https://aspe.hhs.gov/sites/default/files/documents/582de65f285646af741e14f82b6df1f6/hospital-ownership-data-brief.pdf.
---------------------------------------------------------------------------

    Multiple debt collector, health care provider, and consumer 
commenters cited the Report's prediction of an estimated first year 
loss of $24 billion for health care providers that over time may range 
from $82 billion to $655 billion in losses. A consumer advocate 
commenter stated that this $24 billion estimate was inflated. At least 
one health care provider commenter cited the Report's finding that 
medical debt collection rates would fall by more than 8 percent under 
the proposed rule. The CFPB found serious flaws in the Report's 
research methodology, detailed in part VII.C, Data and Evidence, and 
expects the costs of the rule would be substantially lower. Using the 
evidence provided in the Report, the CFPB estimated a $900 million 
reduction in recoverable medical debt over 10 years under the rule, 
which would only partially be borne by health care providers because 
the loss would be shared with debt collectors and debt buyers.
    Although recent changes in the reporting of medical collections due 
to actions by the NCRAs and State laws are part of the baseline, these 
changes provide a benchmark to gauge the plausible effects of the rule. 
Some commenters provided information suggesting that the actions by the 
NCRAs to remove medical collections tradelines that are paid, less than 
one year past due, or less than $500 resulted in substantial reductions 
in debt collector recoveries.
    Commenters, including at least one health care provider and one 
debt collector, stated that most medical debts are ineligible to be 
furnished to the three NCRAs because their average balance is under 
$500. One debt collector commenter reported that the average balance of 
medical accounts referred to them for collection services by health 
care providers between 2021 and 2023 was $414. To the extent that debt 
collectors are referred debts under $500 and rely on debt collection 
practices other than consumer reporting for those medical debts at 
baseline, the CFPB understands that the impact of the rule will be 
lower. Debt collectors that have updated their strategies for 
collecting medical debts under $500 may have lower costs by applying 
those strategies to medical debts over $500 under the rule.
    Multiple debt collector and health care provider commenters 
provided quantitative estimates for recent changes in recoverable 
medical debt experienced, which may have been impacted by the voluntary 
NCRA reporting changes.
    One debt collector commenter stated that their recovery rate had 
dropped from 17.1 percent in 2022 to 12.7 percent by 2024.
    A health care provider commenter stated that their recoverable 
amounts had fallen by 7 percent since medical collections under $500 
were removed from consumer reports, while a debt collector commenter 
stated they had experienced a 25 percent decline in recoverable amounts 
in the same time frame.
    One debt collector commenter stated that their business experienced 
a 7.37 percent decline in revenue in 2023 compared to 2022. The 
commenter experienced an additional 12 percent decline in revenue in 
the first two quarters of 2024. The commenter attributed this decline 
to the NCRA reporting changes.
    The SBA Office of Advocacy commented that one small debt collector 
entity reported a $369,637 decline in dollars collected since the 
changes by the NCRAs in 2022 and 2023.
    One debt collector commenter stated that, when the consumer 
reporting agencies banned the reporting of medical debts under $500, 
they observed a 13 to 22 percent decrease in the recovery of past due 
medical debts below $500.
    At least one debt collector commented that decreases in recovery 
rates in States, such as New York and Colorado, which banned all 
consumer reporting of medical debt around the same time as the changes 
by the NCRAs, were comparable to changes in States which only 
experienced the NCRA changes. This suggests that the rule will not 
reduce recovery rates above and beyond the reductions that have already 
occurred under the baseline.
    These comments did not state that reductions in recoverable amounts 
were specific to medical debts that were directly impacted by the NCRA 
reporting changes, and the trends described by commenters may reflect 
more general changes in medical debt collection that are unrelated to 
consumer reporting.
    As discussed above, the rule may impose reductions in revenue for

[[Page 3326]]

medical debt holders if the removal of medical collections from some 
consumer reports leads to lower recoverable medical debt amounts. This 
cost may be passed through to health care providers that sell medical 
debt to debt buyers, instead of placing the debts with a third-party 
debt collector to collect on the provider's behalf. These debt buyers 
often also engage in debt collection and furnish medical collections 
information to consumer reporting agencies. Debt buyers purchase these 
bundles of medical debt from health care providers at a price that is a 
fraction of the nominal value of the medical bills.\264\ Because the 
rule may reduce the effectiveness of furnishing medical collections as 
a collection practice, the CFPB expects debt buyers' demand for medical 
debt bundles sold by health care providers to potentially decrease. If 
so, the resulting decrease in the price of medical debt bundles would 
reduce the revenues of health care providers who sell past-due bills. 
However, the revenues of health care providers that at baseline do not 
allow debt buyers to furnish medical collections information on debts 
they sell would not be affected in this way.
---------------------------------------------------------------------------

    \264\ Fed. Trade Comm'n, The Structure and Practices of the Debt 
Buying Industry, at 22-23 (Jan. 2013), https://www.ftc.gov/reports/structure-practices-debt-buying-industry.
---------------------------------------------------------------------------

    The CFPB requested data from health care providers to help quantify 
their potential reduction in revenues from the sale of medical debt 
bundles to debt buyers. One debt collector commenter stated that the 
rule would reduce the incentive for patients to resolve their debt, 
which would, in turn, negatively affect health care providers that rely 
on the ability to collect or sell their patient receivables, but no 
comments provided quantitative information on this point. The CFPB does 
not have data with which to quantify the magnitude of this expected 
decrease in the price of medical debt bundles on the secondary market, 
nor does it have information on the current prevalence of health care 
providers allowing debt buyers to furnish medical collections 
information to consumer reporting agencies.
2. Changes in Insurance
    To the extent that health care provider revenue is impacted by the 
rule, contracts between health care providers and health insurers, as 
well as between consumers and health insurers, may be renegotiated to 
mitigate potential reductions in revenue and reflect changes in the 
incentives faced by these entities. In theory, consumers may be less 
likely to demand health insurance if they perceive medical debt to be 
less costly. In practice, the CFPB does not expect that the rule will 
significantly impact the demand for or health insurance because 
pharmaceutical drugs generally require point-of-sale payment, the 
majority of other direct-to-consumer health care costs are charged 
point-of-sale before obtaining service, and the other consequences of 
non-payment remain.
    Several debt collectors and individuals commented that health care 
providers may minimize the risk of patient nonpayment under the 
proposal by renegotiating contracts with insurers so that they receive 
a higher portion, or the entirety, of the cost of patient care directly 
from the insurer. Commenters including debt collectors, an individual, 
an attorney group representing health care providers, and a debt 
collector trade association, stated that increased costs for insurers 
under the proposal would be passed on to consumers through higher 
premiums, copays, and deductibles. Conversely, at least one health care 
provider stated that the proposal would induce insurers to pay a 
smaller portion of the cost of patient care to health care providers, 
because the cost to consumers of higher patient responsibilities would 
be lower.
    The CFPB understands that hospitals contract with many payors and 
contract provisions vary significantly across and within hospitals, 
with most contracts containing multiple contracting methodologies.\265\ 
For example, according to the American Medical Association, physicians 
face a large set of options when negotiating the terms and conditions 
of payments, and use several reimbursement methodologies and 
structures.\266\ Negotiation is costly for both health care providers 
and insurers, given the number and complexity of contracts. 
Additionally, as discussed above, the CFPB has determined that 
reductions in medical debt recovery rates and recoverable amounts would 
be limited under the rule. Accordingly, the CFPB expects that most 
health care providers and insurers will not choose to renegotiate their 
contracts under the rule, because the fundamental negotiating 
incentives (for providers to receive higher reimbursement and insurers 
to pay lower reimbursement), and relative negotiating power, would not 
change. Therefore, the extent to which costs will be passed through to 
consumers through higher premiums, copays, or deductibles will be 
limited.
---------------------------------------------------------------------------

    \265\ Morgan A. Henderson & Morgane C. Mouslim, Facts About 
Hospital-Insurer Contracting, 30:2 AM. J. Managed Care (Feb. 12, 
2024), https://www.ajmc.com/view/facts-about-hospital-insurer-contracting.
    \266\ Am. Med. Ass'n, Payor Contracting 101 (2021), https://www.ama-assn.org/system/files/payor-contracting-toolkit.pdf.
---------------------------------------------------------------------------

    Commenters including a debt collector and a health care provider 
stated that the proposal would prevent health care providers from 
receiving insurance information from consumers, including coordination 
of benefits and accident claim forms, because the cost of communicating 
this information would outweigh the benefit of having insurers pay for 
medical bills.
    Under the rule, consumers will remain liable for medical debt, and 
the cost of coordinating benefits, for most consumers, would be lower 
than the cost of the potential debt. The CFPB expects health care 
providers to continue to receive insurance information from consumers.
    Commenters including debt collectors, health care providers, 
individuals, and a debt collector trade association stated that, under 
the proposed rule, consumers may be more likely to be uninsured or 
under-insured because there would be no incentive for patients to 
purchase insurance if they expect not to have to pay their medical 
bills. One debt collector trade association cited a webinar poll of 165 
health care providers reporting that 74.9 percent of respondents 
thought that ``[t]here is a moderate or high chance th[e] proposed rule 
would impact a patient's view of the need for insurance.'' Some health 
care providers who submitted comments to the SBREFA Outline stated that 
the removal of medical debt from consumer reports would ``eliminate'' a 
consumer's incentive to pay for a health insurance plan, especially for 
consumers that are young and in good health. The providers stated that, 
as a result, the cost of health insurance will increase for those that 
do want or need to be insured. Several commenters including debt 
collectors, health care providers, an individual, and a debt collector 
trade association stated that the proposal would lead to adverse 
selection in health care insurance markets, and that health care 
insurance markets would enter a ``death spiral.'' In contrast, at least 
one consumer advocate commenter highlighted that it is irrational for 
consumers to choose to get sued over a larger debt received without 
health insurance and that other debt collection methods would prevent 
reductions in the insurance rate.
    The CFPB understands that the predominant factor in whether a 
consumer is likely to have health insurance is whether they have access 
to affordable health care coverage, as

[[Page 3327]]

opposed to other factors. Uninsured consumers cite ``coverage not 
affordable'' and ``not eligible for coverage'' as the most common 
reasons for lacking health insurance.\267\ Furthermore, even absent 
consideration of the other debt enforcement mechanisms, consumers 
benefit from health insurance coverage when paying for pharmaceutical 
drugs or non-emergency health care services, where point-of-sale 
payment requirements are common. The rule will have no impact on the 
real or perceived value of health insurance for those health care 
costs. The CFPB expects that the rule would be unlikely to affect 
either access to health insurance or its affordability and has 
therefore determined that changes to the insured population will be 
minimal under the rule. Additionally, because there would be minimal 
changes to the insured population, the CFPB does not expect adverse 
selection or changes in premiums as a result of the rule.
---------------------------------------------------------------------------

    \267\ Jennifer Tolbert et al., Kaiser Fam. Found., Key Facts 
about the Uninsured Population (Dec. 18, 2023), https://www.kff.org/uninsured/issue-brief/key-facts-about-the-uninsured-population/.
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3. Operational Changes
    In theory, to the extent that health care providers face reductions 
in revenue due to the rule, they may implement operational changes to 
mitigate such potential reductions in revenue. Potential changes 
include altering how and when consumers pay for health care, refusing 
nonemergency care for consumers with outstanding balances, reducing the 
amount or type of services, or ceasing to provide services altogether. 
However, the CFPB does not expect the rule will generally impact health 
care provider revenue to an extent that would justify these operational 
changes, given the costs associated with implementing such changes.
    Multiple commenters including individuals, debt collectors, health 
care providers, researchers, health care trade associations, and debt 
collector trade associations stated that health care providers may be 
more likely to require upfront payments or other alternative payment 
schemes like membership-based or concierge-based services. One debt 
collector trade association commenter provided results from a webinar 
poll of 165 health care providers, indicating that 72 percent of 
respondents would require full or partial upfront payments for non-
emergencies if consumer reporting of medical debts was eliminated. 
Several commenters, including health care providers, debt collectors, 
and individuals, stated that even insured consumers would need to pay 
for health care upfront and out of pocket. The commenters stated that 
the onus of working with insurers to receive health care payments would 
be shifted from health care providers to consumers.
    Available evidence shows that most health care providers currently 
have policies and procedures for pre-service or point-of-service 
payment of most medical bills.\268\ Consequently, there would not be 
much margin for health care providers to begin requiring upfront 
payments under the final rule. Multiple health care providers, debt 
collectors, consumer advocates, individuals, and health care trade 
association commenters rejected this argument and stated that the 
presence of these policies does not mean that patients always pay 
before receiving health care. While it may be true that health care 
providers do not always require payment before providing health care, 
it is also true that many health care providers do require upfront 
payment or require recurring patients to eventually pay upfront before 
continuing to see the health care provider. And upfront payment for 
drugs is the universal market norm. In addition, the CFPB understands 
that health care providers lose revenue when they do not receive 
payment for services, but they also forego revenue if they do not 
provide health care to consumers who cannot pay upfront but who would 
have paid their medical bills after the service was provided, or whose 
insurance would have paid for the majority of the overall bill. It is 
unlikely that a small decrease in the recovery rates of furnished 
medical collections under the rule would cause health care providers to 
substantially change their operational and billing procedures in light 
of already existing incentives that determine payment policies.
---------------------------------------------------------------------------

    \268\ According to an HFMA survey, 96 percent of health care 
industry respondents reported having pre-payment or point-of-service 
collection policies and procedures. Healthcare Fin. Mgmt. Ass'n, 
Analyzing pre-payment and point-of-service collections efforts (Aug. 
15, 2021), https://www.hfma.org/technology/analyzing-pre-payment-and-point-of-service-collections-efforts/.
---------------------------------------------------------------------------

    Health care providers, researchers, debt collectors, and debt 
collector trade associations commented that some consumers may increase 
their use of third-party credit products to meet increased upfront 
payment requirements. Some commenters described these third-party 
credit products as high-interest or predatory. Commenters including 
debt collectors, a health care provider, a credit union trade 
association, and an individual consumer stated that, as a result of the 
proposed rule, there would be reduced options for debt repayment 
because consumers that use third-party credit products to pay for 
medical care would not be offered low- or no-interest payment plans by 
their health care providers.
    The CFPB understands that many consumers, at baseline, use third-
party credit products to pay their medical bills.\269\ The CFPB expects 
that most consumers that rely on third-party credit products to pay for 
health care would do so regardless of whether payments were required 
upfront. Affected consumers may incur third-party credit debt instead 
of medical debt, which may be more costly if they are charged interest 
on the third-party credit debt and would have been charged less (or no) 
interest if the debt was owed to a health care provider or debt 
collector.
---------------------------------------------------------------------------

    \269\ 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.
---------------------------------------------------------------------------

    The CFPB expects that the rule would have a small or negligible 
impact on consumers' ability to access emergency medical care, as all 
hospital emergency rooms that receive Medicare funds are required to 
provide emergency medical care, irrespective of an individual's ability 
to pay.\270\ As an attorney group representing health care providers 
commented, emergency medical treatment for insured patients typically 
leads to copayments of less than $500, and uninsured patients typically 
qualify for charity care and have bills below $500 as well. Because 
medical collections under $500 are not included on consumer reports at 
baseline, the rule is unlikely to directly impact emergency health 
care. Additionally, because emergency services represent a significant 
share of health care spending, a significant portion of health care 
revenue would not be impacted by the rule.\271\
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    \270\ Ctrs. for Medicare & Medicaid Servs., Emergency Room 
Rights, https://www.cms.gov/priorities/your-patient-rights/emergency-room-rights (noting Emergency Medical Treatment and Active 
Labor Act, 42 U.S.C. 1395dd, protections) (last visited May 9, 
2024).
    \271\ See, e.g., Scott KW et al., Healthcare spending in U.S. 
emergency departments by health condition, 2006-2016, PLoS One (Oct. 
2021), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8550368/.
---------------------------------------------------------------------------

    The CFPB received feedback from several health care providers 
during the SBREFA process stating that the proposed rule would lead 
them to deny non-emergency care to patients who cannot pay upfront or 
have not paid their previous balances in full. At least

[[Page 3328]]

one health care provider commented that the proposed rule may cause 
health care providers to delay providing health care until they can 
verify that patients can afford to pay. Health care providers commented 
that, as a result of the proposed rule, consumers that are denied 
health care because they cannot meet payment requirements will use 
hospital emergency room services for non-emergency health care, which 
will lead to longer wait times and overburdened emergency rooms.
    There could be a marginal increase in the number of health care 
providers who will not provide health care until the patient pays or 
who will stop providing services to the patient after a period of 
nonpayment, though, as discussed above, the forgone revenue from 
denying health care to patients whose insurance will pay the majority 
of the bill or who would have paid at a later date is likely the reason 
some health care providers have not already shifted to this model. 
Those incentives would remain. In the case where a health care provider 
stops providing health care until a patient pays, some patients may use 
hospital emergency rooms and others may choose to forego care. The CFPB 
does not expect that a significant number of patients will seek these 
services at emergency rooms.
    Debt collectors, health care providers, financial institutions, and 
research institutes commented that patients may delay seeking health 
care if they are unable to meet updated provider standards for pre-care 
payments. A debt collector further commented that if fewer people seek 
preventive care, more people will end up with long-term medical 
conditions. In contrast, a consumer advocacy organization and a State 
attorney general commented that the rule will allow patients to seek 
care without fearing harm to their consumer reports.
    On balance, the CFPB expects most patients will seek the health 
care they need regardless of their financial situation.
    Individuals, debt collectors, debt collection trade associations, 
health care providers, researchers, and health care trade associations 
stated that the proposed rule may cause health care providers to cut 
health care services, which would reduce health care access. At least 
one debt collector commented that even a 2 to 3 percent reduction in 
payments could cause health care providers to stop providing 
unprofitable services. At least one debt collector stated that the 
quality of health care may decline under the rule. Several commenters 
including individuals, health care providers, and debt collectors 
stated that health care providers may reduce their workforce to cut 
costs.
    It does not seem plausible in practice that health care providers 
will reduce the extent or quality of services they provide in response 
to the rule. Reductions in the type of health care provided, health 
care quality, or staffing levels would also reduce health care provider 
revenue, since fewer patients could be served, or patient demand for 
medical services may be reduced as a result of lower patient 
satisfaction. The CFPB expects that any reductions in health care 
provider revenue occurring under the rule would not justify limiting 
the types of provided health care services or providing lower quality 
of service.
    Several commenters including researchers, individuals, health care 
providers, debt collectors, health care trade associations, debt 
collection trade associations, and financial institutions stated that 
health care providers may raise prices under the proposed rule. At 
least one debt collector trade association commented that 15 percent of 
health care respondents to a webinar poll stated that they would start 
or increase the use of legal strategies for collecting payments, with 
the increased costs being passed through to consumers through higher 
prices for health care services.
    The CFPB does not expect that reductions in health care provider 
revenue or changes in collection strategies by health care providers 
under the rule would be significant enough to justify raising prices. 
As described in part VII.E.1, the CFPB expects that the reduction in 
health care provider revenue under the rule would be equal to no more 
than 2 percent of their total costs. Raising prices would require 
renegotiating contracts with insurers, as described in part VII.E.2, 
and the CFPB does not expect that limited reductions in revenue would 
justify the cost of these renegotiations. However, if some health care 
providers raise prices under the rule, higher prices would only 
partially be passed through to insured consumers, with the other 
portion passed on to health insurers. Higher prices would only 
partially be passed through to uninsured consumers as well, to the 
extent that these consumers receive financial assistance. For a more in 
depth discussion of changes in collection strategies, see part VII.E.4.
    Multiple debt collectors, health care providers, debt collection 
trade associations, and financial institutions commented that health 
care providers may close as a result of the rule. One health care 
provider stated that if consumers stopped paying their bills as a 
result of the rule, it would reduce their revenues by $10 million and 
they would close within six months. Several commenters stated that 
increased health care provider closures, especially in rural areas, 
will require patients to drive further to access health care. At least 
one debt collector stated that small health care providers, if they do 
not close, may be acquired by larger companies leading to reduced 
market competition.
    The CFPB agrees that, if patients stopped paying their medical 
bills, and health care providers could not compensate for reductions in 
revenue through renegotiating contracts with insurers, many health care 
providers may cease operating. However, as discussed above, the CFPB 
does not expect that patients will stop paying their medical bills 
under the rule.
    A debt collector stated that the NCRA reporting changes have caused 
health care providers to reduce staffing, reduce the types of services 
they provide, require upfront payment for services, consider using 
litigation to recoup debts from consumers, or close their doors 
completely. The commenter also stated that insurance companies have 
raised premiums while lowering the benefits covered. The commenter 
cited media articles about hospital closures in California as evidence 
of these changes.
    The evidence cited by the commenter does not support the 
commenter's stated view that the NCRA reporting changes led to 
operational changes. The articles cited by the commenter do not mention 
the NCRA reporting changes or the importance of consumer reporting for 
debt collection. Instead, the articles describe low reimbursement rates 
for Medi-Cal patients, and high shares of some hospitals' population 
base that receive care through Medi-Cal, among other concerns with 
rising costs of health care.\272\ The CFPB expects that these factors, 
and not the NCRA reporting changes, were more likely the drivers of the 
impacts the commenter describes. As such, the CFPB finds that

[[Page 3329]]

it is not likely that the final rule will lead to operational changes 
by health care providers, as the comments suggest. Regardless, 
California has already passed a bill prohibiting medical debt consumer 
reporting, so any impact on these health care providers will already be 
experienced absent this final rule.
---------------------------------------------------------------------------

    \272\ Madeline Ashley, Los Angeles hospital on `brink of 
closure', Becker's Healthcare Rev. (June 10, 2024), https://www.beckershospitalreview.com/finance/los-angeles-hospital-on-brink-of-closure.html. Ana B. Ibarra, Hospital Closures, cuts in services 
loom for some communities. How the state may step in to help, Cal 
Matters (Apr. 6, 2023), https://calmatters.org/health/2023/04/hospital-closures-california/. Ron Southwick, One in five California 
hospitals at risk of closing: Report, Chief Healthcare Executive 
(Apr. 13, 2023), https://www.chiefhealthcareexecutive.com/view/one-in-five-california-hospitals-face-risk-of-closing-report. Scott 
Wilson, A hospital's abrupt closure means, for many, help is 
distant, The Wash. Post (Nov. 16, 2023), https://www.washingtonpost.com/nation/2023/11/16/california-health-care-hospital-closing/.
---------------------------------------------------------------------------

    Several debt collectors commented that debt collectors may change 
their staffing and payroll in response to the rule. One debt collector 
stated that in the last 12 months it had to double its number of staff 
to handle the increase in litigation. The SBA Office of Advocacy 
described a small entity that reported a 16 percent increase in payroll 
costs for the first quarter of the year after the NCRA reporting 
changes in 2023. In contrast, multiple commenters including debt 
collectors, individuals, and financial institutions stated that debt 
collection employees will be paid less or there will be staff 
reductions.
    The CFPB acknowledges that debt collectors may need to increase or 
decrease staffing under the rule but does not have information 
sufficient to quantify this impact.
4. Use of Other Collection Mechanisms
    The potential for reductions in revenue due to the rule, as 
discussed above, may affect how health care providers or debt 
collectors use other collection mechanisms to collect unpaid medical 
debt, such as contacting consumers via mail and phone calls, as well as 
debt collection litigation.\273\ While these collection mechanisms are 
available at baseline, health care providers and debt collectors may 
increase their reliance on these mechanisms to induce payments for 
certain consumers after the rule is implemented.
---------------------------------------------------------------------------

    \273\ See, e.g., Consumer Fin. Prot. Bureau, Fair Debt 
Collection Practices Act Annual Report 2012 (Mar. 13, 2012), https://www.consumerfinance.gov/data-research/research-reports/fair-debt-collection-practices-act/; Emily Alpert Reyes, Hospitals that pursue 
patients for unpaid bills will have to tell L.A. County, L.A. Times 
(Aug. 6, 2024), https://www.latimes.com/california/story/2024-08-06/hospitals-report-medical-debt; Judith Garber, Lown Inst., Which 
hospitals are suing patients? Investigation reveals hospital billing 
practices (Feb. 17, 2023), https://lowninstitute.org/which-hospitals-are-suing-patients-investigation-reveals-hospital-billing-practices/.
---------------------------------------------------------------------------

    Contacting consumers via mail and phone calls is usually part of a 
comprehensive debt collection strategy. However, these collection 
mechanisms are time-consuming and labor intensive relative to 
furnishing, and may be less effective for inducing payment. Litigation 
is more costly than furnishing medical debt information to consumer 
reporting agencies for consumers, health care providers, and debt 
collectors. Debt collectors who were small entity representatives in 
the SBREFA process reported that the average cost of furnishing is $10 
per account, compared to $500 for litigation.\274\ Because medical debt 
litigation can impose relatively large costs, the CFPB has considered 
if such litigation would become more common under the rule.
---------------------------------------------------------------------------

    \274\ SBREFA Report at 38.
---------------------------------------------------------------------------

    Typically, when a medical bill is overdue, health care providers 
and debt collectors first contact consumers by mail or phone calls to 
seek payment. A debt collector trade association stated that, at 
baseline, entities that follow industry best practices will attempt 
several patient communications over a timeframe of 360 days, in line 
with the NCRAs' practice of waiting for one year past the date of first 
delinquency to include medical collections on consumer reports, before 
furnishing an outstanding medical debt to consumer reporting agencies. 
A financial trade association and a debt collectors trade association 
stated that consumers, especially those that are unresponsive to mail 
and phone calls, sometimes first learn of a medical collection from 
their consumer report, such as when they are applying for credit.
    In deciding whether to incorporate debt collection litigation into 
their debt collection strategy, medical debt holders take into 
consideration the laws that apply in their jurisdiction. Several debt 
collector commenters noted that litigation is not allowed as a means of 
inducing payment of medical debt in some jurisdictions. For example, 
New Mexico prohibits debt collection lawsuits against consumers whose 
incomes fall below 200 percent of the Federal poverty line.\275\ These 
laws limit increases in debt collection litigation that may occur due 
to the rule.
---------------------------------------------------------------------------

    \275\ Jack Pitsor, Medical Debt: How States are Supporting 
Consumers, Nat'l Conf. of State Legislatures (Jan. 26, 2022), 
https://www.ncsl.org/state-legislatures-news/details/medical-debt-how-states-are-supporting-consumers.
---------------------------------------------------------------------------

    In addition to restrictions on the use of debt collection lawsuits, 
recent changes to industry practices and State laws governing the 
furnishing of medical debt information also limit further increases in 
litigation that may occur due to the rule. In particular, the CFPB does 
not expect the rule to impact litigation for medical debts under $500, 
because any increases in litigation for those debts would have already 
occurred due to the voluntary NCRA changes that removed medical debts 
under $500 from consumer reports in April 2023. A debt collector 
commenter stated that health care providers in California have 
increased their use of litigation following the $500 restriction. This 
may also imply that further increases in litigation may be limited for 
certain types of overdue medical bills, such as those stemming from 
emergency room visits. For example, an attorney group representing 
health care providers stated that emergency room visits typically 
result in medical bills under $500 after insurance or financial 
assistance is taken into account. Because the rule will not impact 
medical debts below $500, and because, where available, debt collection 
litigation is already an option at baseline, the CFPB expects that 
increases in litigation due to the rule will only occur for consumers 
with medical debts greater than $500. In addition, the CFPB does not 
expect the rule to cause increases in debt collection lawsuits in 
States that have already implemented the removal of medical collections 
from consumer reports. Similarly with the voluntary NCRA changes, the 
removal of medical collections from consumer reports will have already 
increased litigation risks for consumers in these States independently 
of this rule.
    The CFPB does not have data or information available to estimate 
the extent to which the rule may affect the use of litigation over 
medical debts, relative to the baseline. The CFPB requested comment on 
this issue, particularly data or quantitative estimates of the expected 
changes in litigation were the rule to go into effect. Commenters, 
including debt collectors, health care providers, debt collector trade 
associations, a bank trade association, a credit union trade 
association, individuals, a researcher, and the SBA Office of Advocacy, 
stated generally that consumers may face increased litigation if the 
rule makes furnishing a less effective means of inducing payment. In 
particular, according to a debt collector trade association, 38 percent 
of respondents to a webinar poll of 165 health care providers stated 
that they would start or increase the use of legal strategies for 
collection.
    However, these commenters did not provide quantitative estimates or 
data that can be used to estimate the expected changes in litigation. 
Historically, repayment rates for medical debt in collections have been 
quite low. As discussed in part VII.E.1, the CFPB believes that the 
recovery rate at baseline is less than 25 percent for medical debts 
that are furnished to a consumer reporting agency, which are the 
medical debts for which litigation might be more likely to be used 
under

[[Page 3330]]

the rule. Moreover, litigation is a relatively expensive option for 
debt holders. As such, pursuing additional lawsuits because of the rule 
is not likely to result in a significant increase in marginal net 
recovery rates.\276\ For these reasons, the CFPB expects that any 
increase in overall litigation frequency would be limited.
---------------------------------------------------------------------------

    \276\ As discussed in the Consumer willingness to pay medical 
bills part, two commenters stated that historically recovery rates 
on bad medical debts were between 18.2 and 24.8 percent. CFPB 
research suggests that only around 2.5 percent of medical collection 
accounts furnished to the NCRAs are ever reported as paid. See 
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/.
---------------------------------------------------------------------------

    The CFPB expects that any increase in overall litigation frequency 
due to the rule would be limited to certain types of consumers who live 
in States that have not already removed medical collections from 
consumer reports. The CFPB understands that, while consumer reporting 
sometimes results in the payment of overdue debt, existing research 
suggests that debt collection litigation more often leads to a default 
judgment in favor of the plaintiff, making debt collection litigation a 
more effective, albeit more costly, means of inducing payment.\277\ 
These default judgments can lead to asset seizures or wage 
garnishment.\278\ Because litigation can be costly, debt collection 
lawsuits would be more likely to be filed against consumers who have 
the means to pay a civil judgment, whether by having their wages 
garnished or liens placed on their assets. Moreover, a debt collector 
commenter stated that adverse judgments from litigation, such as bank 
levies or wage garnishments, would have a greater detrimental effect on 
consumers than being denied a loan or paying a higher risk adjusted 
rate on a loan.
---------------------------------------------------------------------------

    \277\ The Pew Charitable Trs., How Debt Collectors Are 
Transforming the Business of State Courts (May 6, 2020), https://www.pewtrusts.org/en/research-and-analysis/reports/2020/05/how-debt-collectors-are-transforming-the-business-of-state-courts. Medical 
debt collection lawsuits tend to be filed in small claims courts and 
to involve amounts of less than $10,000.
    \278\ Id.
---------------------------------------------------------------------------

    The type of consumer that will most likely see an increase in 
litigation risk under the rule is a consumer who would have paid or 
settled a medical debt if a collection was added to their consumer 
report but would not respond to other debt collection mechanisms. In 
the baseline, medical collections are removed from the NCRAs' consumer 
reports when paid.\279\ Generally, the CFPB understands that consumers 
seeking credit may be more likely to pay medical collections included 
on their consumer reports, assuming they have the means to do so, to 
ensure these collections are removed and unobservable to creditors and 
improve their credit scores. These consumers may be more sensitive to 
the threat of medical debts being furnished or the availability of 
medical debt information to creditors than they would be to the threat 
of litigation. However, the CFPB understands that, at baseline, 
furnishing may induce some consumers who have an immediate need for 
credit to pay debts they do not actually owe or debts based on 
incorrect bills, and the rule may reduce the likelihood that these 
consumers pay spurious debts.\280\
---------------------------------------------------------------------------

    \279\ 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.
    \280\ See, e.g., Consumer Fin. Prot. Bureau, Fair Debt 
Collection Practices Act: CFPB Annual Report 2023, at 2-5 (Nov. 
2023), https://files.consumerfinance.gov/f/documents/cfpb_fdcpa-annual-report_2023-11.pdf (describing consumer medical collection 
complaints received by the CFPB).
---------------------------------------------------------------------------

    For the subset of consumers who legally owe the debt, the rule may 
lead to increased debt resolution costs if the consumers are required 
to pay for the plaintiff's court filing fees or legal fees, which may 
occur for the majority of cases that end in a default judgement against 
the consumer. At least one debt collector who was a small entity 
representative in the SBREFA process suggested that the proposed rule 
would also lead to increased costs for consumers, if debt collectors 
are currently more likely to settle medical debts for less than the 
dollar amount owed when consumers respond to medical debt collections 
added to their consumer reports, but may not be willing to settle or 
will settle only for relatively higher amounts during the course of 
litigation.\281\
---------------------------------------------------------------------------

    \281\ Comment from Jennifer Whipple, Collection Bureau Servs., 
Inc., RE: Small Entity Representative Jennifer Whipple's Comment to 
CFPB regarding the Small Business Review Panel regarding the Fair 
Credit Reporting Act Proposal, SBREFA Report app. A.
---------------------------------------------------------------------------

    Should certain health care providers decide to increase their use 
of debt collection lawsuits, they may do so either by working with debt 
collectors to file debt collection lawsuits on their behalf, or by 
bringing the lawsuits themselves. Health care providers may sell 
medical debt to debt buyers who also engage in debt collection, thereby 
transferring ownership for the debt.\282\ In such cases, the decision 
of whether to pursue litigation is made by the debt buyer, and they 
become the main plaintiff in a debt collection lawsuit.
---------------------------------------------------------------------------

    \282\ Fed. Trade Comm'n, The Structure and Practices of the Debt 
Buying Industry (Jan. 2013), https://www.ftc.gov/reports/structure-practices-debt-buying-industry.
---------------------------------------------------------------------------

    However, some health care providers only assign medical debt to 
debt collectors while retaining ownership of the medical debt, and 
ultimately decide themselves whether to pursue debt collection 
litigation. When debt collection litigation happens this way, the debt 
collectors may be listed as plaintiffs even though it may be the health 
care providers that pay the bulk of the litigation costs. For example, 
debt collectors working with UC Health, the largest hospital system in 
Colorado, were reported to have filed 15,710 lawsuits from 2019 through 
2023.\283\ In this case, the medical debts were ``assigned'' to debt 
collectors, but UC Health retained ownership of the medical debts and 
shared a portion of the recovered payments with the debt collectors.
---------------------------------------------------------------------------

    \283\ John Ingold & Chris Vanderveen, Colorado's largest 
hospital system is quietly suing thousands of patients every year 
over unpaid bills, The Denver Post (Feb. 21, 2024), https://www.denverpost.com/2024/02/21/uchealth-medical-debt-lawsuits-colorado/.
---------------------------------------------------------------------------

    Health care providers that choose to file more debt collection 
lawsuits on their own behalf because of the rule may incur a mix of 
fixed costs and variable litigation costs.\284\ Fixed costs of 
litigation may include the costs of retaining and maintaining 
relationships with legal providers, as well as hiring additional staff. 
Health care providers that already take legal action against their 
patients might not need to incur these fixed costs. Using a random 10 
percent sample of hospitals in the United States, a recent 
investigation found that over two-thirds of hospitals already take 
legal action to collect unpaid medical bills, implying that many health 
care providers currently have some capacity to file debt collection 
lawsuits at baseline.\285\
---------------------------------------------------------------------------

    \284\ See, e.g., Joseph Giuseppe R. Paturzo et al., Trends in 
Hospital Lawsuits Filed Against Patients for Unpaid Bills Following 
Published Research About This Activity, JAMA Network Open (Aug. 23, 
2021), https://jamanetwork.com/journals/jamanetworkopen/article-abstract/2783297.
    \285\ Noam M. Levey, Hundreds of Hospitals Sue Patients or 
Threaten Their Credit, a KHN Investigation Finds. Does Yours?, KFF 
Health News (Dec. 21, 2022), https://kffhealthnews.org/news/article/medical-debt-hospitals-sue-patients-threaten-credit-khn-investigation/.
---------------------------------------------------------------------------

    Separate from fixed costs are variable costs that increase with the 
number and complexity of the debt collection lawsuits that hospitals 
choose to pursue. These are primarily court filing fees and attorney 
fees. Court filing fees vary

[[Page 3331]]

depending on the jurisdiction and the collection amounts, making it 
difficult to estimate costs that hospitals may face.\286\ Health care 
provider commenters stated that court filing fees can be as high as 
$270 while serving fees can be as high as $200. Attorneys can be paid 
on an hourly basis or on a contingency fee basis. However, if health 
care providers already employ in-house attorneys or retain attorneys 
using a flat fee, this may reduce the need to pay additional attorney 
fees to pursue debt collection litigation. In addition, some 
jurisdictions allow health care providers to add filing fees, attorney 
fees, and other litigation costs to the judgment amount, partially 
shifting some of the cost of pursuing debt collection lawsuits to 
consumers if health care providers secure a favorable judgment.\287\ 
Because health care providers already have the option to pursue debt 
collection lawsuits or have otherwise adapted their collection 
mechanisms in response to industry changes and State laws under the 
baseline, the total costs of increased debt collection litigation would 
depend on how many additional medical debt collection lawsuits arise 
because of the rule. The CFPB does not have data to estimate the 
additional number of debt collection lawsuits that health care 
providers may pursue after the rule is implemented.
---------------------------------------------------------------------------

    \286\ See, e.g., the fee schedule for Small Claims Court in 
Maryland, https://www.mdcourts.gov/legalhelp/smallclaims, the 
corresponding fee schedule for regular civil cases, https://www.mdcourts.gov/courts/feeschedules, a comparison between small 
claims and regular civil cases in California, https://selfhelp.courts.ca.gov/small-claims-or-limited-civil (all last 
visited May 12, 2024).
    \287\ Casey Tolan & Ed Lavandera, Arkansas hospital sued 
thousands of patients over medical bills during the pandemic, 
including hundreds of its own employees, CNN (Sept. 8, 2023), 
https://www.cnn.com/2023/09/08/us/arkansas-hospital-debt-collections-lawsuits-pandemic/index.html.
---------------------------------------------------------------------------

    The CFPB requested information from health care providers on the 
costs and amounts involved in current debt collection litigation, as 
well as estimates or information that can be used to estimate the 
number of debt collection lawsuits that might result from the rule. 
Commenters, including debt collectors, health care providers, a debt 
collector trade association, individuals, a researcher, and the SBA 
Office of Advocacy stated that health care providers will face 
increased costs associated with litigation, because they anticipate 
that the rule will cause them to file more debt collection lawsuits 
against consumers. However, these commenters did not provide 
quantitative estimates or data that can be used to estimate the 
expected changes in health care providers' litigation costs. As 
discussed above, the CFPB expects that any increase in overall 
litigation frequency and costs would be limited to States that have not 
removed medical collections from consumer reports, and to health care 
providers within those States whose consumers have medical debts 
greater than $500.
    Rather than collecting unpaid medical bills themselves, health care 
providers may choose to contract with debt collectors. Debt collectors 
may switch to other collection mechanisms if consumer reporting 
agencies stop including medical collections information on consumer 
reports provided for credit eligibility determinations. To the extent 
that debt collectors rely primarily on furnishing to induce payment at 
baseline, the rule may reduce their profits if the other collection 
practices are costlier or less effective than furnishing.
    Debt collectors may have to incur both fixed and variable costs to 
increase their use of collection mechanisms other than medical 
collections furnishing if the rule is finalized, including debt 
collection lawsuits. Fixed costs of litigation include the costs of 
hiring and maintaining relationships with attorneys. Debt collectors 
that already pursue debt collection lawsuits may not need to incur 
these fixed costs. Variable costs include court filing fees, which vary 
depending on the jurisdiction and the collection amounts, making it 
difficult to estimate the increase in costs that debt collectors may 
incur. Variable costs also include attorney fees, which can be paid on 
an hourly basis or on a contingency fee basis. If debt collectors 
already employ attorneys in house or under a flat-fee arrangement, this 
may reduce the need to pay additional attorney fees should they 
increasingly pursue debt collection lawsuits. However, as discussed 
above, it is possible that some debt collectors have at least partially 
incurred the fixed and variable costs of switching to collection 
practices that do not involve furnishing of medical debt given the 
recent voluntary NCRA changes and State laws. The CFPB requested 
further information on the collection activities of debt collectors to 
quantify these costs of debt collection litigation but did not receive 
relevant comments or data.
    Debt collectors may also respond to the rule by increasing their 
use of debt collection lawsuits. In choosing whether to pursue debt 
collection litigation, debt collectors likely compare the cost of 
litigation with the expected recovery amount in the event of a 
favorable judgment. Under the baseline, debt collectors also likely 
compare the expected cost effectiveness of litigation against 
furnishing, although they can choose to furnish and pursue litigation 
for the same debt. The CFPB does not have data to directly compare the 
relative efficacy of furnishing and litigation for inducing payment. 
However, the CFPB expects that per-lawsuit litigation costs may be 
lower for larger debt collectors, or for larger health care providers 
if they sue patients directly, given the potential for economies of 
scale. Comments received from debt collector small entity 
representatives during the SBREFA process indicate that furnishing 
medical collections information to NCRAs costs approximately $10 per 
account, while debt collection litigation costs approximately $500 per 
account.\288\ Due to the cost difference, debt collectors likely incur 
furnishing costs on a much larger percentage of accounts than they 
incur litigation costs, and so this may represent either a net saving 
or net cost for debt collectors, depending on the specific firm's 
furnishing practices and increase in litigation activity. The CFPB 
requested comment on this issue but did not receive relevant comments 
or data on this subject.
---------------------------------------------------------------------------

    \288\ SBREFA Report at 38.
---------------------------------------------------------------------------

    In the proposed rule, the CFPB requested data to quantify the 
impacts on debt collectors. Commenters, including debt collectors and a 
law firm representing health care providers stated that they would need 
to increase their use of debt collection lawsuits. A debt collector 
stated that over the last 12 months, which the CFPB understands to 
cover the period of time after the voluntary NCRA changes, it had 
increased the number of lawsuits it filed each month by over 400 
percent and had to double the number of staff handling litigation. 
Because the medical debts removed from consumer reports due to the 
voluntary NCRA changes were under $500, the commenter claimed that the 
remaining medical debts on consumer reports that will be affected by 
the rule are larger. Recent CFPB research shows that the average 
balance of medical collections included on consumer reports is around 
$3,100.\289\ To the extent that consumers with larger medical debts 
have income or assets that can be used to repay in the event of a debt 
collection lawsuit

[[Page 3332]]

against them, the CFPB expects that debt collectors will be more likely 
to litigate over larger medical debts.\290\ As discussed above, the 
CFPB does not have data or information available to quantify this 
increase, and commenters did not provide such information.
---------------------------------------------------------------------------

    \289\ Ryan Sandler & Zachary Blizard, Consumer Fin. Prot. 
Bureau, Recent Changes in Medical Collections on Consumer Credit 
Records Data Point (Mar. 2024), https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf.
    \290\ See, e.g., Keith Ericson & Tal Gross, Limits on Medical 
Debt Lawsuits, The Abell Found. (Feb. 9, 2021), https://abell.org/wp-content/uploads/2022/02/Final20Medical20Debt20Report.pdf.
---------------------------------------------------------------------------

    Relative to furnishing medical collections information, contacting 
consumers through traditional methods of debt collection that include 
mail, phone, or other means such as text messages may be more time-
consuming and expensive. In a comment letter responding to the proposed 
rule, the SBA Office of Advocacy stated that one small entity reported 
a 16 percent increase in payroll costs for first quarter of the year 
after the NCRA voluntary change that removed medical debts under $500 
from consumer reports. Some debt collector small entity representatives 
stated during the SBREFA process that they expected to have to increase 
staffing by 10 percent as a result of the proposed rule. Increased 
staffing would impose additional labor costs. These small entity 
representatives also expect to incur fixed costs associated with 
``rewriting policies and procedures, training employees, updating 
systems, and renegotiating contracts'' with health care providers.\291\ 
The CFPB does not have further data to assess the relative prevalence, 
costs, and effectiveness of the various collection mechanisms that debt 
collectors use at baseline.
---------------------------------------------------------------------------

    \291\ SBREFA Report at 38.
---------------------------------------------------------------------------

5. Availability of Information on Consumer Reports Used in Underwriting
    Under the final rule, creditors generally would not be permitted to 
use consumer report information related to medical debt in their 
determinations of consumers' eligibility for credit by utilizing the 
financial information exception at Sec.  1022.30(d). This section below 
discusses possible impacts, including impact on creditors' underwriting 
practices and revenues, consumers' access to credit, debt collectors' 
assessments of consumers' ability to pay medical debts, and the revenue 
received by consumer reporting agencies for consumer reports.
    Creditors use information from consumer reports, usually obtained 
from the NCRAs, to reduce the risk of lending to consumers who may be 
unable to repay. Removing medical collections information from consumer 
reports provided to creditors for credit eligibility determinations 
would reduce the information they contain relative to the baseline. In 
theory, if creditors expect medical collections information to be on 
consumer reports, or if they view medical collections information as 
critical to their assessment of the riskiness of lending to consumers, 
their willingness to pay consumer reporting agencies for consumer 
reports that do not contain medical collections information may 
decrease. However, creditors would likely find the remaining 
information on consumer reports to still be valuable, mitigating the 
reduction in demand for consumer reports that may result from the rule. 
Furthermore, the market for consumer reports used to underwrite credit 
is highly concentrated amongst the NCRAs. Lenders will not be in a 
position to refuse to obtain a consumer report because they will still 
need the information contained in consumer reports to underwrite, and 
so there is no plausible mechanism by which a lender's perceived 
reduction in consumer report quality would affect price. If there were 
such a mechanism, consumers may face lower loan origination costs 
because consumer report fees are often passed on at loan origination to 
the borrower.
    One NCRA SBREFA commenter stated that it considers medical 
collections as predictive of a consumer's repayment willingness and 
ability and believes that the complete removal of medical collections 
from consumer reporting would ``degrade the accuracy of consumer 
reporting.'' As described above, some medical collections reflect 
inaccurate billing practices, and their inconsistent inclusion on 
consumer reports adds only a noisy signal of consumers' ability to pay. 
The CFPB expects that removing medical collections from consumer 
reports used in credit eligibility determinations would instead improve 
the accuracy of consumer reporting.
    For purposes of complying with laws requiring an assessment of a 
consumer's ability to repay a loan, the rule allows creditors to 
consider medical debt information that consumers provide in response to 
general requests for information on a consumer's debt. The rule, 
however, does not allow creditors to obtain or use medical information 
from consumer reporting agencies for such purposes. The CFPB 
understands that creditors for many types of credit products do not 
generally ask explicitly for medical debt information on applications 
for credit at baseline, and instead rely on the medical collection 
information provided in consumer reports. Some forms of credit, like 
mortgages, more commonly require that an applicant report all debts on 
the credit application.\292\ The rule will not change any existing law 
or guidance regarding the information that creditors must request from 
applicants.
---------------------------------------------------------------------------

    \292\ See, e.g., Fannie Mae, Uniform Residential Loan 
Application (Form 1003), https://singlefamily.fanniemae.com/delivering/uniform-mortgage-data-program/uniform-residential-loan-application (last visited Nov. 25, 2024).
---------------------------------------------------------------------------

    Commenters, including a bank trade association, an NCRA, and a 
researcher stated that consumers may withhold medical debt information 
from creditors if more general requests on a credit application for a 
consumer's debt information do not specify medical debt. These 
commenters further stated that creditors would have no mechanism for 
verifying whether disclosed liabilities were accurate.
    The CFPB does not agree with the commenters that the rule will 
generally prevent creditors from learning about the scope of consumers' 
liabilities. Creditors largely rely on consumers to provide information 
about their medical debts at baseline because most medical debts are 
not included on consumer reports, as discussed below. To the extent 
that creditors do explicitly ask for medical debt information at 
baseline, this rule changes the process by which creditors obtain 
medical debt information from consumers. Specifically, creditors will 
no longer be able to explicitly ask for information about medical debt. 
Instead, consumers will need to provide this information in response to 
a more general request for debt information.
    To the extent that consumers are less likely to provide medical 
debt information in credit applications under the rule relative to the 
baseline, the CFPB does not expect this to impose major costs on 
creditors. For example, the Federal Housing Administration currently 
omits medical debt information from its calculations of debt-to-income 
ratios in mortgage underwriting.\293\ This suggests that, to the extent 
consumers cease to provide their own medical debt information after the 
rule is issued, mortgage underwriters will likely adjust eligibility 
criteria to account for this change without significantly increasing 
repayment risk to creditors, including by placing more weight on other 
borrower characteristics. Additionally, few creditors explicitly ask 
for medical debt information at baseline; for example, the Uniform 
Residential Loan

[[Page 3333]]

Application, required for loans sold to Freddie Mac and Fannie Mae, 
does not specifically request medical debt information.\294\ The CFPB 
requested evidence for how the continued ability to observe medical 
debt on credit applications may impact creditors and consumers but did 
not receive relevant evidence.
---------------------------------------------------------------------------

    \293\ U.S. Dep't of Hous. & Urban Dev., Single Family Housing 
Policy Handbook 4000.1, https://www.hud.gov/program_offices/housing/sfh/handbook_4000-1 (last visited Nov. 21, 2024).
    \294\ Fannie Mae, Uniform Residential Loan Application (Form 
1003), https://singlefamily.fanniemae.com/delivering/uniform-mortgage-data-program/uniform-residential-loan-application (last 
visited Nov. 25, 2024).
---------------------------------------------------------------------------

    The medical collections included on consumer reports comprise only 
a subset of consumers' medical debt for several reasons. First, not all 
medical debt, including past-due medical debt, is in collections at any 
given time, and not all medical debts that are in collections are 
included on consumer reports, for a variety of reasons. For one, a 
medical collection that appears on a consumer report from one NCRA may 
not appear on other consumer reports if the debt collector did not 
report to all three NCRAs. Additionally, the NCRAs entered into a 
settlement, called the National Consumer Assistance Plan (NCAP), with 
over thirty States' attorneys general in 2015 that required them to 
remove from consumer reports all medical collections that were paid by 
insurance, as well as ensure that medical collections were not included 
on consumer reports until they were at least 180 days past due from the 
date of first delinquency.\295\ Since that agreement, the NCRAs have 
voluntarily removed many types of medical collections from consumer 
reports, including medical collections that were paid by any source, 
medical collections under $500, and medical collections that have not 
been outstanding for at least one year.\296\
---------------------------------------------------------------------------

    \295\ Assurance of Voluntary Compliance/Assurance of Voluntary 
Discontinuance (May 20, 2015), In re Equifax Info. Servs., https://www.ohioattorneygeneral.gov/Files/Briefing-Room/News-Releases/Consumer-Protection/2015-05-20-CRAs-AVC.aspx.
    \296\ 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.
---------------------------------------------------------------------------

    In addition, the medical collections that currently appear on 
consumer reports are rarely reported for the full seven years that the 
FCRA permits. Previous CFPB research found that fewer than half of 
medical collections over $500 were reported for longer than one year, 
and just over 10 percent were reported for at least four years.\297\ 
Since the NCRAs' voluntary medical debt reporting changes were fully 
implemented in April 2023, the persistence of medical collection 
reporting has been substantially reduced. The CFPB analyzed CCIP data 
and found that fewer than half of the medical collections reported in 
May 2023 were reported in November 2023, and just 26 percent were 
reported in February 2024.
---------------------------------------------------------------------------

    \297\ 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/.
---------------------------------------------------------------------------

    Finally, several states have passed laws that significantly 
restrict or prohibit consumer reporting of medical debt 
information.\298\ Creditors that serve consumers for whom consumer 
reports will have medical collections removed pursuant to these State 
laws provide or will soon be providing credit without knowledge from 
consumer reports of their applicants' outstanding medical debt for 
reasons unrelated to this final rule.
---------------------------------------------------------------------------

    \298\ See 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.
---------------------------------------------------------------------------

    Nationally representative surveys indicate that between 15 and 41 
percent of adults had some form of outstanding medical debt between 
2021 and 2022, depending on the definition of ``medical debt'' 
used.\299\ However, only 14 percent of consumers had a medical 
collection on their consumer report in 2022.\300\ By June 2023, after 
the NCRAs' voluntary removal of all medical collections under $500 in 
April 2023, only 5 percent of people with a consumer report had a 
medical collection included on their consumer report.\301\ Because most 
consumers with medical debt do not have medical collections on their 
consumer report, creditors that do not request medical debt information 
on credit applications provide credit accounts to many consumers who 
have medical debt without any knowledge of that debt under the 
baseline. The CFPB understands that medical collections are not 
primarily reported to the NCRAs to assist creditors in assessing 
delinquency risk, but rather to induce repayment.
---------------------------------------------------------------------------

    \299\ U.S. Census Bureau, Wealth, Asset Ownership, & Debt of 
Households Detailed Tables: 2021 (2021), https://www.census.gov/data/tables/2021/demo/wealth/wealth-asset-ownership.html; 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/.
    \300\ 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/.
    \301\ Ryan Sandler & Zachary Blizard, Consumer Fin. Prot. 
Bureau, Recent Changes in Medical Collections on Consumer Credit 
Records Data Point (Mar. 2024), https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf.
---------------------------------------------------------------------------

    The general prohibition of the use of consumer report information 
related to medical debt in creditors' determinations of consumers' 
eligibility for credit may affect the performance of creditors' loan 
portfolios if the absence of this medical debt information reduces the 
accuracy of creditors' assessments of delinquency risk. Indeed, the 
removal of information from the set of variables that can be used in 
underwriting models should not improve performance if models optimally 
assess risk at baseline. The variables included in underwriting models 
are generally selected because they are predictive of the risk of loss 
a creditor would experience from providing a new credit account to a 
given consumer. Creditors typically measure risk by predicting the 
probability that a new account will become at least 90 days past due 
(or ``seriously delinquent'') within two years of origination.
    The evidence available to the CFPB indicates that the predictive 
performance of underwriting models would not be impaired by the removal 
of all medical collections information from consumer reports. Many 
creditors have voluntarily reduced or eliminated the use of medical 
collections from their underwriting standards, and indeed, credit 
scoring companies have either removed or differentiated medical 
collections in their models and found minimal or no negative effects on 
performance.\302\ Furthermore, an

[[Page 3334]]

industry analysis of the NCRAs' June 2022 voluntary medical debt 
reporting changes found that because
---------------------------------------------------------------------------

    \302\ 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. 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); Ethan Dornhelm, The Impact of Medical Debt Collections 
on FICO Scores, FICO Blog (July 13, 2015), https://www.fico.com/blogs/impact-medical-debt-collections-ficor-scores; VantageScore, 
What was the rationale for removing Medical Debt from VantageScore 
4.0?, https://www.vantagescore.com/faq/what-was-the-rationale-for-removing-medical-debt-from-vantagescore-4-0/ (last visited May 9, 
2024).

the vast majority of the impacted consumers would likely have other 
derogatory information and FICO[supreg] Scores that remain low, the 
ability of FICO[supreg] Scores to rank order risk on the total 
population prior to these medical debt collections being excluded is 
almost identical to what lenders would experience with these medical 
debt collections excluded.\303\
---------------------------------------------------------------------------

    \303\ Tommy Lee, Senior Director, Analytics & Scores, Medical 
Collection Removals Have Little Impact on FICO Scores, FICO Blog 
(June 30, 2022), https://www.fico.com/blogs/medical-collection-removals-have-little-impact-fico-scores.
---------------------------------------------------------------------------

    The NCRAs' June 2022 medical debt reporting changes removed paid 
medical collections from consumer reports and required medical 
collections to be at least one year past the date of first delinquency 
before being included on consumer reports. Though these changes were 
more limited in scope than those in this rule, the CFPB expects that an 
ex-post analysis of the rule's impacts would draw a similar conclusion 
as the industry analysis above, given the CFPB's evidence in the 
Technical Appendix showing that there is sufficient information 
remaining on consumer reports to enable creditors to make credit 
eligibility determinations without the inclusion of medical collections 
information on those consumer reports. Consumers with medical 
collections on their consumer reports in June 2023, after the NCRA 
voluntary reporting changes were fully implemented, had an average 
credit score of 582, near the deep subprime cutoff; \304\ additionally, 
more than 40 percent had at least one nonmedical collection and nearly 
19 percent had no other tradelines.\305\ The fact that a consumer has a 
thin credit file \306\ and information about nonmedical collections 
will remain available to creditors under the rule, to the extent that 
creditors use these markers to assess delinquency risk.
---------------------------------------------------------------------------

    \304\ Consumer Fin. Prot. Bureau, Borrower risk profiles, 
https://www.consumerfinance.gov/data-research/consumer-credit-trends/student-loans/borrower-risk-profiles/ (last visited May 9, 
2024).
    \305\ Ryan Sandler & Zachary Blizard, Consumer Fin. Prot. 
Bureau, Recent Changes in Medical Collections on Consumer Credit 
Records Data Point (Mar. 2024), https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf.
    \306\ A thin credit file is a consumer report that contains 
fewer than five credit accounts. Jennifer White, Experian, What is a 
Thin Credit File? (May 25, 2022), https://www.experian.com/blogs/ask-experian/what-is-a-thin-credit-file-and-how-will-it-impact-your-life/.
---------------------------------------------------------------------------

    An important remaining question is whether consumers with medical 
debt and medical collections on their consumer reports are meaningfully 
more likely to become seriously delinquent than consumers with medical 
debt but no medical collections on their consumer reports, again 
holding all else equal. If this were true, the rule would reduce the 
accuracy of assessments of delinquency risk.
    Several commenters, including credit union trade associations, a 
bank trade association, a consumer reporting agency trade association, 
a debt collector trade association, a health care trade association, 
debt collectors, research institutions, researchers, a health care 
provider, members of Congress, and the SBA Office of Advocacy, 
expressed an expectation that the proposed rule would reduce the 
accuracy of assessments of delinquency risk. Conversely, multiple 
commenters, including consumer advocates and individuals, stated that 
medical debt is not a good predictor of delinquency risk.
    Multiple commenters, including credit union trade associations and 
at least one debt collector, stated that the proposed rule would 
increase the likelihood of consumer bankruptcy because, absent the use 
of medical collections information in credit eligibility 
determinations, creditors would approve consumers for unaffordable 
loans and consumers would become overleveraged. A debt collector trade 
association commenter cited research suggesting that medical debt is 
the largest driver of consumer bankruptcy and stated that creditors 
would be exposed to default risk if they could not infer a consumer's 
bankruptcy risk through the use of medical debt information in 
underwriting.\307\ However, a researcher commenter discussed the 
academic literature on the subject of medical debt and bankruptcy, and 
stated that, based on the cited evidence, fewer than 5 percent of 
bankruptcies of nonelderly adults are caused by hospitalization.\308\
---------------------------------------------------------------------------

    \307\ Arthur L. Kellerman, The U.S. Spends More On Healthcare 
Than Other Wealthy Nations But Ranks Last In Outcomes, Forbes (Oct. 
24, 2023), https://www.forbes.com/sites/arthurkellermann/2023/10/24/the-us-spends-more-on-healthcare-than-other-wealthy-nations-but-ranks-last-in-outcomes.
    \308\ Carlos Dobkin et al., The Economic Consequences of 
Hospital Admissions, 108:2 a.m. Econ. Rev. 308-52 (2018), https://doi.org/10.1257/aer.20161038.
---------------------------------------------------------------------------

    The CFPB expects that creditors will have sufficient information to 
accurately assess a consumer's bankruptcy risk under the rule, as the 
evidence presented in the Technical Appendix shows that the rule would 
lead to an expansion of credit without added risk of delinquency.
    One researcher commenter cited an academic study that considered 
how privacy ordinances impacted the likelihood of foreclosure in one 
Metropolitan Statistical Area between 2001 and 2006.\309\ Three 
counties within the MSA enacted an opt-in ordinance in 2003, in which 
financial institutions had to receive consumers' permission to share 
their information, while two counties did not enact the opt-in 
ordinance. The study found that loan denial rates fell, and foreclosure 
rates in 2007-2008 rose in the counties that enacted an opt-in 
ordinance. The commenter stated that the proposed rule was akin to a 
privacy rule against medical debt information and that there would be 
increases in lending to unqualified borrowers under the proposed rule.
---------------------------------------------------------------------------

    \309\ Jin-Hyuk Kim & Liad Wagman, Screening Incentives and 
Privacy Protection in Financial Markets: A Theoretical and Empirical 
Analysis, 46:1 RAND J. Econ. 1-22 (2015), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2317942.
---------------------------------------------------------------------------

    The study cited by the commenter is not specific to medical debt 
and includes all information about a consumer that would be available 
at a financial institution, making the study substantially broader in 
scope than the rule. Furthermore, the study does not support the 
commenter's claims, as the study explicitly states that the evidence in 
support of the relationship between the privacy ordinances and 
foreclosure rates is not causal.\310\ Instead, the CFPB provided causal 
evidence in the Technical Appendix showing that the availability of 
medical collection information in underwriting does not reduce the 
delinquency risk faced by creditors. Because delinquency risk is 
indicative of foreclosure risk, the CFPB concludes that there is 
minimal risk of increased foreclosure rates under the rule.
---------------------------------------------------------------------------

    \310\ See id. at 23.
---------------------------------------------------------------------------

    One researcher commenter cited an academic study showing that an 
auto finance company increased its profits when it began using credit 
scores in its underwriting in 2001.\311\ The CFPB does not see a direct 
implication from the results of this study to the rule and agrees that 
credit scoring models can be valuable for creditors. However, no credit 
scoring model is entirely reliant on any one element of credit

[[Page 3335]]

information, and at least one credit scoring company has voluntarily 
removed medical collections from its model with minimal changes in 
predictive performance.\312\
---------------------------------------------------------------------------

    \311\ Liran Einav et al., The impact of credit scoring on 
consumer lending, 44:2 RAND J. Econ. 249-74 (2013), https://
web.stanford.edu/~leinav/pubs/RAND2013.pdf.
    \312\ VantageScore, What was the rationale for removing Medical 
Debt from VantageScore 4.0?, https://www.vantagescore.com/faq/what-was-the-rationale-for-removing-medical-debt-from-vantagescore-4-0/ 
(last visited May 9, 2024).
---------------------------------------------------------------------------

    Numerous commenters, including debt collectors, credit union trade 
associations, health care providers, individuals, a financial trade 
association, a consumer reporting agency trade association, a debt 
collector trade association, a bank trade association, a consumer 
reporting agency, a consumer advocate, a health care trade association, 
a research institute, and a researcher stated that creditors would 
provide more credit to consumers with medical debt under the proposed 
rule. These commenters stated that this increased access to credit 
would harm creditors and consumers because many consumers with medical 
debt would not be able to afford the credit they were provided, causing 
them to default. Other commenters, including at least one research 
institute, health care provider, government official, an individual, as 
well as multiple researchers and consumer advocates, stated that 
consumers with medical debt would experience increased access to credit 
under the proposed rule without repercussions.
    In the Technical Appendix, the CFPB finds that medical collection 
reporting did not change the delinquency risk faced by creditors, as 
credit accounts provided to consumers with medical collections that 
were included on their consumer report were no more or less likely to 
become seriously delinquent than credit accounts provided to consumers 
with medical collections that were not included on their consumer 
report. The CFPB expects that creditors and consumers will benefit from 
increased access to credit under the rule, as described in more detail 
below.
    A debt collector trade association commented that the proposed rule 
would not increase access to mortgages for consumers with medical debt 
because creditors use several factors to make mortgage eligibility 
determinations and medical debt is unlikely to be the marginal, 
deciding factor. However, the CFPB uses evidence from the Technical 
Appendix to estimate that an additional 21,882 mortgages would be 
originated annually under the rule. Though this would be a small 
percent increase in the number of mortgages originated annually, it 
suggests that medical debt is a deciding factor for some mortgage 
originations.
    Multiple debt collectors commented that consumers with credit 
profiles similar to those of consumers with medical debt would be less 
likely to receive credit or may receive worse terms under the proposed 
rule, as creditors would proxy for medical debt information with other 
available information. Two researchers commented that creditors would 
begin to engage in statistical discrimination, whereby they restrict 
access to credit or provide worse terms to protected classes that are 
more likely to have medical debt.
    The CFPB finds in the Technical Appendix that the use of medical 
collections information in credit eligibility determinations does not 
reduce the delinquency risk faced by creditors, relative to a baseline 
in which medical collection information is not used because the 
information has not yet been added to a consumer report. This implies 
that underwriting models are oversaturated with information at 
baseline, meaning that they use more information than is necessary to 
optimally predict default risk. Furthermore, because medical 
collections information does not improve the predictiveness of credit 
eligibility determinations, holding other inputs constant, creditors 
would not find value from proxying for medical collection information. 
This is especially true if creditors chose to proxy for medical 
collection information by membership in a protected class, which is 
illegal under the Equal Credit Opportunity Act and may therefore create 
the risk of costly litigation.\313\
---------------------------------------------------------------------------

    \313\ See 12 CFR part 1002.
---------------------------------------------------------------------------

    A research institute commented that lenders may cease providing 
credit to low-income consumers because 2.9 million of the 19.9 million 
households with medical debt in 2021 had household income below the 
poverty threshold. However, using the same data set as the commenter, 
the CFPB finds that an almost identical share of households below the 
poverty line as households above the poverty line have medical debt: 
14.8 percent of households with incomes below the poverty line have 
medical debt, compared to 15.1 percent of households with incomes above 
the poverty line.\314\ As such, even if creditors desired to 
specifically exclude potential borrowers with medical debt, excluding 
low-income consumers would not accomplish this purpose, and as such it 
is unlikely that this outcome would occur.
---------------------------------------------------------------------------

    \314\ U.S. Census Bureau, Wealth, Asset Ownership, & Debt of 
Households Detailed Tables: 2021 (2021), https://www.census.gov/data/tables/2021/demo/wealth/wealth-asset-ownership.html.
---------------------------------------------------------------------------

    Several commenters, including multiple credit union trade 
associations, debt collectors, individuals, financial trade 
associations, at least one bank trade association, at least one 
consumer reporting agency trade association, at least one health care 
provider trade association, and at least one health care provider, 
stated that consumers generally would experience reduced access to 
credit or receive worse terms under the proposed rule. These commenters 
stated that the proposed rule would impact access to credit for all 
consumers, not just those with medical debt, because creditors would 
experience higher default rates from providing too much credit to 
consumers with medical debt and would pass those costs on to all 
consumers by raising interest rates or reducing the number or dollar 
amounts of originated loans. During the SBREFA process, debt collectors 
expressed similar concern that creditors would be concerned about the 
possibility of providing credit to consumers who cannot pay their 
medical debt under the proposed rule, leading creditors to raise 
interest rates and fees to account for anticipated increased 
delinquency rates.
    The CFPB does not expect that creditors would experience any 
significant decline in their customers' willingness or ability to 
repay, or in account performance under the rule. Instead, the evidence 
available to the CFPB and described in the Technical Appendix suggests 
that the rule will enable creditors to provide more credit accounts 
that have similar delinquency risk to credit accounts in their baseline 
lending portfolio. The data used in the Technical Appendix does not 
include the terms of credit accounts, so the CFPB cannot estimate how 
the terms provided to consumers may change under the rule, though it 
understands that any changes in terms would likely not be limited to 
consumers with medical debt. However, the CFPB expects that creditors, 
overall, would experience an increase in profitable loan volume under 
the rule, as market frictions have prevented creditors from fully 
reaching this more profitable equilibrium at baseline, as described 
above in part VII.A, Statement of Need.
    One researcher commenter stated that firms may become insolvent 
from mispricing risk under the proposed rule. However, many creditors 
currently approve applications for credit without full knowledge of 
consumer medical

[[Page 3336]]

debts because most medical debts are not included on many consumer 
reports, as discussed above. Comparing the performance of credit 
accounts that creditors made without medical collections information to 
the performance of accounts made with this information would provide 
the most direct evidence on how the rule may impact account 
performance, and therefore, creditors' profits. Ideally, this analysis 
would be performed with data from consumer reports linked with the 
timing and presence of consumers' outstanding and unreported medical 
debts. The CFPB does not have access to such linked data and is not 
aware of such data being available.
    The research described in the Technical Appendix provides the 
closest feasible analysis of the potential effect of the rulemaking 
against the baseline by considering if the visibility of medical 
collections that remain on consumer reports enables creditors to 
provide fewer credit accounts that result in serious delinquency. The 
CFPB uses de-identified consumer report data from the CFPB's CCIP and 
leverages the 180-day waiting period for reporting medical collections 
implemented under NCAP.\315\ The CFPB's research considers inquiries 
made by creditors to one of the NCRAs in response to an application for 
credit in the 180 days before a medical collection was added to a 
consumer report, using data after the NCAP 180-day waiting period was 
implemented in September 2017.\316\ Credit applications made during 
this 180-day period were made by consumers who had outstanding, but 
unreported, medical collections. The CFPB's research finds that the 
characteristics of inquiries made before and after a medical 
collection's addition to a consumer report are similar; therefore, any 
difference in the likelihood that a credit application led to an opened 
line of credit, or in the performance of those opened lines of credit, 
is likely caused by whether or not the creditor observed the consumer's 
medical collection.
---------------------------------------------------------------------------

    \315\ See part XII, Technical Appendix.
    \316\ The April 2023 NCRA reporting changes were too recent to 
be the focus of the analysis in the Technical Appendix, but the 
appendix provides heterogeneity results for whether all medical 
collections were at least $500 to provide the closest analog to the 
current lending environment. The CFPB relies on these results to 
estimate the impact of the rule.
---------------------------------------------------------------------------

    The CFPB uses a regression discontinuity design in the Technical 
Appendix to analyze how the presence of a medical collection on a 
consumer report when an inquiry is made affects the likelihood that the 
consumer opened a new account in connection with that inquiry. The 
CFPB's data cannot identify the cause of an unsuccessful inquiry, which 
may include a credit denial, unfavorable terms, or a change in the 
consumer's credit demand.\317\ For all credit account categories, the 
CFPB's research finds lower inquiry success rates for inquiries made 
immediately after a medical collection is added to a consumer report, 
compared to inquiries made immediately before a medical collection is 
added. This implies that creditors use medical collections information 
to deny or worsen the terms of credit provided to applicants. Table 1 
uses coefficients estimated in the Technical Appendix (provided in 
Column 1 of Table 7) to estimate the annual number of additional credit 
accounts that would be originated if medical collections were removed 
from all consumer reports, all else equal.
---------------------------------------------------------------------------

    \317\ The data used and empirical strategy of the CFPB's 
analysis are described in the Technical Appendix. This section 
describes the estimation of the effect of medical collection 
reporting on the likelihood that a hard pull of a consumer report 
(an inquiry) made by a creditor in response to a consumer's credit 
application led to an originated loan. Under the assumption that 
inquiries made just before and just after a medical collection is 
added to a consumer report have similar underlying delinquency risk 
and reflect similar consumer preferences for terms and other loan 
qualities, differences in inquiry success can be attributed to 
creditors' use of medical collections information in their 
underwriting processes. These assumptions are justified in the 
Technical Appendix.

    Table 1--Estimated Changes in the Number of Originated Loans Under the Rule by Credit Account Type \318\
----------------------------------------------------------------------------------------------------------------
                                                                                                   (6) Expected
                                                   (3) Baseline    (4) Expected     (5) Annual       change in
        (1) Account type           (2) Estimated      inquiry     percent change     number of        annual
                                    coefficient    success rate    in originated    originated      originated
                                                        (%)          accounts        accounts        accounts
----------------------------------------------------------------------------------------------------------------
Credit card.....................       ***-0.047            26.0            18.1       2,014,427         364,611
Mortgage........................         *-0.026            17.2            15.1         144,915          21,882
Other loans.....................         *-0.014            23.9             5.9       1,083,879          63,949
----------------------------------------------------------------------------------------------------------------
Estimates marked with *** are statistically significantly different from zero at the one percent confidence
  level. Estimates marked with * are statistically different from zero at the 10 percent confidence level.

    For all credit account categories, the CFPB expects that more loans 
would be originated if all medical collections were removed from 
consumer reports provided to creditors under the rule. The estimates in 
Columns 5 and 6 are underestimates because not all originated loans can 
be connected to an inquiry in the CFPB's CCIP, as the data only include 
inquiries made to one NCRA, and many non-mortgage creditors pull 
consumer reports from only one or two NCRAs. Additionally, these 
estimates assume that credit demand would not change under the rule. 
The CFPB's research in the Technical Appendix finds that consumers are 
more likely to apply for

[[Page 3337]]

credit in the weeks before a medical collection is added to their 
consumer report than in the weeks after. However, the characteristics 
of credit applications made before and after a medical collection is 
added (and their associated consumers) do not appear to have any 
statistically distinguishable differences between them. This finding 
suggests that any increase in credit demand under the rule will not 
lead to declines in credit application quality.
---------------------------------------------------------------------------

    \318\ All credit accounts in the CFPB's CCIP (excluding 
collections and non-loan information, such as child support 
tradelines) are included in one of the three categories of Column 1. 
Estimated coefficients in Column 2 are taken from Table 7 in the 
Technical Appendix. Column 3 includes the baseline inquiry success 
rate for inquiries made when medical collections are reported in the 
sample of the Technical Appendix. These baselines differ from those 
in the Technical Appendix because the CFPB reports baseline inquiry 
success rates for inquiries made when medical collections are 
unreported in the Technical Appendix, as it is standard to provide 
the average of the dependent variable to the left of the threshold 
in regression discontinuity analyses. Column 4 calculates the 
estimated percent change in the number of loans that would be 
originated under the rule by first dividing the estimated 
coefficient in Column 2 by the baseline average inquiry success rate 
in Column 3. Column 4 is then multiplied by negative one because the 
coefficients in Column 2 were estimated for medical collections 
moving from being unreported to reported in the Technical Appendix, 
but the change here is estimated for medical collections moving from 
being reported to unreported. Column 5 includes the number of 
inquiries made by creditors for consumer reports with reported 
medical collections between May 2023 and October 2023 in the CFPB's 
CCIP, multiplied by 50 to create a national estimate from the CCIP's 
2 percent sample, annualized by multiplying by 2, and then 
multiplied by the baseline inquiry success rate for people with 
reported medical collections in Column 3 to estimate the annual 
number of credit accounts originated. Column 6 multiplies Column 4 
by Column 5 to calculate the expected change in the number of 
originated credit accounts under the rule.
---------------------------------------------------------------------------

    The results in Table 1 provide evidence that creditors will provide 
more credit to consumers with medical collections under the rule. At 
baseline, the CFPB assumes that creditors only make loans to people 
with reported medical collections if those loans are profitable on 
average, holding consumer report characteristics constant. If the 
marginal loans that would be made under the rule have similar revenue 
potential to those made to consumers with reported medical collections 
at baseline, the increase in the number of loans made to people with 
medical collections would increase creditor profits. To estimate the 
revenue potential of originated accounts, the CFPB estimates the 
likelihood of serious delinquency within two years of a credit 
account's origination date for accounts that are opened in connection 
with an inquiry made in the 180 days before or after a medical 
collection is included on a consumer report. If creditors' use of 
medical collections information in their underwriting decisions reduces 
the delinquency risk of newly opened accounts, one would expect that 
credit provided to consumers with outstanding, but unreported, medical 
collections will have higher delinquency propensity than credit 
provided to consumers with outstanding and reported medical 
collections.
    The CFPB tests this hypothesis, and estimates ranges for the number 
of delinquent loans that would be issued if medical collections were 
not included on consumer reports, as when the rule is finalized, in 
Table 2. These ranges also incorporate the evidence from the Technical 
Appendix on how the number of newly originated loans would change, 
shown above in Table 1. The estimated coefficients from Column 1 of 
Table 8 in the Technical Appendix are listed in Table 2 in Column 2.

                   Table 2--Estimated Changes in the Number of Seriously Delinquent Loans Under the Rule by Credit Account Type \319\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 (6) Expected number of
                                                                                           (4) Expected    (5) Expected number    annual D90+ accounts
                                                                                             change in      of D90+ accounts       within two years of
                    (1) Account type                       (2) Estimated   (3) Baseline       annual       within two years of  origination at estimated
                                                            coefficient    D90+ rate (%)    originated       origination at       delinquency rate for
                                                                                             accounts      baseline D90+ rate      unreported medical
                                                                                                                                       collections
--------------------------------------------------------------------------------------------------------------------------------------------------------
Credit card.............................................           0.000            20.7         364,611                75,474                    75,474
Mortgage................................................           0.011             3.1          21,882                   678                       438
Other loans.............................................           0.012            17.1          63,949                10,935                    10,168
--------------------------------------------------------------------------------------------------------------------------------------------------------
None of the estimated coefficients are statistically significantly different from zero.

    Table 2 shows that, for mortgages and other (not credit card and 
not mortgage) account types, accounts originated by consumers with 
reported medical collections have slightly higher delinquency 
propensity than accounts originated by consumers with unreported 
medical collections. This is not consistent with creditors using 
medical collections information to reduce the delinquency risk of 
originated accounts. The coefficients are not statistically 
distinguishable from zero, so the evidence is only suggestive, rather 
than conclusive, that the expansion of credit under the rule would 
yield a rate of serious delinquency that is lower than the rate of 
serious delinquency currently faced by creditors for accounts they 
provide to consumers with reported medical collections. The CFPB 
interprets its findings as evidence against any significant increase in 
the rate of serious delinquency as compared to the rate of serious 
delinquency for accounts provided to consumers with reported medical 
collections at baseline. The CFPB notes that this claim holds if all 
else is equal under the rule.
---------------------------------------------------------------------------

    \319\ All credit accounts in the CFPB's CCIP (excluding 
collections and non-loan information, such as child support 
tradelines) are included in one of the three categories of Column 1. 
Estimated coefficients in Column 2 are taken from Table 8 in the 
Technical Appendix. Column 3 includes the baseline two-year serious 
delinquency propensity for loans opened when medical collections 
were reported in the sample of the Technical Appendix, though the 
CFPB provides baseline inquiry success rates for inquiries made when 
medical collections are unreported in the Technical Appendix, as is 
standard in reporting regression discontinuity results. Column 4 is 
copied from Column 6 of Table 1. Column 5 multiplies Column 3 by 
Column 4, describing the expected number of additional accounts that 
would be originated under the proposed rule and would be D90+ within 
two years at the baseline D90+ rate. Column 6 multiplies Column 4 by 
the difference between Column 3 and Column 2 (where Column 3 is 
reflected as a decimal instead of as a percent, e.g., 20.7 percent 
is equal to 0.207), describing the expected number of additional 
accounts that would be originated under the proposed rule and would 
be D90+ within two years at the D90+ rate for accounts originated 
when consumers have unreported medical collections. Columns 2 and 3 
are differenced instead of added because the coefficients in Column 
2 were estimated for medical collections moving from being 
unreported to being reported in the Technical Appendix, but the 
expected impact of the proposed rule is for medical collections 
moving from being reported to being unreported.
---------------------------------------------------------------------------

    If consumer demand for credit is affected by the rule, the credit 
applications that creditors receive may have different underlying 
delinquency risk. Some consumers may avoid applying for credit when a 
medical collection appears on their consumer report if they understand 
that this information lowers the likelihood that their credit 
application will be approved or provided with favorable terms. Removing 
medical collections from consumer reports used in credit eligibility 
determinations may lead these consumers to submit credit applications, 
which could lead to an increase or decrease in the delinquency risk of 
applicant pools. As discussed in the Technical Appendix, the CFPB finds 
that consumers are less likely to apply for credit after a medical 
collection is added to their consumer report; however, the underlying 
delinquency risk of the remaining credit applications is not 
statistically distinguishable from the delinquency risk of credit 
applications made before the medical collection is reported.
    To provide further evidence for how credit demand may respond to 
the rule, the CFPB used data from the CCIP to estimate if the NCRAs' 
voluntary removal of medical collections under $500 in April 2023 was 
associated with

[[Page 3338]]

increased credit demand.\320\ The CFPB found that consumers who had 
medical collections under $500 included on their consumer reports in 
the first quarter of 2023 were just 0.07 percent less likely to have an 
inquiry in the six months after medical collections under $500 were 
removed from their consumer reports. This suggests that credit demand 
is not responsive to the removal of medical collections from consumer 
reports, at least in the short run. In the long-run equilibrium, the 
CFPB expects that consumer demand for credit may increase without the 
use of medical collections information in underwriting, but the CFPB 
does not expect that either the underlying delinquency risk of 
consumers with medical collections that apply for credit, or creditors' 
ability to predict those consumers' delinquency risk, will change under 
the rule.
---------------------------------------------------------------------------

    \320\ The CFPB compared the credit demand of ``treated'' 
consumers, who had medical collections under $500 included on their 
consumer reports in the first quarter of 2023, to the credit demand 
of ``control'' consumers, who had medical collections under $500 
included on their consumer reports in the last quarter of 2022, but 
not in 2023. Neither group had any medical collections over $500 on 
their consumer reports in 2023. The treated group was directly 
affected by the April 2023 removal of medical collections under 
$500, but the control group was not, though both groups likely have 
similar underlying delinquency risk and credit demand. The CFPB 
estimated a linear regression of a binary monthly indicator 
describing if consumers had an inquiry on their consumer report in 
each of the six months between May and October 2023 on a binary 
indicator describing whether the consumer was in the treated or 
control group. The regression further included month fixed effects. 
The coefficient was statistically significant at the ten percent 
level.
---------------------------------------------------------------------------

    Creditors may change their underwriting processes in response to 
the rule, which may impact the allocation of credit. The CFPB's 
research in the Technical Appendix analyzed inquiries that were made 
when a subset of medical debt information was available to creditors on 
consumer reports. If creditors instead knew that they could not 
generally use any medical debt information in their underwriting 
processes, they may change their underwriting models to put more weight 
on other variables. The CFPB expects that these changes would improve 
model performance relative to the baseline, and as a result, 
delinquency rates may be lower under the rule.
    Although the CFPB does not estimate that there will be a 
significant number of additional seriously delinquent accounts as a 
result of the rule, the CFPB does not have data available that would 
enable it to calculate the monetary cost to creditors of potential 
additional delinquencies. The CFPB requested information on the dollar 
cost to creditors of an account that becomes seriously delinquent 
within two years of its origination. A researcher commenter stated that 
even if the probability of serious delinquency or default did not 
change under the rule, the Exposure at Default, or the dollar amount 
that the consumer is delinquent for, may be higher for credit card 
lenders under the rule. This would lead to a higher expected loss and 
reduced revenues.
    The CFPB agrees that the profitability of a loan is not solely 
defined by whether it becomes delinquent or not. However, the other 
factors that determine profitability do not unambiguously point toward 
lower revenue for creditors due to the rule, all else equal. For 
example, credit card borrowers who carry a balance month-to-month 
(often termed revolvers), are more profitable for credit card companies 
than other types of consumers.\321\ Therefore, higher credit limits for 
these consumers under the rule may lead to higher revenue. If this 
source of higher revenue does not balance higher costs of default, the 
CFPB expects that credit card lenders may reduce the credit limits they 
provide under the rule. The CFPB does not expect this outcome to be 
likely because credit card lenders already do not observe most medical 
debts, as most medical debts are not included on consumer reports and 
credit card lenders do not generally explicitly ask for medical debt 
information on credit applications.
---------------------------------------------------------------------------

    \321\ Robert Adams et al., Bd. of Governors of the Fed. Rsrv. 
Sys., Credit Card Profitability (Sept. 9, 2022), https://www.federalreserve.gov/econres/notes/feds-notes/credit-card-profitability-20220909.html.
---------------------------------------------------------------------------

    Increases in access to credit may revert over the long run if 
credit scoring companies change their models or creditors change their 
underwriting practices in response to the rule. Other information on 
consumer reports could receive different weights to compensate for the 
loss of medical collection information, which could attenuate these 
increases or even reduce access to credit for some consumers. However, 
the CFPB understands that credit scoring companies and creditors would 
only implement these changes if the benefit from doing so outweighed 
the costs of changing these models and procedures. The results in the 
Technical Appendix suggest that medical collections reporting does not 
enable creditors to make fewer delinquent loans, implying that 
creditors on average would not experience any decline in revenue from 
the absence of this information. Accordingly, the expected small (or 
zero) benefit of recalibrating credit scoring models and underwriting 
practices may lead to longer-term increases in access to credit for 
consumers with medical debt.
    Because commonly used commercial credit scoring models require a 
minimal number of credit tradelines to generate a score, some consumers 
may lose their credit scores if medical collections are removed from 
their consumer reports. For instance, FICO will only provide a credit 
score if the consumer has at least one credit account that is at least 
six months old and there has been activity on the credit account in the 
previous six months.\322\ Similarly, VantageScore requires at least one 
tradeline with any activity before providing a score.\323\ For 
consumers with few tradelines, the removal of medical collections could 
lead them to lose their credit score.
---------------------------------------------------------------------------

    \322\ Louis DeNicola, Experian, Improve Credit: How to Establish 
Credit if You're Unscoreable (Feb. 12, 2024), https://www.experian.com/blogs/ask-experian/how-to-establish-credit-if-youre-unscoreable/.
    \323\ Id.
---------------------------------------------------------------------------

    Multiple commenters, including at least one debt collector, health 
care provider, and an individual, agreed with this point, stating that 
the proposed rule would cause more people to have thin credit 
files.\324\ One NCRA commenter estimated that over three million 
consumers would lose their credit score under the proposed rule, though 
the commenter did not list the scoring model or models that provided 
the basis for their estimation.
---------------------------------------------------------------------------

    \324\ A thin credit file is a consumer report that contains 
fewer than five credit accounts. Jennifer White, Experian, What is a 
Thin Credit File? (May 25, 2022), https://www.experian.com/blogs/ask-experian/what-is-a-thin-credit-file-and-how-will-it-impact-your-life/.
---------------------------------------------------------------------------

    To provide evidence for the scale of this effect, the CFPB analyzed 
CCIP data from the months immediately before and after the NCRAs' 
voluntary removal of medical collections under $500 in April 2023. This 
internal analysis estimated that these reporting changes caused 
approximately 5,500 consumers to lose their credit score, representing 
0.03 percent of consumers who had all their medical collections removed 
because of the April 2023 reporting changes. The median credit score 
for these consumers before their medical collections were removed was 
581. The CFPB estimated using consumer reports from January 2024 in 
CFPB's CCIP as the baseline that fewer than 1,000 consumers may lose 
their credit scores if all medical collections were to be removed from 
consumer reports. The median credit score for these consumers in 
January 2024 was 573. Though not having a credit score can reduce 
access to credit, so too does having a subprime

[[Page 3339]]

credit score, and the generally low baseline credit scores of affected 
consumers indicate that any increase in the number of consumers without 
credit scores under the rule may not lead to an overall reduction in 
consumers' access to credit. Indeed, as stated by one NCRA, generally 
``no credit is better than bad credit'' for the purposes of accessing 
credit.\325\ Based on CFPB's analysis of the CCIP data, the CFPB 
expects that any reduction in access to credit because of an increase 
in the population of consumers without credit scores would be very 
small.
---------------------------------------------------------------------------

    \325\ Jim Akin, Experian, Credit Reports & Scores: Is No Credit 
Better than Bad Credit (Oct. 3, 2022), https://www.experian.com/blogs/ask-experian/is-no-credit-better-than-bad-credit/.
---------------------------------------------------------------------------

    Despite these potential negative effects, the CFPB expects that 
consumers who at baseline have medical collections on their consumer 
reports would generally experience increased access to credit under the 
rule, in part caused by increases in their credit scores. Multiple 
commenters, including consumer advocates, at least one research 
institute, and at least one researcher, stated that the proposed rule 
would lead to higher credit scores for consumers, though a bank trade 
association stated that any expected gains are speculative without 
access to credit scoring models. The CFPB agrees that existing research 
cannot conclusively describe how credit scores will be impacted by the 
rule, but the research sheds light on potential changes.
    Consumers with medical collections on their consumer reports in 
August 2022 had credit scores that were 30 points higher in August 2023 
than in August 2022, after the implementation of the voluntary removal 
of medical collections under $500 in April 2023; consumers without 
medical collections on their consumer reports in August 2022 
experienced a one-point decline in their average credit scores by 
August 2023.\326\ This suggests that the removal of medical collections 
under $500 may have increased credit scores by at least 30 points, on 
average, though there may be other differences between consumers with 
and without medical collections on their consumer reports in August 
2022 that explain part of the difference in their credit scores.
---------------------------------------------------------------------------

    \326\ Fredric Blavin et al., Urban Wire, Urban Inst., Medical 
Debt Was Erased from Credit Records for Most Consumers, Potentially 
Improving Many Americans' Lives (Nov. 2, 2023), https://www.urban.org/urban-wire/medical-debt-was-erased-credit-records-most-consumers-potentially-improving-many.
---------------------------------------------------------------------------

    Evidence from CFPB research suggests that consumers experience a 
25-point increase in their credit score, on average, after their last 
medical collection is removed from their consumer report.\327\ However, 
the causes of the studied medical collection removals were unknown, and 
there may be unobservable factors that caused both the medical 
collection removal and increases in consumer credit scores, so these 
results cannot be interpreted causally.
---------------------------------------------------------------------------

    \327\ Alyssa Brown & Eric Wilson, Consumer Fin. Prot. Bureau, 
Consumer Credit and the Removal of Medical Collections from Credit 
Reports (Apr. 2023), https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-removal-medical-collections-from-credit-reports_2023-04.pdf.
---------------------------------------------------------------------------

    One researcher commenter identified several methodological 
limitations of the study that the commenter stated meant that the CFPB 
study did not capture the causal effect of removing medical collections 
on consumers' credit scores. While the CFPB does not agree with many of 
the specific methodological critiques made by the commenter, the CFPB 
stated in the proposal and again above that it does not see this 
evidence as causal and agrees with the commenter on this broader point.
    Other CFPB research has leveraged the recent voluntary removal of 
medical collections tradelines below $500, finding that consumers for 
whom all medical collections were below $500 prior to the changes saw 
their credit scores increase 20 points more than consumers who had some 
medical collections tradelines above $500.\328\
---------------------------------------------------------------------------

    \328\ Consumer Fin. Prot. Bureau, Data Spotlight: Early Impacts 
of Removing Low-balance medical collections (May 16, 2023), https://www.consumerfinance.gov/data-research/research-reports/data-spotlight-early-impacts-of-removing-low-balance-medical-collections/.
---------------------------------------------------------------------------

    One researcher commenter stated that this conclusion could not be 
validated because there is no control group.\329\ The researcher 
commenter further stated that any increase in credit scores would lead 
to higher delinquency rates. With respect to the consequences of 
increases in credit scores for creditors, the CFPB does not agree that 
creditors will face higher delinquency rates as a result. When a credit 
scoring company removed medical collections from its model in 2023, the 
company reported that there was minimal change in predictive 
performance.\330\
---------------------------------------------------------------------------

    \329\ Regression discontinuity is a widely used policy 
evaluation tool and is described in detail in the Technical 
Appendix. In this context, the ``control group'' includes consumers 
whose largest medical debt is just over $500, compared to the 
``treatment group'' of consumers whose largest medical debt is just 
under $500. Under the assumptions adopted in this estimation 
strategy, assignment to the treatment or control group is as good as 
random, so the credit score difference can be attributed to the 
medical collection reporting change.
    \330\ VantageScore, What was the rationale for removing Medical 
Debt from VantageScore 4.0?, https://www.vantagescore.com/faq/what-was-the-rationale-for-removing-medical-debt-from-vantagescore-4-0/ 
(last visited May 9, 2024).
---------------------------------------------------------------------------

    For a sample of fewer than 3,000 consumers who had their medical 
debts removed from their consumer reports after their debt was relieved 
by a nonprofit organization, Kluender et al. (2024) found that credit 
scores increased by an average of just three points; however, this 
sample may not be representative of all consumers with medical debts, 
as the reported collections were much older on average than most 
medical collections on consumer reports.\331\
---------------------------------------------------------------------------

    \331\ Raymond Kluender et al., The effects of medical debt 
relief: evidence from two randomized experiments, Nat'l Bureau of 
Econ. Rsch. Working Paper No. 32315 (Apr. 2024), https://www.nber.org/system/files/working_papers/w32315/w32315.pdf.
---------------------------------------------------------------------------

    VantageScore removed all medical collections from its credit 
scoring model in 2022 and reported that ``millions of consumers may see 
an increase of up to 20 points in their VantageScore credit scores.'' 
\332\ The CFPB expects that consumers may experience similar increases 
in their credit scores from other credit scoring companies if medical 
debt information is removed from consumer reports under the rule. 
Higher credit scores can lead to higher loan approval rates and more 
favorable terms.\333\ The CFPB requested information on the dollar 
value to consumers of higher credit scores but did not receive relevant 
comments.
---------------------------------------------------------------------------

    \332\ VantageScore, VantageScore Excluding Medical Debt from 
Credit Scores (Aug. 12, 2022), https://www.vantagescore.com/press_releases/vantagescore-excluding-medical-debt-from-credit-scores/.
    \333\ Consumer Fin. Prot. Bureau, What is a credit score? (Aug. 
28, 2023), https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-score-en-315/.
---------------------------------------------------------------------------

    Several commenters, including debt collectors, individuals, and at 
least one health care provider, one researcher, and one debt collector 
trade association, commented that the proposed rule will make it more 
challenging for consumers to repair their credit scores. The commenters 
stated that ``clearing'' or ``resolving'' medical debts from a consumer 
report signals that a consumer is a good credit risk. The CFPB 
understands that this concern is not accurate based on the way credit 
scores currently operate. In the past, it was possible for consumers to 
increase their credit scores by paying a collections item, as paid 
collections tradelines are typically treated as less negative than 
unpaid collections tradelines. However, currently there is no mechanism 
for

[[Page 3340]]

paid medical collections to appear as a positive indicator because the 
NCRAs voluntarily removed paid medical collections from consumer 
reports in June 2022. Even before this change, the removal of a medical 
collection tradeline would typically be better for consumers' credit 
scores than a paid medical collections tradeline. Furthermore, it would 
typically be even better for the consumer to never have the medical 
collection appear on their consumer report in the first place, as under 
the rule.
    At baseline, debt collectors may use information from consumer 
reports to determine a consumer's ability to pay the collection amount 
and to guide what collection practices will be most cost-effective. 
Debt collector small entity representatives, in their submitted 
comments during the SBREFA process, stated that they found medical debt 
information on consumer reports to be relevant to estimating whether a 
consumer will repay a debt that is in collections.\334\ Under the rule, 
debt collectors will continue to be permitted to use medical debt 
information on consumer reports because debt collection is not 
considered a credit eligibility determination. The CFPB expects that, 
if medical debt information is a critical indicator of a consumer's 
ability to repay a debt in collections, debt collectors will continue 
to furnish medical debt information to consumer reporting agencies. 
Furthermore, debt collectors and health care providers may continue to 
furnish medical collections to consumer reporting agencies because 
consumer reporting agencies would still be able to include medical 
collections information on the reports that they provide for other non-
credit eligibility determination purposes such as employment or 
insurance, or to consumers seeking a copy of their own consumer 
reports.
---------------------------------------------------------------------------

    \334\ Id. at 36.
---------------------------------------------------------------------------

6. Compliance Costs
    Under the rule, consumer reporting agencies will need to ensure 
that medical information is removed from consumer reports that are 
provided to creditors for credit eligibility determinations, which will 
require significant changes to existing consumer reporting systems and 
databases. Compliance costs will be low because furnishers have an 
obligation to notify consumer reporting agencies of their status,\335\ 
thus making their removal from certain consumer reports a simple coding 
adjustment, which the consumer reporting agencies will already have to 
do to comply with several states' laws. The rule also has the potential 
to reduce consumer reporting agencies' costs by reducing the number of 
consumer disputes. Creditors may incur compliance costs to update their 
underwriting systems. Creditors may also need to train and staff 
attorneys to ensure they continue to meet their obligations to assess a 
consumer's ability to repay under the Truth in Lending Act and 
Regulation Z.
---------------------------------------------------------------------------

    \335\ See 15 U.S.C. 1681s-2(a)(9).
---------------------------------------------------------------------------

    Commenters noted that consumer reporting agencies may incur one-
time costs to develop practices to comply with the rule. At least one 
credit union commenter and consumer reporting agency trade group 
commenter stated that removing medical debt from consumer reports would 
require significant changes to existing consumer reporting systems and 
practices. One consumer reporting agency commenter wrote that 
implementing the NCAP required working with furnishers and took two 
years to complete. The commenter stated they would require at least the 
same amount of time to implement the changes needed to comply with the 
proposed rule.
    The CFPB agrees that some consumer reporting agencies may need to 
add new code to computer systems and databases such that no medical 
debt information is contained in consumer reports provided to creditors 
for credit eligibility determinations. However, some operational and 
compliance costs that may have otherwise been caused by the rule may 
have already been incurred to some degree to comply with certain State 
laws as well as the NCAP changes, and the consumer reporting agencies 
should be able to scale those coding changes nationwide. The CFPB 
requested data that could be used to quantify costs that may be 
incurred or have already been incurred by consumer reporting agencies 
but did not receive relevant quantitative information.
    A SBREFA commenter, not representing the NCRAs, posited that making 
the necessary changes would be a significant undertaking in terms of 
time and cost and that the NCRAs would have to reconfigure, test, and 
validate their current compliance programs. The CFPB agrees that 
compliance costs may be different for the three NCRAs (Equifax, 
Experian, and TransUnion) and Innovis compared to other consumer 
reporting agencies. The NCRAs and Innovis are known to provide a 
standardized reporting format to be used by furnishers, called Metro 2, 
and have organized their databases to process and screen data furnished 
in this format.\336\ The Metro 2 format that the NCRAs and Innovis 
currently provide to furnishers may help facilitate compliance because 
tradeline information submitted by furnishers is already required to 
include codes that specify when a debt is a medical debt.\337\
---------------------------------------------------------------------------

    \336\ The CFPB does not have information on whether other 
consumer reporting agencies also rely on the Metro 2 format. For an 
overview of how NCRAs and Innovis, another CRA, receive and screen 
furnished data, see Consumer Fin. Prot. Bureau, Key Dimensions and 
Processes in the U.S. Credit Reporting System: A review of how the 
nation's largest credit bureaus manage consumer data, at 19 (Dec. 
2012), https://files.consumerfinance.gov/f/201212_cfpb_credit-reporting-white-paper.pdf.
    \337\ Id. at 16-19.
---------------------------------------------------------------------------

    Additionally, the three NCRAs currently do not include medical 
collections under $500, medical collections that are less than one year 
past due, or paid medical collections on any consumer report provided 
to third parties. The NCRAs also remove medical collections as required 
by State laws.\338\ It is likely that the NCRAs already have systems in 
place to screen out any furnished medical collections that may violate 
these conditions. These systems may be specific to removing furnished 
medical collections from all consumer reports, rather than only from 
consumer reports provided to creditors for the purposes of a credit 
eligibility determination as required under the rule. It is possible 
that the NCRAs' and Innovis's screening process may have to be expanded 
such that they only selectively remove medical collections information 
from consumer reports as required by the rule, or they may choose to 
remove medical collections from all consumer reports. The CFPB does not 
have information that would allow it to predict how the NCRAs and 
Innovis would choose to comply with the rule.
---------------------------------------------------------------------------

    \338\ See, e.g., Colo. Rev. Stat. section 5-18-109; N.Y. Pub. 
Health Law art. 49-A; 2024 Conn. Act 24-6; 2024 Va. Acts ch. 751.
---------------------------------------------------------------------------

    Consumer reporting agencies that have different screening processes 
and databases that do not rely on the Metro 2 format may incur 
different compliance costs associated with their own systems, though, 
as noted above, some compliance costs may already have been incurred to 
comply with State laws, and efforts to comply with those state laws are 
likely replicable or scalable for a nationwide change. Consumer 
reporting agencies may incur costs to screen medical information 
provided by such furnishers, or for which there is no medical 
information furnisher within the meaning of FCRA section 623(a)(9), 
from consumer reports provided to creditors for credit eligibility

[[Page 3341]]

determinations. The CFPB requested comment and information on this 
potential compliance cost, general operational and compliance costs, 
and other possible one-time costs for consumer reporting agencies, but 
it did not receive relevant information.
    The U.S. Chamber of Commerce and an individual commenter stated 
that determining which debts are ``medical'' could be complex and that 
any broadening to include debts owed to third-party lenders would 
result in debts not connected to the provision of health care being 
removed from consumer reports. The CFPB is not broadening the rule to 
include debts owed to third-party lenders, however, and there is no 
indication that consumer reporting agencies currently have difficulty 
determining which debts are ``medical.''
    The removal of medical collections information from consumer 
reports provided to creditors for the purpose of credit eligibility 
determinations may reduce consumer reporting agencies' costs by 
reducing the number of accounts that consumer reporting agencies must 
screen or conduct accuracy checks for, and the number of consumer 
disputes that they may need to resolve. Consumer reporting agencies 
regularly process significant amounts of data. For example, the NCRAs 
receive information on over 1 billion tradelines each month and must 
accurately compile this information for each consumer.\339\ Under the 
FCRA, consumers have the right to dispute inaccuracies on their 
consumer reports, and consumer reporting agencies are obligated to 
investigate and resolve disputes if necessary.\340\ This dispute 
resolution process imposes costs on consumer reporting agencies. A CFPB 
analysis shows that 5.7 percent of reported medical collections 
tradelines have had a dispute flag, much higher than the rate of 
dispute flags for credit cards and student loans.\341\ One NCRA 
commenter reported that their data shows that while consumers dispute 
medical collections tradelines more often than other collections 
tradelines, they do so at a similar rate to consumers disputing other 
delinquent non-collections tradelines.
---------------------------------------------------------------------------

    \339\ Key Dimensions and Processes in the U.S. Credit Reporting 
System: A review of how the nation's largest credit bureaus manage 
consumer data, at 21 (Dec. 2012), https://files.consumerfinance.gov/f/201212_cfpb_credit-reporting-white-paper.pdf.
    \340\ 15 U.S.C. 1681i(a)(1)(A).
    \341\ 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/.
---------------------------------------------------------------------------

    To the extent that medical collections tradelines contribute to the 
number of disputes that consumer reporting agencies must address and, 
if possible, resolve, removing medical collections information from 
consumer reports may reduce consumer reporting agencies' costs 
associated with addressing disputes and dispute resolution. However, 
the CFPB does not have data to estimate the cost reduction arising from 
dispute management that consumer reporting agencies may experience if 
medical debt information is prohibited from appearing on most consumer 
reports provided to creditors. The CFPB requested data to quantify 
these potential cost-reducing benefits but did not receive relevant 
information.
    One credit union commenter wrote that consumer reporting agencies 
may provide medical debt information in violation of the rule, which 
puts the recipient creditors at legal risk if they then rely on that 
information for credit eligibility determinations. The CFPB, however, 
has no reason to believe that consumer reporting agencies will fail to 
comply with their obligations under Sec.  1022.38 to exclude medical 
debt information from consumer reports furnished to creditors, and 
assuming such compliance on the part of consumer reporting agencies, 
there will generally be no costs to creditors arising from litigation 
concerning medical information when they rely on consumer reports from 
consumer reporting agencies.
    One credit union trade association commented that, for creditors 
that use information beyond consumer reports, there will be costs 
associated with excluding medical information. At least one credit 
union commenter and one credit union trade association commenter stated 
that financial institutions would incur significant costs to update 
their underwriting systems, consumer reporting systems, and practices, 
and that there is a risk of errors during the removal process which 
could lead to further complications and disputes. The SBA Office of 
Advocacy commented that it may be challenging for creditors to prove 
whether medical debt information was disclosed by consumers themselves, 
and making these determinations would require training and staffing 
attorneys.
    The CFPB agrees that creditors may incur compliance costs from the 
rule. Creditors will need to ensure that they are not unintentionally 
using medical information in making lending determinations in 
circumstances that fall outside the exceptions to the creditor 
prohibition. The CFPB has determined that costs related to ensuring 
that no medical information is unintentionally used in lending 
determinations should be minor to the extent that creditors currently 
only utilize medical debt information provided through consumer 
reports. In such cases, so long as the consumer reporting agency 
providing the consumer report has complied with the rule, no medical 
debt information would be conveyed to the creditor, unless the consumer 
reporting agency has reason to believe the creditor intends to use the 
medical debt information in a manner not prohibited by the creditor 
prohibition. Creditors who use consumer reports may have additional 
costs if they utilize consumer reports from which the consumer 
reporting agency has not excluded medical debt information in 
compliance with Sec.  1022.38. In such cases creditors would need to 
employ systems and staff time to identify and exclude that information. 
But as explained above, the CFPB has no reason to believe that consumer 
reporting agencies will fail to comply with their obligations under 
Sec.  1022.38.
    In addition, creditors that rely on information outside of consumer 
reports will face compliance costs related to identifying medical 
information from other sources and excluding it from their underwriting 
(except as permitted by an exception to the creditor prohibition). The 
CFPB does not have data available to quantify the extent or dollar 
amount of any of these compliance costs, and requested comment on this 
issue but did not receive relevant data or estimates.
    Commenters including health care providers, a researcher, debt 
collectors, credit unions, the U.S. Chamber of Commerce, and the SBA 
Office of Advocacy commented that the proposed rule would create 
conflicting obligations for creditors under the Truth in Lending Act 
(TILA) and Regulation Z, particularly with respect to the ability-to-
repay provisions. They stated that it would be more difficult to 
respond to ability-to-repay laws under the proposed rule.
    The rule, however, allows creditors to obtain and use medical 
information to comply with applicable requirements of local, State, or 
Federal laws, including ability-to-repay laws, and provides an example 
of how a creditor can consider consumers' self-reported medical debt 
information to comply with such laws. The CFPB thus concludes that 
creditors can comply with both the rule and the requirements of 
ability-to-repay laws.

[[Page 3342]]

    One credit union commented that, by complying with the proposed 
rule, they would be at risk of losing a member with medical debt who 
receives credit from the credit union that they would not have received 
otherwise and who feels that they were not adequately educated or 
protected. The CFPB does not expect that consumers with medical debt 
would be provided credit they cannot afford under the rule.
    One bank trade association expressed confusion about including 
certain types of medical payments in underwriting. They stated that 
transaction data includes payments to medical providers, and they were 
unclear if this information could be used by creditors for the purpose 
of credit eligibility determinations under the proposed rule. The CFPB 
has permitted the use of medical information that is included in the 
transaction information of an account by creditors for the purpose of 
credit eligibility determinations in the final rule.
7. Inaccurate Billing
    The CFPB understands that many medical collections included on 
consumer reports reflect incorrect billing, including debts that were 
already paid by either the consumer or by their insurance company, or 
debts that are not owed by the consumer. Nearly half of consumers who 
made formal complaints to the CFPB about medical debt collection in 
2021 reported that they did not owe the debt, and many consumers did 
not know that they had outstanding medical debt until they discovered a 
collections tradeline on their consumer report.\342\
---------------------------------------------------------------------------

    \342\ 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.
---------------------------------------------------------------------------

    Numerous commenters, including individuals, debt collectors, health 
care providers, and health care trade associations, disputed the 
prevalence of inaccurate medical billing as described in the proposed 
rule. These commenters stated that most patient accounts are billed 
accurately and that the CFPB's complaint database, which was cited as 
evidence of inaccurate medical billing in the proposed rule, does not 
reflect health care provider perspectives. Multiple individuals, debt 
collectors, health care providers, NCRAs, and debt collection trade 
associations commented that most medical bills are accurate and that 
there is no evidence that bills are inaccurate. One debt collection 
trade association commented that disputes are generally the result of 
conflicts between health insurers and consumers, so the fault for 
inaccurate medical billing lies with health insurers rather than with 
debt collectors. An NCRA commented that medical collections are 
disputed less frequently than other collections, and when disputed, are 
verified at higher rates.
    One debt collector commented that consumer reporting agencies 
already have methods for consumers to dispute and pursue legal remedies 
for inaccurate data. A financial trade association noted that the 
proposed rule referenced a study in which, of the 43 percent of 
consumers that reported receiving a medical bill that they believed 
contained an error, 79 percent took actions to dispute the mistake with 
their insurer or health care provider.\343\ Seventy percent of those 
disputes led to a successful resolution, which the commenter 
interpreted as evidence that there are already measures in place within 
the health care system to address erroneous billing.
---------------------------------------------------------------------------

    \343\ 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/.
---------------------------------------------------------------------------

    At least one consumer advocate stated that, citing public 
statements from medical billing advocate groups, 60 to 80 percent of 
hospital medical bills have errors, with multiple individuals, research 
centers, consumer advocates, and law firms stating that inaccuracies in 
medical billing data are pervasive. At least one consumer advocate 
cited survey results that found most consumers have received a medical 
bill they believe to have errors.
    The CFPB acknowledges that its complaint database is centered 
around consumers' negative experiences with medical debt, and the 
database cannot provide an estimate of the share of medical collections 
that result from inaccurate billing. However, even though there are 
existing mechanisms for consumers to dispute inaccurate medical bills 
with health care providers, debt collectors, and consumer reporting 
agencies, consumers will benefit from not needing to dispute these 
debts under the rule in order to avoid inaccurate negative information 
on their credit reports.
    At baseline, consumers may pay debts they do not owe to remove them 
from their consumer report. The CFPB does not have information 
available to estimate how many medical debts are paid despite 
containing inaccurate information but expects that fewer of these 
erroneous debts will be paid under the final rule. The CFPB requested 
comment and submissions of data, or any other relevant information, 
that may be helpful in estimating this reduction in erroneous debts 
paid but did not receive data or evidence.
    At least one debt collector commented that consumer privacy would 
be harmed under the proposal because many entities would need to handle 
sensitive information. The commenter did not explain why this would be 
the case. In fact, the CFPB expects that fewer entities would need to 
handle sensitive information under the rule because medical information 
would no longer be provided to creditors on consumer reports.
    A researcher commenter stated that consumer privacy would be harmed 
by increased use of litigation under the rule, because litigation can 
lead to the formation of public records, unlike consumer reporting. The 
CFPB agrees that this is a potential cost of the rule but expects that 
the rule will not greatly increase the number of consumers that are 
subject to litigation.
8. Alternatives Considered
    Government officials and consumer advocate commenters recommended 
extending the rule to include medical credit cards, medical financing 
plans, and medical information on general-purpose credit cards. Under 
this alternative construction of the rule, consumer reporting agencies 
would not be permitted to provide this information to creditors, and 
creditors could not use this information in their credit eligibility 
determinations. One consumer advocate commented that, in addition, the 
CFPB should prohibit common features of medical payment products that 
can lead to consumer harm, including deferred interest, charging for 
services before they are rendered, and issuing payment products to 
consumers whose insurance would otherwise pay or who qualify for 
financial assistance. One government official suggested that this 
alternative may be preferable in part because card issuers' merchant 
category code system includes categories that would be similar to those 
needed to label medical information as such, simplifying the process by 
which creditors would be required to identify medical information.
    The CFPB's own research has shown that medical payment products can 
pose financial risk to consumers.\344\ The CFPB is working with the 
U.S.

[[Page 3343]]

Departments of Health and Human Services and Treasury to monitor the 
relationships between financial institutions and health care providers 
and gather relevant information.\345\ The CFPB has also considered the 
use of medical transaction information in credit eligibility 
determinations but understands that most creditors do not use granular 
transaction data. The CFPB has determined that there is not yet 
substantial evidence that the inclusion of medical payment products 
information on consumer reports, or its use in underwriting, leads to 
consumer harm and has chosen not to include this information in the 
rule.
---------------------------------------------------------------------------

    \344\ 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.
    \345\ 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/.
---------------------------------------------------------------------------

    Government officials and consumer advocates recommended extending 
the rule to consumer reports used for employment and tenant screening, 
rather than limiting the prohibition to medical information provided on 
consumer reports for the purpose of credit eligibility determinations 
as proposed.
    The CFPB does not have insight into the use of medical information 
by employers or landlords, but it did study its use by creditors to 
deny access to credit through its CCIP, as discussed in part VII.E.5. 
This evidence motivates the rule's focus on consumer reports provided 
to creditors for the purpose of credit eligibility determinations. The 
CFPB has determined that while these proposals might have additional 
benefits for consumers, they are beyond the scope of this rulemaking.
    Commenters including a debt collector trade association and 
multiple credit union trade associations stated that the CFPB should 
provide guidance to, or increase its enforcement of, relevant entities 
instead of issuing the final rule. The SBA Office of Advocacy commented 
that CFPB should consider using enforcement actions with respect to 
businesses that furnish inaccurate medical debt information instead of 
the proposed rule. A debt collector trade association commented that 
the CFPB should provide guidance to medical debt collectors covering 
the inclusion of financial assistance policies in debt collection 
communications under the safe harbor provisions of Regulation F. The 
commenter also stated that the CFPB should better enforce the FCRA 
consumer dispute provisions to ensure the accuracy of medical debt 
reporting and should work with the U.S. Department of Health and Human 
Services to provide information about financial assistance to consumers 
who may qualify. One credit union trade association commented that the 
CFPB should provide a safe harbor provision for credit unions that 
unintentionally possess medical debt information. A second credit union 
trade association commented that the CFPB should issue guidance to 
financial institutions to help them better understand the predictive 
value of medical debt or permit lenders to use medical debt as long as 
it is assigned a lower weight in credit eligibility determinations.
    The CFPB has determined that these proposed alternatives may be 
marginal improvements toward the intended goals of the rulemaking but 
would not fully realize the full scope of the rule's benefits for 
consumers. As such, it has decided not to implement these suggestions.
    Multiple commenters suggested alternatives that are beyond the 
jurisdiction of the CFPB. A debt collector trade association commented 
that it would be preferable to target health plan cost-sharing and 
policies that impact consumers' ability to pay large bills from any 
source, not just from health care. A debt collector commented that the 
CFPB should provide financial assistance programs, improve health 
insurance coverage, and simplify billing processes. A different debt 
collector stated that the CFPB should encourage health insurers to 
improve their health care coverage, so consumers incur less medical 
debt in the first place. A credit union trade association stated that 
the CFPB should require health care providers to require transparency 
in medical pricing and billing.
    These alternatives may achieve some of the goals of the rulemaking, 
but the CFPB does not have the regulatory authority to implement them.
    Commenters suggested that the CFPB conduct additional research 
before finalizing the proposed rule to evaluate whether the rule is 
necessary. A debt collector trade association commented that the CFPB 
could evaluate the benefit of the No Surprises Act after it has been 
fully implemented. A debt collector stated that the CFPB should not 
finalize the rule before it studies the impacts of the voluntary NCRA 
reporting changes, while another debt collector stated that the CFPB 
should first study how the marketplace responds to credit scoring 
models that reduce the weight that medical collection information 
receives.
    The CFPB shares the commenters' interest in ensuring the rule is 
supported by research. The evidence in the Technical Appendix shows 
that the inclusion of medical information on consumer reports reduces 
consumer access to credit without lowering creditors' delinquency risk. 
As such, the CFPB does not believe that additional research is needed.
    Two debt collectors commented that the CFPB should differentiate 
between consumers who can and cannot pay under the rule. One debt 
collector recommended making this differentiation by consumers that are 
insured versus uninsured, while the other recommended finding 
alternative measures to differentiate between consumers that are 
unwilling to pay versus those that are unable to pay.
    Information about consumers' insured status or that specifically 
addresses consumers' ability to pay is not commonly available on 
consumer reports. Including insurance information on consumer reports 
would impose substantial costs on consumer reporting agencies and on 
health insurers that would presumably be responsible for furnishing 
health insurance information, and it would exacerbate the privacy 
concerns that this rule aims to address. Including information on 
consumer ability to pay may pose even more challenges as many 
consumers' incomes and financial responsibilities are not included on 
consumer reports, and numerous entities that do not commonly furnish to 
consumer reporting agencies, such as landlords and employers, would be 
required to begin doing so. This would also not resolve the privacy 
concerns that this rule aims to address. As such, the CFPB has decided 
not to differentiate between groups of consumers in the rule.
    A debt collector commented that the CFPB should allow for positive 
consumer reporting of medical debts, such that consumers that make 
payments on medical bills would have those payments reported as 
positive information demonstrating an ability to pay debts.
    The CFPB understands that, at baseline, most medical debts are 
furnished to consumer reporting agencies by debt collectors rather than 
by health care providers. If consumers are more likely to make on-time 
payments to health care providers before the debt is placed with a debt 
collector, this would impose costly furnishing requirements on health 
care providers. It would also impose furnishing costs on debt 
collectors that, at baseline, often only furnish medical debts a few 
times, as discussed above. The CFPB does not have any evidence that 
paid medical collection items are treated positively in any lending 
models, and reporting positive medical

[[Page 3344]]

payment information also would only add to the privacy concerns that 
this rule seeks to address.
    A commenter stated that the CFPB should allow medical debt to 
remain on consumer reports but require that it is given less weight 
than other debts.
    It would be impracticable for the CFPB to dictate a precise weight 
that creditors may or may not give to medical debts in their 
underwriting or how credit scoring companies weight their algorithms. 
In addition, it is unclear to what debts the medical debt weights 
should be compared. Furthermore, reducing the weight on medical debts 
would not resolve the privacy concerns that this rule aims to address.
    A commenter stated that the CFPB should prevent health care 
providers and debt collectors from reporting medical debts as long as 
the consumer makes minimum payments.
    The CFPB understands that, at baseline, most medical debt 
furnishers use consumer reporting as a mechanism to induce payment. 
Therefore, it is unlikely that consumers making minimum payments on 
their medical debt would have it furnished to a consumer reporting 
agency. This suggested alternative to the rule would not achieve the 
same benefit to consumers as would the rule.
    A debt collector commented that the CFPB should implement a waiting 
period before medical debt can be reported and remove paid medical debt 
from consumer reports instead of finalizing the proposed rule.
    The NCRAs have implemented these changes voluntarily, so limiting 
the rule to these changes would not benefit consumers relative to the 
current baseline.
    A credit union trade association commented that the CFPB should 
require medical debt furnishers to ensure the accuracy of the 
information they provide to consumer reporting agencies.
    The CFPB agrees with this comment and issued similar guidance to 
medical debt collectors in October 2024.\346\
---------------------------------------------------------------------------

    \346\ Consumer Fin. Prot. Bureau, CFPB Takes Aim at Double 
Billing and Inflated Charges in Medical Debt Collection (Oct. 1, 
2024), https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-aim-at-double-billing-and-inflated-charges-in-medical-debt-collection/.
---------------------------------------------------------------------------

F. Specific Impacts on Consumers in Rural Areas

    The costs and benefits to consumers of the rule will likely be the 
same, on average, for consumers regardless of where they reside. 
However, consumers who have outstanding medical debt may be more likely 
to be affected by the rule. Research by the CFPB and others shows that 
medical collections on consumer reports are more common for consumers 
who reside in rural areas, compared to those who reside in non-rural 
areas.\347\ Therefore, in the aggregate, the rule may have a 
disproportionate impact on consumers in rural areas. Additionally, to 
the extent that the rule will lead to consumers being denied services 
by a health care provider, that cost could be greater for consumers in 
rural areas, where there are often fewer options for medical care.
---------------------------------------------------------------------------

    \347\ See, e.g., Matthew Liu et al., Consumer Fin. Prot. Bureau, 
Consumer Finances in Rural Appalachia (Sept. 2022), https://www.consumerfinance.gov/data-research/research-reports/consumer-finances-in-rural-appalachia/.
---------------------------------------------------------------------------

    Several commenters, including numerous debt collectors, multiple 
health care providers, at least one health care administration trade 
association, at least one debt collector trade association, and at 
least one individual, stated that the proposed rule may decrease access 
to health care in rural settings. At least one health care provider 
trade association commenter and at least one individual commenter 
stated that small rural health care providers are at a disadvantage at 
baseline and would face more challenges under the proposed rule. 
Commenters including multiple health care providers, at least one 
health care administration trade association, several debt collectors, 
at least one debt collector trade association, and at least one 
researcher, stated that the proposed rule may lead to increased 
closures among providers in rural areas and may result in patients 
needing to travel longer distances for treatment, or may force them to 
use emergency rooms for non-emergency care. At least one individual 
commenter, at least one debt collector trade association commenter, and 
at least one health care provider commenter cited that over 700 rural 
hospitals are already at risk of closure, and more than half of the 700 
face an immediate risk of closure.\348\ More than one health care 
provider commenter stated that hospital closures in rural areas will 
lead to worse health outcomes or more deaths. At least one consumer 
advocate commenter stated that closures of health care facilities lead 
to longer travel distances for consumers in rural areas, and that for 
some consumers, longer travel times can increase unpaid time off from 
work and paying for childcare, in addition to the cost of health care 
received.
---------------------------------------------------------------------------

    \348\ Molly Gamble, 703 hospitals at risk of closure, state by 
state, Becker's Hosp. Rev. (Aug. 5, 2024), https://www.beckershospitalreview.com/finance/703-hospitals-at-risk-of-closure-state-by-state.html?utm_medium=email&utm_content=newsletter.
---------------------------------------------------------------------------

    The CFPB does not expect that the rule will result in increased 
closures of rural health care providers. The CFPB expects that rural 
health care providers would only close if their revenue decreases 
significantly. As discussed above, the rule is unlikely to 
substantially impact revenue for health care providers in the 
aggregate, as most health care revenue does not consist of consumers 
paying their bills after receiving treatment and the CFPB does not 
expect that there will be significantly reduced incentive to pay 
medical debts as a result of the rule. Additionally, the CFPB does not 
expect rural providers' revenue to be differentially impacted by the 
rule. Therefore, the CFPB does not expect increased closures of rural 
health care providers and significant changes to access to health care 
in rural settings.

G. Specific Impacts on Depository Institutions With $10 Billion or Less 
in Assets

    The CFPB does not expect that the rule will have significantly 
different impacts on depository institutions with $10 billion or less 
in assets, compared to larger institutions. The CFPB concludes that the 
costs to creditors, described above, would apply equally to these 
smaller institutions.
    Several commenters, including at least one credit union trade 
association and at least one bank trade association, highlighted that 
small institutions, including some credit unions, lack the same risk 
mitigation resources as larger institutions. These commenters stated 
that the proposed rule would have a disparate negative impact on 
smaller institutions in terms of risk mitigation. At least one credit 
union trade association commenter stated that the proposal would likely 
lead to a scenario where small lenders decide the risk is too great and 
leave the lending market. At least one bank trade association commenter 
predicted that community banks would need to reduce their lending the 
most, leading to competitive losses and operational and compliance 
costs under the proposed rule. The commenter did not provide evidence 
for why community banks would be disproportionately impacted by the 
proposed rule.
    The CFPB finds in the Technical Appendix that the use of medical 
collections information in underwriting does not reduce the delinquency 
risk of accounts originated to consumers with reported medical 
collections relative to consumers with unreported medical collections, 
and therefore expects that

[[Page 3345]]

removing medical collection information from consumer reports will not 
reduce the ability of institutions to assess delinquency risk. The CFPB 
does not expect the impact to vary by the size of institution. Thus, 
the CFPB does not expect significantly different impacts on depository 
institutions with $10 billion or less in assets.

H. Specific Impacts on Access to Credit

    The CFPB discusses impacts on access to credit in detail above. In 
brief, the CFPB expects that some consumers will lose their credit 
score, although it is unclear whether this will decrease these 
consumers' access to credit relative to only having medical collections 
tradelines. Other consumers will likely see increased access to credit 
due in part to increased credit scores.

VIII. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (RFA) generally requires the CFPB to 
conduct an initial regulatory flexibility analysis (IRFA) and a final 
regulatory flexibility analysis (FRFA) and convene a panel to consult 
with small entity representatives before proposing a rule subject to 
notice-and-comment requirements,\349\ unless it certifies that the rule 
will not have a significant economic impact on a substantial number of 
small entities.\350\ The CFPB provided its analysis to ``describe the 
impact of the rule on small entities'' in the NPRM and requested public 
comment.\351\
---------------------------------------------------------------------------

    \349\ 5 U.S.C. 603, 609(b), (d)(2).
    \350\ 5 U.S.C. 605(b).
    \351\ 5 U.S.C. 603(a).
---------------------------------------------------------------------------

    In the NPRM, the CFPB Director certified that the proposed rule 
would not have a significant economic impact on a substantial number of 
small entities within the meaning of the RFA. Thus, neither an IRFA nor 
a Small Business Advisory Review Panel (SBREFA Panel) was required. 
Nonetheless, the CFPB decided in an abundance of caution to include the 
proposed rule in the SBREFA Panel convened to address a number of 
topics under the FCRA on October 18 and 19, 2023, and to provide an 
analysis consistent with the requirements of an IRFA. In response to 
the NPRM, the CFPB received comments relevant to the IRFA, which are 
reflected in the FRFA set forth in part VIII.B.
    The Small Business Review Panel for this rule is discussed in part 
VIII.A. Among other things, the FRFA contains a statement of the 
significant issues raised by the public comments in response to the 
IRFA, a statement of the assessment of the agency of such issues, a 
statement of any changes made in the proposed rule as a result of such 
comments, the response of the CFPB to comments filed by the Chief 
Counsel for Advocacy of the Small Business Administration in response 
to the proposed rule, and estimates of the number of small entities 
that may be subject to the rule and descriptions of the impact on those 
entities. The FRFA for this rule is set forth in part VIII.B.

A. Small Business Review Panel

    Under section 609(b) of the RFA, as amended by SBREFA and the CFPA, 
the CFPB must seek, prior to publishing the IRFA, information from 
representatives of small entities that may potentially be affected by 
its proposed rule to assess the potential impacts of that rule on such 
small entities. The CFPB complied with this requirement when it 
included the proposed rule in the Small Business Review Panel convened 
on October 18 and 19, 2023.

B. Final Regulatory Flexibility Analysis

1. Statement of the Need for, and Objectives of, the Rule
    The creditor prohibition in section 604(g)(2) of the FCRA reflects 
Congress's intention to protect the privacy of sensitive medical 
information.\352\ The creditor prohibition generally prevents creditors 
from considering medical information pertaining to a consumer in 
determining the consumer's eligibility, or continued eligibility, for 
credit. As described in more detail in part IV.B, Congress allowed 
certain Agencies, and later the CFPB, to make exceptions to this 
prohibition, consistent with the congressional intent ``to restrict the 
use of medical information for inappropriate purposes.'' \353\ In 2005, 
the Federal financial agencies and the National Credit Union 
Administration promulgated the financial information exception, 
restated in the CFPB's regulations at Sec.  1022.30(d), which allows a 
creditor to consider certain medical information, including medical 
debt information and information relating to expenses, assets, and 
collateral, pertaining to a consumer in crediting decisions, provided 
the conditions of a three-part test are met.\354\ The CFPB has 
determined that an exception for creditors to consider this type of 
medical information for credit eligibility determinations is not 
``necessary and appropriate'' to protect legitimate operational, 
transactional, risk, consumer, or other needs, nor is an exception 
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). The CFPB has also determined 
that an exception for creditors to consider medical information 
relating to a consumer's expenses, assets, and collateral would not 
meet the requirements for an exception under FCRA section 604(g)(5). As 
a result, the CFPB is removing the financial information exception and 
limiting the circumstances under which consumer reporting agencies can 
include medical collections information in consumer reports provided to 
creditors. Further details may be found in parts I.B and IV.
---------------------------------------------------------------------------

    \352\ FCRA section 604(g)(2) (15 U.S.C. 1681b(g)(2)).
    \353\ FCRA section 604(g)(5) (15 U.S.C. 1681b(g)(5)).
    \354\ This background and the three-part test are discussed in 
part III.B.
---------------------------------------------------------------------------

    The primary objectives of this rule are to enhance consumer privacy 
with respect to sensitive medical information and enable creditors to 
make appropriate credit decisions based on accurate information, in 
line with the purposes of the FCRA. The CFPB is authorized under 
section 604(g)(5) of the FCRA to promulgate exceptions to the creditor 
prohibition ``that are determined to be necessary and appropriate to 
protect legitimate operational, transactional, risk, consumer, and 
other needs . . . consistent with the intent of [the prohibition] to 
restrict the use of medical information for inappropriate purposes.'' 
The CFPB also has authority under section 621(e) of the FCRA to issue 
regulations to carry out the purposes and objectives of, and to prevent 
evasions of or to facilitate compliance with, the FCRA. A discussion of 
the background leading to the rule may be found in part I, and a 
discussion of the legal authority relevant to this rule may be found in 
part III.
2. Significant Issues Raised by Public Comments in Response to the 
IRFA, a Statement of the Assessment of the Agency of Such Issues, and a 
Statement of Any Changes Made in the Proposed Rule as a Result of Such 
Comments
    The CFPB received few comments that were explicitly in response to 
the IRFA of the proposed rule. Commenters, including small entity 
representatives in the SBREFA process and debt collectors, stated that 
the SBREFA process was rushed and that they did not have enough 
information to provide input on the proposed rule. Commenters also 
stated that some types of entities that would be affected by the 
proposed rule were not considered in the IRFA, such as nonbank lenders, 
health care

[[Page 3346]]

providers, and payors. A debt collector trade organization stated that 
initial compliance costs would be about $100,000 for each of its member 
debt collectors, most of which, according to the commenter, are small 
entities. Several commenters, including debt collectors and a debt 
collector trade association, stated that the CFPB should consider some 
exemptions or longer implementation timelines.
    In response to these comments, the CFPB respectfully disagrees that 
the SBREFA process was rushed or that participants needed more 
information--the proposal relevant to this rulemaking was 
straightforward, the CFPB gave participants an outline summary of the 
proposal one month in advance of hosting the panel and gave 
participants an opportunity to provide written feedback three weeks 
after the panel. Additionally, with respect to the IRFA, the CFPB has 
revised its estimate of the number of small entities that may be 
affected by the rule to include debt collectors and health care 
providers in addition to the consumer reporting agencies and creditors 
listed in the IRFA. In its discussion of projected reporting, 
recordkeeping and compliance costs, the CFPB includes estimates 
provided by commenters. The CFPB also includes a discussion of the 
alternatives proposed by commenters in its description of significant 
alternatives to the rule.
3. Response of the Agency to Any Comments Filed by the Chief Counsel 
for Advocacy of the Small Business Administration in Response to the 
Proposed Rule, and a Detailed Statement of Any Change Made to the 
Proposed Rule in the Final Rule as a Result of the Comments
    The Chief Counsel for Advocacy of the Small Business Association 
(Advocacy) provided comments on several aspects of the proposal, which 
generally echoed comments received from both small and large industry 
entities. Advocacy stated that the rule will significantly impact small 
entities involved in debt collection and that the CFPB has 
underestimated the number of small entities that may be impacted. 
Advocacy stated that the CFPB did not provide sufficient information to 
meet the requirements of a certification of no significant economic 
impact on a substantial number of small entities, and that the IRFA did 
not contain economic information on the projected reporting, 
recordkeeping, and other compliance costs. Advocacy also commented that 
the rule will increase litigation, causing harm to small entities and 
consumers because litigation is costly. Advocacy stated that the rule 
will lead to conflicts with other laws, including TILA and Regulation 
Z, as well as applicable State laws. Furthermore, Advocacy stated that 
the rule is redundant in light of changes to industry practices and 
State laws. In their comment, Advocacy stated that the CFPB should 
issue clarifications on which laws are controlling so as to mitigate 
litigation risks for small entities, including creditors who have 
ability-to-repay requirements under TILA and Regulation Z, and debt 
collectors who operate in states with their own medical debt collection 
laws. Advocacy also stated, based on feedback from small entity 
representatives during the SBREFA Panel, that the cost of credit for 
small entities may be affected by the rule because removing medical 
collections from consumer reports may increase credit scores and cause 
creditors to increase their underwriting standards.\355\ Finally, 
Advocacy suggests that the CFPB provide guidance to small entities for 
complying with the rule, and develop a mechanism to ensure that small 
entities are not penalized for not including medical debt in their 
ability-to-repay determinations.
---------------------------------------------------------------------------

    \355\ Advocacy also commented that the cost of credit for small 
entities will increase because of the ``written instructions'' 
provision. The ``written instructions'' provision would specify what 
is needed to establish a permissible purpose for an entity to obtain 
a consumer report pursuant to the written instructions of the 
consumer. While the ``written instructions'' provision was included 
in the topics under the FCRA that were discussed during at the 
SBREFA Panel convened, it is not included in this rulemaking.
---------------------------------------------------------------------------

    In this FRFA, the CFPB has considered indirect impacts to small 
entities that are health care providers and debt collectors, in 
addition to the direct impacts to consumer reporting agencies and 
creditors considered in the IRFA.\356\ By examining all credit 
inquiries made between July 2023 and December 2023 contained in the 
CCIP, the CFPB determined that most small creditors receive few 
applications from consumers with medical collections that appear on 
their consumer reports. In order for the rule to create a significant 
reduction in revenue, consumers with medical collections would have to 
experience unreasonably high default rates. Thus, the CFPB has 
determined that the rule will not have a significant economic impact on 
a substantial number of small entities directly impacted by the rule, 
specifically, consumer reporting agencies and creditors. The rule will 
not directly impact the behavior of medical debt holders such as health 
care providers and debt collectors since the rule will not affect their 
ability to furnish medical debt information to consumer reporting 
agencies. However, to the extent that furnishing becomes a less 
effective means of inducing payment, health care providers and debt 
collectors may incur costs associated with their use of other 
collection mechanisms as well as potential reductions in revenue. For 
these reasons, the CFPB acknowledges the possibility of indirect 
economic impacts on small entities that are health care providers or 
debt collectors. In some parts of the FRFA, the CFPB references the 
impact analysis part of this rule and presents quantitative estimates 
when available, including estimates provided by commenters in response 
to the proposed rule. In addition, the CFPB has revised its estimates 
of the number of small entities that are creditors that will be 
affected by the rule.
---------------------------------------------------------------------------

    \356\ By considering impacts on small entities not directly 
regulated by the rule, the CFPB has gone beyond the statutory 
requirements for a FRFA. See 5 U.S.C. 604(a)(4)-(5) (calling for 
analysis focused on ``small entities to which the rule will apply'' 
and ``small entities which will be subject to the requirement[s]'' 
of the rule) (emphasis added); see also Mid-Tex Elec. Coop., Inc. v. 
FERC, 773 F.2d 327, 342 (D.C. Cir. 1985) (``Congress envisioned that 
the relevant `economic impact' [under the Regulatory Flexibility 
Act] was the impact of compliance with the proposed rule on 
regulated small entities.'').
---------------------------------------------------------------------------

    With regard to the harm to consumers and small entities from 
litigation, the CFPB has considered the extent to which litigation 
might increase as a means of inducing payment of medical debt under the 
rule. As discussed in part VII.E.4, debt collection litigation is 
already a collection mechanism used at baseline, and the rule might 
increase debt collection litigation. Increased debt collection 
litigation may be most likely to occur in States that have not already 
passed laws prohibiting medical collections from appearing in consumer 
reports, and also for small entities collecting on medical debts that 
are over $500.
    In the proposed rule, the CFPB included an example in proposed 
Sec.  1022.30(e)(6) to direct creditors and card issuers that are 
creditors regarding how they may use medical information provided by 
the consumer in compliance with TILA and Regulation Z, as set forth in 
Sec.  1022.30(e)(1)(ii), for purposes of compliance with the ability-
to-repay rule under Sec.  1026.43(c) for closed-end mortgages, the 
repayment ability rule under Sec.  1026.34(a)(4) for open-end, high-
cost mortgages, and the ability-to-pay rule under Sec.  1026.51(a) for 
open-end (not home-secured) credit card accounts. With respect to 
Advocacy's comment that the rule is redundant in light of changes to 
State

[[Page 3347]]

laws and industry practices, the CFPB's expectation is that the rule 
will provide clarity and uniformity in the treatment of medical 
collections on consumer reports across the US. The rule will also 
complement the voluntary NCRA changes that removed medical collections 
from consumer reports under $500 as well as paid medical collections, 
which are industry practices that apply only to medical collections 
furnished to the NCRAs and can be reversed at any time.
    The CFPB acknowledges that it is possible that underwriting 
standards might tighten if the rule causes credit scores to increase 
for a substantial fraction of the population. However, the CFPB's 
recent research shows that only 5 percent of consumers still have 
medical debt on their consumer reports at baseline.\357\ The CFPB 
expects that any increase in credit scores may represent a more 
accurate reflection of credit risk, and that it is unlikely that 
creditors will raise underwriting standards sufficiently to cause a 
significant impact on the cost of credit for small entities.
---------------------------------------------------------------------------

    \357\ Ryan Sandler & Zachary Blizard, Consumer Fin. Prot. 
Bureau, Recent Changes in Medical Collections on Consumer Credit 
Records Data Point, at 3 (Mar. 2024), https://files.consumerfinance.gov/f/documents/cfpb_recent-changes-medical-collections-on-consumer-credit-reports_2024-03.pdf.
---------------------------------------------------------------------------

4. Description and, Where Feasible, Provision of an Estimate of the 
Number of Small Entities to Which the Rule Will Apply
    The rule will directly affect small entities that participate as 
creditors as that term is defined in section 702 of the ECOA, except 
for small entities excluded from coverage by section 1029 of the CFPA, 
because it will prohibit them from considering certain medical 
information in their underwriting decisions. This information has been 
available to creditors under the financial information exception. In 
limiting the circumstances under which medical debt information can be 
included on consumer reports, the rule will also directly affect some 
small consumer reporting agencies. Specifically, consumer reporting 
agencies that currently provide medical debt information to creditors 
for credit eligibility determinations will generally no longer be able 
to do so.
    For the purposes of assessing the impacts of the rule on small 
entities, ``small entities'' are defined in the RFA to include small 
businesses, small nonprofit organizations, and small government 
jurisdictions.\358\ A ``small business'' is determined by application 
of Small Business Administration (SBA) regulations in reference to the 
North American Industry Classification System (NAICS) classification 
and size standards.\359\
---------------------------------------------------------------------------

    \358\ 5 U.S.C. 601(6)
    \359\ See U.S. Small Bus. Admin., Table of size standards, 
https://www.sba.gov/document/support-table-size-standards (last 
visited May 13, 2024).
---------------------------------------------------------------------------

    There are several NAICS industries with small entities that may be 
subject to this rule. Consumer reporting agencies receive and assemble 
various types of consumer information and provide consumer reports to 
third parties for various purposes. Consumer reporting agencies are 
mostly contained within the NAICS industry ``credit bureaus'' (561450). 
However, not all entities within this NAICS code are consumer reporting 
agencies.\360\ Additionally, some consumer reporting agencies 
specialize in providing consumer reports to facilitate other 
operations, such as employment screening, check and bank account 
screening, and insurance, and not for credit purposes.\361\ Many small 
consumer reporting agencies will not be affected by the rule, either 
because they do not currently furnish consumer reports containing 
medical debt information or because, under the rule, consumer reports 
containing medical debt information may continue to be provided for 
purposes other than credit eligibility, such as employment screening or 
insurance.
---------------------------------------------------------------------------

    \360\ NAICS 561450 also includes mercantile credit reporting 
bureaus. There may also be a small number of consumer reporting 
agencies classified under Investigation and Personal Background 
Check Services (NAICS 561611).
    \361\ An overview of the types of consumer reporting agencies 
may be found at: Consumer Fin. Prot. Bureau, List of consumer 
reporting companies, https://www.consumerfinance.gov/consumer-tools/credit-reports-and-scores/consumer-reporting-companies/ (last 
visited Apr. 15, 2024). This list is not intended to be all-
inclusive and does not cover every company in the industry.
---------------------------------------------------------------------------

    Creditors potentially directly affected by the rule are contained 
in multiple NAICS categories. These include depository institutions, 
such as commercial banks and credit unions, and non-depository 
institutions, such as mortgage and non-mortgage loan brokers, as well 
as firms that are primarily engaged in sales lending, consumer lending, 
or real estate credit. Creditors that currently use medical information 
related to debts, expenses, assets, and collateral in connection with a 
determination of a consumer's eligibility, or continued eligibility, 
for credit will be directly affected by the rule.
    Medical debt holders, which include health care providers and debt 
buyers, may also be indirectly affected by the rule. The rule will not 
affect these entities' ability to furnish information to consumer 
reporting agencies. However, because consumer reporting agencies will 
generally not be able to include medical debt on consumer reports 
provided to creditors for credit eligibility determinations, the rule 
may reduce the effectiveness of furnishing as a collection mechanism. 
Health care providers are broadly contained in the NAICS subsector 62. 
Debt collectors are contained in several NAICS categories, and include 
small entities such as debt buyers, collection agencies, and collection 
law firms.
    The SBA size standards use asset thresholds for depository 
institutions and revenue thresholds for non-depository institutions. 
Depository institutions are small if they have less than $850 million 
in assets. Consumer reporting agencies are small if they receive less 
than $47 million in annual revenues. Non-depository institutions in 
many industries are small if they receive less than $47 million in 
annual revenues, but the threshold is lower for some NAICS categories 
of non-depository institutions. The revenue thresholds for health care 
providers and debt collectors differ depending on the NAICS industry 
they belong to, ranging between $9 million in annual revenues and $47 
million in annual revenues.
    Table 3 shows the number of small businesses within NAICS 
categories that may be subject to the rule according to the December 
2023 NCUA and FFIEC Call Report data and the 2017 Economic Census data 
from the U.S. Census Bureau, which are the most recent sources of data 
available to the CFPB.

[[Page 3348]]



             Table 3--Number of Entities Within NAICS Industry Codes That May Be Subject to the Rule
----------------------------------------------------------------------------------------------------------------
                                                      Total      Total number
       NAICS codes           NAICS description      number of      of small             SBA size standard
                                                     entities      entities
----------------------------------------------------------------------------------------------------------------
522110..................  Commercial Banking.....        4,248           3,170  <$850M (assets).
522130..................  Credit Unions..........        4,702           4,202  <$850M (assets).
522180..................  Savings Institutions             322             239  <$850M (assets).
                           and Other Depository
                           Credit Intermediation.
522210..................  Credit Card Issuing....            6               1  <$850M (assets).
522220..................  Sales Financing........        2,367           2,124  <$47M.
522291..................  Consumer Lending.......        3,037           2,915  <$47M.
522292..................  Real Estate Credit.....        3,289           2,904  <$47M.
522298..................  International,                 5,422             128  <$47M.
                           Secondary Market, and
                           All Other Non-
                           depository Credit
                           Intermediation.
522310..................  Mortgage and                   6,809           6,684  <$15M.
                           Nonmortgage Loan
                           Brokers.
522320..................  Financial Transactions         3,068           2,928  <$47M.
                           Processing, Reserve,
                           and Clearinghouse
                           Activities.
522390..................  Other Activities               3,772           3,621  <$28.5M.
                           Related to Credit
                           Intermediation.
541110..................  Offices of Lawyers.....      163,725             833  <$15.5M.
561440..................  Collection Agencies....        3,224           3,050  <$19.5M.
561450..................  Credit Bureaus.........          307             279  <$41M.
621111..................  Offices of Physicians        161,286         158,262  <$16M.
                           (except Mental Health
                           Specialists).
621112..................  Offices of Physicians,        10,561          10,407  <$13.5M.
                           Mental Health
                           Specialists.
621210..................  Offices of Dentists....      125,329         124,787  <$9M.
621310..................  Offices of                    38,695          38,665  <$9M.
                           Chiropractors.
621320..................  Offices of Optometrists       19,627          19,492  <$9M.
621330..................  Offices of Mental             24,236          23,958  <$9M.
                           Health Practitioners
                           (except Physicians).
621340..................  Offices of Physical,          26,722          26,217  <$12.5M.
                           Occupational and
                           Speech Therapists and
                           Audiologists.
621391..................  Offices of Podiatrists.        7,304           7,241  <$9M.
621399..................  Offices of All Other          19,442          19,170  <$10M.
                           Miscellaneous Health
                           Practitioners.
621410..................  Family Planning Centers        1,472           1,398  <$19M.
621420..................  Outpatient Mental              6,523           5,879  <$19M.
                           Health and Substance
                           Abuse Centers.
621491..................  HMO Medical Centers....           27               3  <$44.5M.
621492..................  Kidney Dialysis Centers          431             374  <$47M.
621493..................  Freestanding Ambulatory        4,385           3,888  <$19M.
                           Surgical and Emergency
                           Centers.
621498..................  All Other Outpatient           6,630           5,845  <$25.5M.
                           Care Centers.
621511..................  Medical Laboratories...        3,365           3,106  <$41.5M.
621512..................  Diagnostic Imaging             4,272           3,898  <$19M.
                           Centers.
621610..................  Home Health Care              23,801          22,840  <$19M.
                           Services.
621910..................  Ambulance Services.....        3,071           2,940  <$22.5M.
621999..................  All Other Miscellaneous        3,557           3,332  <$20.5M.
                           Ambulatory Health Care
                           Services.
622110..................  General Medical and            2,560           1,130  <$47M.
                           Surgical Hospitals.
622210..................  Psychiatric and                  396             213  <$47M.
                           Substance Abuse
                           Hospitals.
622310..................  Specialty (except                332             131  <$47M.
                           Psychiatric and
                           Substance Abuse)
                           Hospitals.
623110..................  Nursing Care Facilities        9,137           8,374  <$34M.
                           (Skilled Nursing
                           Facilities).
623210..................  Residential                    6,885           6,322  <$19M.
                           Intellectual and
                           Developmental
                           Disability Facilities.
623220..................  Residential Mental             4,165           3,674  <$19M.
                           Health and Substance
                           Abuse Facilities.
623311..................  Continuing Care                3,874           3,533  <$34M.
                           Retirement Communities.
623312..................  Assisted Living               14,338          13,885  <$23.5M.
                           Facilities for the
                           Elderly.
623990..................  Other Residential Care         3,194           2,931  <$16M.
                           Facilities.
                                                  --------------------------------------------------------------
    Total...............  .......................      739,915         554,973
----------------------------------------------------------------------------------------------------------------

    Table 4 provides the estimated number of small entities within the 
categories of credit bureaus, depository institutions, and non-
depository institutions, debt collectors (including debt buyers), and 
health care providers as well as the NAICS codes these entities may 
fall within. Under the rule, small consumer reporting agencies will no 
longer be able to provide to creditors consumer reports that contain 
medical debt information under the financial information exception. The 
CFPB is not able to precisely estimate the number of small consumer 
reporting agencies whose activities will be affected by the rule. As 
discussed above, many consumer reporting agencies currently specialize 
in providing consumer reports for purposes that will not be affected by 
the rule. Additionally, consumer credit markets currently rely heavily 
on consumer reports from consumer reporting agencies which are not 
small entities.\362\ For these reasons, the CFPB estimates that only a 
small fraction of the small consumer reporting agencies identified in 
Table 4 will be affected by the rule. The CFPB requested data to more 
precisely quantify the number of small consumer reporting agencies that 
will be affected by the rule, but did not receive relevant comments.
---------------------------------------------------------------------------

    \362\ Impacts to consumer reporting agencies are also described 
within part VII.E.
---------------------------------------------------------------------------

    Small creditors that will be directly affected by the rule are 
included in several NAICS categories that can be broadly divided into 
depository and non-depository institutions. Small creditors will be 
generally prohibited from considering medical information from consumer 
reports (and other sources) in credit eligibility determinations under 
the rule, unless a specific exception applies. However, some small 
creditors currently do not consider medical information that will be 
prohibited under the rule, and others only consider medical debt 
information if consumers disclose that they have

[[Page 3349]]

made monthly payment arrangements with medical debt holders.\363\
---------------------------------------------------------------------------

    \363\ Two small entity representatives provided this context in 
their comment letters. Written Submission of Evelyn Schroeder, Vice 
President, First Security Bank and Trust, to the CFPB, ``Re: CFPB's 
Outline of Proposals and Alternatives Under Consideration, Small 
Business Advisory Review Panel for Consumer Reporting Rulemaking'' 
at 7 (Nov. 6, 2023). Written Submission of Jeff Jacobson, Vice 
President, New Market Bank, to the CFPB, ``RE: SER response to 
SBREFA Outline for Consumer Reporting Rulemaking'' at 5 (Nov. 6, 
2023).
---------------------------------------------------------------------------

    While all small creditors will be subject to the rule, the CFPB 
lacks the data to precisely quantify how many small creditors currently 
make credit decisions in ways that will be affected by the rule. Small 
creditors who are currently in compliance, whether in whole or in part, 
with the rule might not be impacted as much as small creditors who 
currently consider medical debt information (and certain other 
categories of medical information) from consumer reports or other 
sources. The CFPB requested data to precisely quantify the number of 
small creditors that may be directly affected by the rule, but did not 
receive relevant comments.

      Table 4--Estimated Number of Small Entities by Category \364\
------------------------------------------------------------------------
                                                             Estimated
                                        NAICS code(s)        number of
                                                          small entities
------------------------------------------------------------------------
Consumer Reporting Agencies.......  561450..............             281
Depository Institutions...........  522110, 522130,                7,612
                                     522180, 522210.
Non-depository Institutions.......  522220, 522291,               14,454
                                     522292, 522310,
                                     522320, 522390.
Debt Collectors...................  522298, 541110,                4,011
                                     561440.
Healthcare Providers..............  621111, 621112,              521,895
                                     621210, 621310,
                                     621320, 621330,
                                     621340, 621391,
                                     621399, 621410,
                                     621420, 621491,
                                     621492, 621493,
                                     621498, 621511,
                                     621512, 621610,
                                     621910, 621999,
                                     622110, 622210,
                                     622310, 623110,
                                     623210, 623220,
                                     623311, 623312,
                                     623990.
------------------------------------------------------------------------

5. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements of the Rule, Including an Estimate of the Classes of Small 
Entities Which Will Be Subject to the Requirement and the Type of 
Professional Skills Necessary for the Preparation of the Report
---------------------------------------------------------------------------

    \364\ The estimated number of small entities is calculated by 
taking the sum of the number of entities whose assets held or annual 
revenues fall below the relevant SBA thresholds for each NAICS code 
under the three categories, using the data presented in Table 3. 
When entity counts for a NAICS category in Table 3 are reported for 
two revenue limits (an upper and a lower bound), the average of the 
two entity counts is taken to estimate the number of small entities 
in that NAICS category.
---------------------------------------------------------------------------

    The rule may impose reporting, recordkeeping, and other compliance 
requirements on small entities subject to the rule. These requirements 
generally differ for entities in two classes: credit bureaus that 
function as consumer reporting agencies, and depository or non-
depository institutions that function as creditors. Based on Table 4, 
these requirements will be imposed on, at most, an estimated 281 small 
consumer reporting agencies and 22,006 small creditors. The CFPB does 
not expect that debt collectors and health care providers listed in 
Table 4 will have reporting, record keeping and other compliance 
requirements.
Requirements for Consumer Reporting Agencies
    Under the rule, consumer reporting agencies will only be able to 
provide to creditors (in connection with credit eligibility 
determinations) consumer reports that contain medical debt information 
if they have reason to believe that the creditor intends to use the 
medical debt information in a manner that is not prohibited. Thus, if 
consumer reporting agencies continue to receive and record medical debt 
information from furnishers, consumer reporting agencies may need to 
devise policies and procedures to ensure that they appropriately 
restrict the provision of medical debt information to creditors. 
However, these compliance costs may only apply to consumer reporting 
agencies who, at baseline, provide consumer reports containing medical 
debt information to creditors based on the existing financial 
information exception. It is the CFPB's understanding that this task is 
mostly performed by the NCRAs (none of which are small entities), and 
the CFPB is not aware of any small consumer reporting agencies that 
provide consumer reports containing medical debt information to 
creditors at baseline. Compliance for affected small consumer reporting 
agencies will generally require professional skills related to software 
development, legal expertise, compliance, and customer support. The 
CFPB does not have the data to estimate the costs of reporting, 
recordkeeping, and other compliance requirements for small consumer 
reporting agencies, and requested but did not receive data to quantify 
these costs.
Requirements for Creditors
    The rule will generally prohibit creditors from using information 
related to medical debt (among other categories of medical information) 
in credit eligibility decisions. The CFPB's final rule prohibits CRAs 
from furnishing medical debt information to creditors pulling a general 
report in order to underwrite a loan, which means small creditors would 
not have to incur the compliance costs associated with updating their 
underwriting procedures to exclude medical debt information. However, 
creditors using their own proprietary credit score may choose to change 
their underwriting procedures in response. Currently, many creditors 
use medical debt information from consumer reporting agencies that will 
no longer be included in consumer reports under the rule. The rule will 
not change any existing law or guidance regarding the information that 
creditors must request from applicants. Creditors may use (or continue 
to use) certain information, including information relating to medical 
debt, that consumers provide in response to questions in credit 
applications that do not specifically request medical information to 
satisfy ability-to-repay requirements. The rule may cause creditors to 
modify their underwriting procedures to rely more heavily on consumer 
information that they obtain from credit applications. These changes 
will generally require professional skills related to compliance, 
underwriting, and legal expertise. The CFPB requested data and evidence 
to estimate these costs, but did not receive relevant comments.

[[Page 3350]]

Requirements for Debt Collectors
    One debt collector trade association commented that initial 
compliance costs will be at least $100,000 per debt collector. This 
estimate included costs such as updating software, hiring attorneys to 
ensure compliance with the rule, renegotiating contracts with vendors, 
and updating their business practices. However, the rule will not 
prohibit debt collectors from furnishing medical debt information to 
consumer reporting agencies or directly impose any other reporting, 
recordkeeping, or other compliance burdens on them. As discussed in 
part VII.E.4, the rule may make furnishing a less effective means of 
inducing payment of medical debts. This may reduce debt collectors' 
revenue; however, reductions in revenue will not be due to reporting, 
recordkeeping or compliance requirements that the rule imposes on debt 
collectors.
Requirements for Health Care Providers
    The CFPB understands that at baseline, health care providers do not 
generally furnish medical debt information to consumer reporting 
agencies. But even if they do furnish debt collection information to 
consumer reporting agencies, as described above, the rule does not 
impose any requirements on furnishers, nor does the rule impose other 
requirements on health care providers. Accordingly, the CFPB has 
determined that the rule will not impose reporting, recordkeeping, and 
other compliance costs on health care providers. However, as discussed 
in part VII.E.4, the rule may make furnishing a less effective means of 
inducing payment of medical debts. This may impose costs on health care 
providers if they turn to other collection mechanisms that may be more 
costly or less effective than furnishing, such as debt collection 
litigation, or if the rule causes them to renegotiate contracts with 
medical debt buyers or debt collectors, but these costs will not be due 
to reporting, record keeping, or compliance requirements that the rule 
imposes on health care providers.

6. Description of the Steps the Agency Has Taken To Minimize the 
Significant Economic Impact on Small Entities Consistent With the 
Stated Objectives of Applicable Statutes, Including a Statement of the 
Factual, Policy, and Legal Reasons for Selecting the Alternative 
Adopted in the Final Rule and Why Each One of the Other Significant 
Alternatives to the Rule Considered by the Agency Which Affect the 
Impact on Small Entities Was Rejected
    When developing the proposal, the CFPB decided to include a 
prohibition on consumer reporting agencies furnishing medical debt 
information to creditors who did not have a permissible purpose by 
virtue of the fact that this rule (or other laws) prohibit them from 
considering the information in credit underwriting. This provision was 
in large part proposed, and is now finalized, in order to minimize the 
economic impact on small entities. In the absence of such a 
prohibition, consumer reporting agencies might continue to include 
medical debt information on credit reports, in which case creditors 
would have to update underwriting models and credit scores to avoid 
giving it any weight. By prohibiting consumer reporting agencies from 
sending the data, creditors are able to forgo that substantial 
compliance cost.
    The CFPB considered exempting small entities from the rule, in 
whole or in part. Several commenters, including debt collectors, stated 
that the CFPB should consider limiting the scope of the rule to apply 
only to some forms of data, or to certain medical debts, such as those 
originating from emergency medical services. Another commenter stated 
that the CFPB should consider exempting small businesses below a 
certain size threshold. However, the CFPB has determined that such 
exemptions will not achieve the objective of FCRA section 604(g)(2) and 
the rule to protect consumer privacy with respect to sensitive medical 
information.
    The CFPB also considered several other alternatives to the rule 
that would possibly result in lower costs for small entities. These 
alternatives include: (1) alternative compliance timelines, (2) 
allowing creditors to consider specific types of medical information, 
(3) codifying and broadening the voluntary changes in medical 
collections reporting implemented by the NCRAs in 2022 and 2023, (4) 
requiring consumer reporting agencies to independently investigate the 
accuracy of furnished medical debt collections, and (5) defining when a 
furnisher must investigate the accuracy of furnished medical 
collections information.
    The CFPB considered making the rule effective more than 60 days 
after the issuance of a final rule. During the SBREFA process, several 
small creditors stated that they would need time to comply with the 
proposals discussed at the panel. One small creditor stated that their 
compliance department is already working at full capacity to comply 
with recently issued rules, and that they and others in the financial 
industry would need additional time to comply with further rules. A 
debt collector trade association stated in a comment that an 
implementation period of 60 days is too short for small businesses to 
comply with the rule, while Advocacy stated that stakeholders believe 
it will take 18 to 20 months to comply with the rule. The CFPB has 
determined that compliance with the rule would not impose significant 
compliance costs on small entities, and as a result the CFPB does not 
believe additional time for compliance is necessary. Further, allowing 
additional time for compliance would extend the period during which 
sensitive medical information may continue to be used for credit 
eligibility determinations.
    As described in the SBREFA Outline, the CFPB considered removing 
the financial information exception only with respect to medical 
information relating to debts, while continuing to allow creditors to 
consider medical information relating to expenses, assets, collateral, 
income, benefits, and the purpose of the loan. The CFPB has determined 
that a creditor's consideration of medical information relating to 
expenses, assets, and collateral is not warranted, and is therefore 
removing the financial information exception with respect to these 
additional categories of medical information.
    The final three alternatives considered may not achieve some of the 
objectives of the rule. These alternatives were included in the 
discussions with small entity representatives and the SBREFA Panel. As 
discussed in part VII.B, the NCRAs voluntarily implemented changes in 
the consumer reporting of medical debt. Because their changes were 
voluntary, codifying and broadening the changes may protect consumers 
from the possibility that NCRAs might choose to reverse their policies 
in the future. The last two alternatives would serve to increase the 
accuracy of medical collections information on credit reports. The CFPB 
has determined that these three alternatives would not achieve the 
objective of protecting consumer privacy with respect to sensitive 
medical information.
    After considering these significant alternatives, the CFPB declines 
to adopt them because none of the alternatives would achieve the 
objective of FCRA section 604(g)(2) to protect consumer privacy with 
respect to sensitive medical information, and thus are not appropriate 
methods for reducing the economic impact on small entities in the 
context of this rule.

[[Page 3351]]

7. Description of the Steps the Agency Has Taken To Minimize Any 
Additional Cost of Credit for Small Entities
    Because the rule will only affect how small consumer reporting 
agencies report and small creditors obtain or use consumers' medical 
information, the CFPB does not expect that the rule will affect the 
business lending market. The CFPB concludes that the costs of credit 
for small creditors and small consumer reporting agencies will not be 
impacted by the rule. Commenters, including the small entity 
representatives cited by Advocacy in its comment, stated the 
possibility of credit score creep increasing underwriting standards 
more broadly. To the extent that this happens, the cost of credit may 
rise for small business owners who rely on personal credit. However, 
because the share of consumers with medical collections on their 
consumer reports is only 5 percent at baseline, the CFPB views this 
possibility as unlikely.

IX. Paperwork Reduction Act

    The CFPB has determined that the final rule would not impose any 
new information collections or revise any existing recordkeeping, 
reporting, or disclosure requirements on covered entities or members of 
the public that would be collections of information requiring approval 
by the Office of Management and Budget under the Paperwork Reduction 
Act.\365\ The existing information collections contained in Regulation 
V, which implements the FCRA, are approved by OMB under OMB Control 
Number 3170-0002 which currently has an expiration date of October 31, 
2025.
---------------------------------------------------------------------------

    \365\ 44 U.S.C. 3501.
---------------------------------------------------------------------------

X. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the CFPB will submit a report containing this rule and other required 
information to the U.S. Senate, the U.S. House of Representatives, and 
the Comptroller General of the United States at least 60 days prior to 
the rule's published effective date. The Office of Information and 
Regulatory Affairs has designated this rule as a ``major rule'' as 
defined by 5 U.S.C. 804(2).

XI. Severability

    The CFPB intends that, if the consumer reporting agency prohibition 
on furnishing medical debt information finalized in Sec.  1022.38 (or 
any provision or application of that section) is stayed or determined 
to be invalid, the amendments to Sec.  1022.30 are severable and shall 
continue in effect. The CFPB also intends that if the amendments to 
Sec.  1022.30 (or any provisions or applications of those amendments) 
were stayed or determined to be invalid, Sec.  1022.38(b)(1) would not 
take (or continue in) effect, because it relies on the amendments to 
Sec.  1022.30, but Sec.  1022.38(b)(2) is severable and shall continue 
in effect. Furthermore, if the result of a stay or judicial 
determination is that creditors are generally able to obtain or use 
medical information in connection with determinations of consumers' 
eligibility, or continued eligibility, for credit, the CFPB intends the 
prior version of Sec.  1022.30(d) to continue in effect.

XII. Technical Appendix

    This appendix describes the technical details of the CFPB's 
analysis that aims to estimate how medical collection consumer 
reporting affects consumer access to credit, considering an 
``equilibrium'' in which all medical collection tradelines are removed 
from consumer reports, as under the rule. The analysis also compares 
the performance of new credit accounts that can be traced to creditors' 
inquiries for consumers that have medical collections. The analysis 
exploits a change in consumer reporting practices that occurred in 2017 
that has prevented medical collections that are less than 180 days past 
their date of first delinquency from appearing on consumer reports 
obtained from the nationwide consumer reporting agencies (NCRAs).\366\ 
As a result of this change, when consumers applied for credit in the 
180 days before a medical collection tradeline was added to their 
consumer report, they had an outstanding medical debt that was in 
collections, but creditors would not have seen evidence of those 
medical collections on consumer reports when making determinations 
about whether to extend credit to the consumers.\367\
---------------------------------------------------------------------------

    \366\ Assurance of Voluntary Compliance/Assurance of Voluntary 
Discontinuance (May 20, 2015), In re Equifax Info. Servs., https://www.ohioattorneygeneral.gov/Files/Briefing-Room/News-Releases/Consumer-Protection/2015-05-20-CRAs-AVC.aspx.
    \367\ This practice continued through June 2022, when the 180-
day period was extended to one year. 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.
---------------------------------------------------------------------------

1. Data Used

    The data for this analysis are derived from the CFPB's Consumer 
Credit Information Panel (CCIP), a 1-in-50 de-identified nationally 
representative sample of credit records from one of the three NCRAs. 
The data include information on consumers' credit accounts, 
collections, public records, credit scores, and inquiries, which are 
creditor requests for consumer reports. Each credit account is 
described by a ``tradeline,'' which includes the account's product 
type, balance amount, initial credit limit or loan principal, date of 
origination, anonymized firm identifier, and delinquency status.\368\ 
Collections are also described by tradelines, which include the 
collection's balance amount, the original creditor's industry 
classification, and the date that the collection was added to the 
consumer report. Each inquiry includes the product type for which the 
consumer applied and the date that the inquiry was made. The sample 
used in the analysis includes all inquiries made by creditors within 
180 days of a medical collection tradeline's addition to a consumer 
report. In other words, the sample includes inquiries made within 180 
days of the time each medical collection became visible to creditors.
---------------------------------------------------------------------------

    \368\ Credit record data are described in detail by Christa 
Gibbs et al., Consumer Credit Reporting Data (forthcoming), J. Econ. 
Literature, https://www.aeaweb.org/articles?id=10.1257/jel.20241737&&from=f.
---------------------------------------------------------------------------

    The CFPB created two datasets to estimate the effect of medical 
collection reporting on access to credit and credit account 
performance. The first dataset includes all inquiries made in the 180 
days before and after each medical collection's addition to a consumer 
report (inquiry dataset). The second dataset includes the two-year 
performance of all credit account tradelines that can be traced back to 
an inquiry in the inquiry dataset (performance dataset).\369\ Both 
datasets only include inquiries made and credit account tradelines 
opened in response to credit applications from consumers with medical 
collections. The analysis is limited to inquiries associated with 
medical collections first reported at least six months after the final 
implementation of the NCAP in September 2017, which ensured that all 
medical collections were identifiable as such and that all consumers 
with reported medical collections had a past-due medical bill for at 
least 180 days prior to the medical collection's

[[Page 3352]]

appearance on their consumer report.\370\ Given these constraints, the 
dataset includes inquiries associated with medical collections that 
were furnished to the NCRA that provides the CFPB's CCIP between March 
2018 and July 2023.\371\
---------------------------------------------------------------------------

    \369\ The CFPB considered two-year delinquency as an outcome 
because it is the standard used in credit scoring models. 
VantageScore, Credit Score Basics, Part 1: What's Behind Credit 
Scores? (Nov. 2011), https://www.transunion.com/docs/rev/business/financialservices/VantageScore_CreditScoreBasics-Part1.pdf.
    \370\ Prior to NCAP, the field in credit record data indicating 
the original creditor type of a collections tradeline was optional 
and was left blank by the furnisher for around a quarter of all 
collections tradelines in the CCIP. Some of these tradelines with 
unreported original creditor type were likely medical collections 
tradelines. One component of the NCAP was to make the original 
creditor type a mandatory field, such that all medical collections 
reported after September 2017 can be identified as such.
    \371\ The sample is limited to inquiries associated with medical 
collections added to consumer reports between March 2018 and July 
2023 because the dataset needs to include all inquiries made within 
a 361-day window of each medical collection. A medical collection 
reported before March 2018 may have an associated inquiry that was 
made before the September 2017 reporting change, while a medical 
collection reported after July 2023 may have an associated inquiry 
that was made after the final date of the CFPB's CCIP at the time of 
the research analysis, January 2024. The sample includes inquiries 
made in the 180 days before a medical collection is reported because 
all consumers have an outstanding medical collection during that 
period, and includes inquiries made in the 180 days after a medical 
collection is reported in order to have a balanced window. 
Additionally, note that the sample may omit some inquiries 
associated with medical collections. Some collections may not have 
been reported to all three NCRAs, so the CFPB may not observe all 
consumers' medical collections.
---------------------------------------------------------------------------

    Each dataset in the primary sample includes a subsample of 
inquiries and tradelines that were associated with medical collection 
tradelines having initial balances over $500 and that were made when 
any other medical collection tradelines on the consumer report had 
initial balances over $500. This specification is referred to as the 
``over-$500'' sample and mimics the current reporting environment in 
which medical collections under $500 are not included on consumer 
reports.\372\ The CFPB also created versions of the inquiry and 
performance datasets that do not make any restrictions on the dollar 
amount of medical collection tradelines and presents results for this 
``full sample'' in parallel with those for the ``over-$500 sample.''
---------------------------------------------------------------------------

    \372\ The NCRAs removed medical collections with balances below 
$500 from consumer reports in April 2023. The datasets include 
inquiries made through January 2024, and so a small portion of the 
inquiries in the datasets were subject to this removal. All of these 
inquiries are included in the ``over-$500'' sample of the results. 
See 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.
---------------------------------------------------------------------------

    Creditors only observe the consumer reports of consumers that apply 
for credit, so the analysis is inherently limited to consumers that 
actively seek credit. The CFPB found in the proposed rule, and included 
in part VII.E.5, that there was a near-zero change in consumers' 
propensity to demand credit when medical collections under $500 were 
removed from consumer reports. The CFPB expects that the composition of 
consumers actively seeking credit will not be affected by the rule.
    When a consumer has multiple medical collection tradelines, the 
data contain duplicates of the inquiries and credit account tradelines 
if they occur within 180 days of different medical collection 
tradelines. For example, suppose a consumer has two medical collection 
tradelines that are first reported on May 1 and on September 1. Suppose 
a creditor makes an inquiry on August 1. This inquiry will appear in 
the inquiry dataset twice: once for the May 1 collection, and once for 
the September 1 collection. Inquiries and credit account tradelines are 
also duplicated when consumers have multiple medical collection 
tradelines reported on the same day.
    Three reporting changes occurred during the sample period that 
removed certain types of medical collections from consumer 
reports.\373\ However, because the analysis exploits the date that a 
medical collection was added to a consumer report instead of the date 
it was removed from a consumer report, these changes do not undermine 
the general methodology of the analysis. The reporting changes do 
affect the types of medical collections that were on consumer reports 
when inquiries were made.\374\ The CFPB first describes each of these 
three changes and their impact, before addressing the consequences for 
the analysis. First, all paid medical collections were removed from 
consumer reports in June 2022. Fewer than 2.5 percent of medical 
collections reported between January 2017 and March 2022 were ever 
marked as paid.\375\ Second, medical collections that were between 180 
days and 365 days past due were removed from consumer reports in June 
2022, and the delay before medical collections could be added to 
consumer reports was permanently extended to one year. The CFPB does 
not have an estimate of how many medical collections were affected by 
this change, as the number of days that the medical debt is past due is 
not provided in the CCIP. Finally, all medical collections under $500 
were removed from the NCRAs' consumer reports in April 2023. Combined, 
these reporting changes contributed to a large decline in the number of 
consumers with medical collection tradelines on their consumer report, 
from 14 percent of consumers in March 2022 to 5 percent of consumers in 
June 2023.\376\
---------------------------------------------------------------------------

    \373\ 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.
    \374\ Furthermore, the reporting changes may impact how 
creditors used medical collections in their credit eligibility 
determinations. For example, suppose creditors weighted medical 
collections more heavily in their determinations after the April 
2023 reporting change. Then inquiries made with reported medical 
collections after April 2023 may have a lower success rate than 
inquiries made prior to the change. The estimated coefficient 
provides an average impact of medical collection reporting on 
inquiry success and cannot identify these potential changes in 
creditor behavior.
    \375\ Lucas Nathe & Ryan Sandler, Consumer Fin. Prot. Bureau, 
Paid and Low-Balance Medical Collections on Consumer Credit Reports 
(July 2022), https://www.consumerfinance.gov/data-research/research-reports/paid-and-low-balance-medical-collections-on-consumer-credit-reports/.
    \376\ 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.
---------------------------------------------------------------------------

    Because of these reporting changes for some inquiries that were 
made after a medical collection tradeline was first reported, the 
medical collection may not have been present on the consumer report by 
the date of the inquiry. For example, if a consumer had a medical 
collection with an initial balance less than $500 first reported in 
February 2023, and an inquiry in May 2023, the inquiry would be 
classified as occurring about three months after the collection but 
would not in fact have that collection tradeline included on the 
consumer report at the time of the inquiry. The CFPB expects this to 
attenuate the results, as inquiries made ``with medical collection 
reporting'' would have outcomes more similar to inquiries with the 
medical collection not yet reported. Medical collections reported 
before January 2022 would not have associated inquiries affected by any 
of these reporting changes.
    The analysis of the performance dataset is not affected by the 
recent reporting changes. Because the focus is on two-year performance, 
the performance analysis only included tradelines opened before January 
2022, as they require sufficient time to measure two-year performance. 
Therefore, the performance regressions are not impacted by these 
medical collection removals.
    Commenters including a bank trade association commenter and a 
researcher stated that the time period considered in the proposal was 
not reflective of the

[[Page 3353]]

current market because it was marked with instability in the medical 
debt collection environment, including pandemic-era changes and State 
policy changes. The CFPB acknowledges this limitation but finds it 
infeasible to study two-year delinquency risk without using accounts 
that were originated at least two years ago. Furthermore, because 
relatively few medical collections are included on consumer reports at 
baseline, the analysis needs to incorporate older data to have 
sufficient statistical power to identify statistically significant 
effects.\377\ The CFPB expects that any differences in consumer 
behavior as a result of these changes, compared to the current 
baseline, may affect the magnitude of the results but not the 
direction. For example, if mortgage forbearance caused fewer consumers 
with medical collections to become delinquent on their mortgages, the 
estimated difference in mortgage performance between consumers with 
reported medical collections and consumers with unreported medical 
collections may be smaller than at the current baseline. However, there 
should be no difference in the coefficient's sign if consumers with 
unreported collections are more likely, in any time period, to be 
seriously delinquent than consumers with reported medical collections 
because creditors use medical collection information to avoid bad debt 
risks.
---------------------------------------------------------------------------

    \377\ Mary-Alice Doyle & Laura Feeney, Quick Guide to Power 
Calculations, Abdul Latif Jameel Poverty Action Lab, https://www.povertyactionlab.org/resource/quick-guide-power-calculations 
(last updated Mar. 2021).
---------------------------------------------------------------------------

    Other commenters, including at least one researcher and at least 
one debt collector, stated that the analysis in the Technical Appendix 
to the proposed rule is subject to self-selection bias because only 
consumers actively seeking credit are included in the dataset. The 
inquiry and performance datasets are structured at the inquiry or 
credit account tradeline level, and not at the consumer or medical 
collection level. This means the analysis can be interpreted as 
modeling credit decisions and outcomes from creditors' perspective, 
rather than modeling the decisions of consumers or debt collectors.
    Commenters, including at least one debt collector, health care 
provider, researcher, and individual, stated that the results of the 
Technical Appendix were skewed or too narrow because they were limited 
to medical collections with initial balances over $500. As described 
above, the CFPB also presents results for the full sample, regardless 
of medical collection balance amount. The results from this sample are 
similar to those in the primary sample, as described below.
    Multiple researcher commenters stated that the results of the 
CFPB's analysis could not be validated or fully evaluated with the 
information included in the Notice of Proposed Rulemaking. Releasing 
the data would be a violation of the CFPB's contract with the NCRA that 
provides its CCIP, however, and courts have held that an agency can 
rely on confidential information in its rulemaking so long as the 
agency discloses information to allow interested parties to comment on 
the methodology and general data.\378\ Here, the CFPB discussed its 
data set, provided information about its methodologies, and invited 
interested parties to comment. The CFPB considered the comments that 
addressed the analysis and has determined that the available evidence 
supports the choices made in the final rule. While some commenters also 
suggested that the CFPB erred in not obtaining peer review of its 
analysis, they did not articulate why peer review would be required in 
this rulemaking.
---------------------------------------------------------------------------

    \378\ See NRDC v. Thomas, 805 F.2d 410, 418 n.13 (D.C. Cir. 
1986); see also Riverkeeper Inc. v. EPA, 475 F.3d 83, 112 (2d Cir. 
2007), rev'd on other grounds, 556 U.S. 208 (2009).
---------------------------------------------------------------------------

2. Construction of the Inquiry Dataset

    Because inquiries in the dataset are made in the 180 days before 
and after a medical collection is reported, the inquiries in the 
dataset occurred between September 2017 and January 2024. The dataset 
includes the number and type of medical and nonmedical collection 
tradelines that were included on the consumer report at the time each 
inquiry was made.
    Identifying unique medical collections over time in the CCIP may be 
imprecise; the CFPB assumes that unique medical collections are 
characterized by their dollar amounts, dates of medical collection 
account opening (usually the date the medical collection was assigned 
to the debt collector or other furnisher), and dates of the account's 
addition to the consumer report. Medical collections are rarely 
consistently reported for the full seven-year period for reporting 
adverse information permitted by the Fair Credit Reporting Act.\379\ 
This poses challenges in tracking the same medical debt over time, as 
debts can disappear and reappear. Medical debts in collections are 
often transferred between debt collectors (e.g., reassigned to a 
different collector by the health care provider or sold to a debt 
buyer), and when this happens the dates and dollar amounts associated 
with the medical collection tradelines may change, making it difficult 
to link these records. While these may be experienced as unique 
collections by the consumer as a new debt collector attempts to make 
contact, they may not be representative of the number of unique medical 
debts that each consumer has, as many of the debts are reflected by 
multiple subsequent collections.\380\
---------------------------------------------------------------------------

    \379\ 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/.
    \380\ A challenge in studying the impact of medical collections 
tradelines is that a shock to consumers' health, such as an injury 
or illness that results in hospitalization, may affect credit 
outcomes independently. Given this challenge, one benefit of these 
collection debt transfers is that it means that the medical expense 
that resulted in the medical collections tradeline is relatively 
more likely to have occurred long before the medical collection 
appeared.

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[[Page 3354]]

    The inquiry dataset is used to estimate the impact of medical 
collection reporting on consumers' access to credit, as measured by 
inquiry success. The CFPB classifies an inquiry as ``successful'' if 
the inquiry leads to an open tradeline. This definition of ``success'' 
does not necessarily mean that the specific credit application that 
generated the inquiry was being approved. The CFPB cannot directly 
observe whether the specific credit application that generated the 
inquiry in question was approved, and it is challenging to infer 
approval for a specific inquiry for several reasons. First, the CCIP 
does not include inquiries made to other NCRAs, and creditors do not 
always make inquiries to all three NCRAs. The CCIP therefore includes 
credit account tradelines that cannot be matched to an inquiry. These 
tradelines cannot be included in the CFPB's analysis because the 
empirical strategy requires that one know the date of each tradeline's 
associated inquiry. Second, the CCIP does not include creditor names, 
but instead has an anonymized company identifier; however, a particular 
creditor often has a different identifier for inquiries and for opened 
credit account tradelines. Thus, even if the consumer opened a 
tradeline with the same creditor that pulled their consumer report, it 
may not be identifiable as such in the data. Therefore, the CFPB cannot 
be certain that the observed inquiry is associated with a specific 
opened tradeline. The CFPB instead follows approaches used in academic 
research and the CFPB's Consumer Credit Trends credit tightness series 
and assumes that a credit account is associated with an inquiry if it 
is opened within a certain number of days after the observed inquiry 
and is of the same credit account type.\381\ The number of days varies 
for different account types because of differences in the typical 
length of time between an account application and origination.\382\ 
Finally, when consumers shop for credit, multiple inquiries may be made 
in a narrow window of time, even though the consumer only intends to 
open one account. The CFPB assumes that multiple inquiries for one 
consumer within a certain shopping window indicate the consumer's 
shopping behavior, and therefore only the last of these inquiries is 
included in the datasets, where each credit account type's window 
length is equivalent to its maximum time-to-origination.\383\ For 
example, if a consumer had inquiries from mortgage lenders on April 1 
and May 1, these would be treated as one observation, dated May 1, and 
it would be counted as a successful inquiry if a mortgage account was 
opened by August 29.
---------------------------------------------------------------------------

    \381\ See Charles Romeo & Ryan Sandler, Off. of Rsch., Consumer 
Fin. Prot. Bureau, The effect of debt collection laws on access to 
credit, 195 J. Econ. (2021), https://ssrn.com/abstract=3124954; 
Consumer Fin. Prot. Bureau, Credit Trends: Market dashboards (Dec. 
10, 2019), https://www.consumerfinance.gov/data-research/consumer-credit-trends/.
    \382\ The inquiries are considered to be within a shopping 
window if they are within 14 days for credit cards and auto loans, 
120 days for mortgages, and 30 days for all other loan types, 
following approaches used in academic research and the CFPB's 
Consumer Credit Trends credit tightness series, both of which use 
data similar to the CCIP. See Charles Romeo & Ryan Sandler, Off. of 
Rsch., Consumer Fin. Prot. Bureau, The effect of debt collection 
laws on access to credit, 195 J. Econ. (2021), https://ssrn.com/abstract=3124954; Consumer Fin. Prot. Bureau, Credit Trends: Market 
dashboards (Dec. 10, 2019), https://www.consumerfinance.gov/data-research/consumer-credit-trends/.
    \383\ This follows approaches used in academic research and the 
CFPB's Consumer Credit Trends credit tightness series, both of which 
use data similar to the CCIP. See Charles Romeo & Ryan Sandler, Off. 
of Rsch., Consumer Fin. Prot. Bureau, The effect of debt collection 
laws on access to credit, 195 J. Econ. (2021), https://ssrn.com/abstract=3124954; Consumer Fin. Prot. Bureau, Credit Trends: Market 
dashboards (Dec. 10, 2019), https://www.consumerfinance.gov/data-research/consumer-credit-trends/.
---------------------------------------------------------------------------

    A researcher commenter restated the limitations described above, 
which were also described in the proposal, but characterized this 
discussion as indicating that the CFPB did not have a ``clean 
standard'' to identify inquiry success in the Technical Appendix to the 
proposed rule. As described above and in the rule, the CFPB's 
construction of inquiry success is the best available measure and has 
been used in academic research and the CFPB's policy research.

3. Construction of the Performance Dataset

    The performance dataset includes all originated credit account 
tradelines that are associated with successful inquiries in the inquiry 
dataset. The match between credit account tradelines and inquiries is 
one-to-one: each tradeline is matched to one inquiry, and each inquiry 
is matched to, at most, one tradeline.\384\ The CFPB calculated the 
two-year performance for each originated credit account tradeline, with 
performance success measured by whether the tradeline was ever 90 or 
more days delinquent (seriously delinquent) within the first two years 
of its origination date.\385\ Because the CFPB focuses on two-year 
performance, credit account tradelines opened after January 2022 are 
not included in the analysis as the CFPB cannot observe a full two 
years after origination. The CFPB was able to identify the two-year 
performance of over 94 percent of the credit account tradelines opened 
before January 2022. The exceptions are accounts that stopped being 
reported by the furnisher before the end of two years.
---------------------------------------------------------------------------

    \384\ When multiple credit account tradelines within a time 14, 
30, or 120 days of an inquiry (as appropriate for the type of 
credit) are observed, the tradeline with the earliest origination 
date is kept.
    \385\ Credit account tradelines are matched over time either 
using the tradeline's account number or the tradeline's date of 
account opening and loan type. Tradelines are matched on origination 
date and loan type when there is no match on account number because 
account numbers can change when an account is lost or transferred, 
e.g., if a consumer loses their credit card and has a new card 
issued.
---------------------------------------------------------------------------

4. Inquiry Summary Statistics

                                    Table 5--Inquiry Summary Statistics \386\
----------------------------------------------------------------------------------------------------------------
                                                                (1)  Credit                     (3)  Other inq.
                                                                   cards      (2)  Mortgages         type
----------------------------------------------------------------------------------------------------------------
Panel A: Unsuccessful, Over $500 Sample:
    Shopping window (days)..................................            0.47           16.87                0.89
    No. open mortgages......................................            0.03            0.11                0.04
    No. open credit cards...................................            0.73            1.18                0.68
    No. open other trades...................................            0.61            0.82                0.64
    Any D90+ trades.........................................            0.30            0.29                0.29
    Credit score............................................          563.89          613.81              566.76
    Obs. (Unique Inquiries).................................         259,532          44,524             218,127
Panel B: Successful, Over $500 Sample:
    Shopping window (days)..................................            1.00           42.74                1.11
    No. open mortgages......................................            0.07            0.23                0.07
    No. open credit cards...................................            1.36            1.85                1.11

[[Page 3355]]

 
    No. open other trades...................................            0.71            0.99                1.08
    Any D90+ delinquent trades..............................            0.26            0.20                0.29
    Credit score............................................          624.44          673.12              602.45
    Credit amount...........................................        1,645.96      244,846.31            5,374.88
    Two-year D90+...........................................            0.21            0.03                0.25
    Past due amount.........................................          145.19          304.43              661.84
    Obs. (Unique Inquiries).................................         117,147          11,188              13,160
Panel C: Unsuccessful, Full Sample:
    Shopping window (days)..................................            0.46           16.09                0.86
    No. open mortgages......................................            0.03            0.12                0.04
    No. open credit cards...................................            0.69            1.15                0.64
    No. open other trades...................................            0.56            0.80                0.60
    Any D90+ trades.........................................            0.30            0.30                0.30
    Credit score............................................          562.12          607.76              563.39
    Obs. (Unique Inquiries).................................         892,295         171,704             761,275
Panel D: Successful, Full Sample:
    Shopping window (days)..................................            0.97           40.69                1.06
    No. open mortgages......................................            0.08            0.26                0.06
    No. open credit cards...................................            1.32            1.84                0.98
    No. open other trades...................................            0.70            0.96                1.04
    Any D90+ trades.........................................            0.27            0.20                0.30
    Credit score............................................          621.08          670.13              597.12
    Credit amount...........................................        1,582.59      238,199.13            5,597.18
    Two-year D90+...........................................            0.20            0.03                0.23
    Past due amount.........................................          125.17          201.84              598.32
    Obs. (Unique Inquiries).................................         409,209          42,138              52,669
----------------------------------------------------------------------------------------------------------------

    Table 5 provides summary statistics for the unique inquiries in the 
data. The summary statistics are provided separately for 
``unsuccessful'' inquiries that do not result in originated credit 
account tradelines, which are provided in Panels A and C, and for 
``successful'' inquiries that can be associated to originated 
tradelines, which are provided in Panels B and D. Panels A and B are 
limited to the over-$500 sample, while Panels C and D provide summary 
statistics for the full sample. Table 5 shows that successful inquiries 
are associated with stronger credit profiles for every inquiry type and 
for both considered samples. The average successful credit applicant 
has more open pre-existing credit account tradelines, fewer seriously 
delinquent pre-existing credit account tradelines, and a higher credit 
score in the month or quarter before inquiry was made than the average 
unsuccessful credit applicant.\387\ The table also shows that 
successful credit applicants shop for longer than unsuccessful credit 
applicants in the sample. Panels B and D further include the average 
characteristics of credit accounts opened in response to successful 
inquiries, measuring the credit limit at time of origination, the past 
due amount, and serious delinquency status two years after origination, 
showing that credit cards are much more likely than mortgages to be 
seriously delinquent within two years from opening, perhaps in part 
because credit cards are unsecured. However, the average past due 
amount is lower for credit cards, perhaps because average credit card 
monthly minimum payments are much lower than mortgage monthly payment 
amounts.
---------------------------------------------------------------------------

    \386\ Each panel in the table includes one observation per 
inquiry. All values are means. Panels A and B limit the sample to 
consumers with at least one inquiry that is associated with a 
medical collection over $500 and includes no medical collections on 
the consumer report under $500 when the inquiry is made. Panels C 
and D include the full sample. Panels A and C includes all inquiries 
that do not correspond to a tradeline opened within the inquiry 
type's origination window. Panels B and D includes all inquiries 
that can be matched to an originated tradeline. ``Shopping window 
(days)'' provides the length of the shopping window for each 
inquiry, where the shopping window is equal to zero if all inquiries 
are made on the same day. Variables providing the number of open 
accounts for a given credit account type, ``No. open'', describe the 
number of accounts of a given type that appeared on the consumer 
report in the month before the inquiry. ``Any D90+ trades'' is equal 
to one if the consumer had at least one tradeline (open or closed) 
that had been at least 90+ days delinquent in the last seven years 
included on their consumer report in the month before the inquiry. 
``Credit score'' is equal to the credit score in the month before 
the inquiry. ``Credit amount'', ``Two-year D90+'', and ``Past due 
amount'' describe tradelines that opened in response to the inquiry, 
where ``Credit amount'' provides the credit limit of revolving 
accounts or credit account principal of installment accounts, ``Two-
year D90+'' is equal to one if the account is at least 90 days 
delinquent within two years of its origination date, and ``Past due 
amount'' is the dollar amount past due on the account after two 
years. These variables cannot be included in Panels A and C because 
no account was opened in response to unsuccessful inquiries.
    \387\ These characteristics are considered as of the month or 
quarter before the inquiry because they can be affected by the 
outcome of the inquiry. The month before the inquiry is used when 
data is available, but only quarterly data are available prior to 
2020 for some variables.
---------------------------------------------------------------------------

5. Consumer Summary Statistics

[[Page 3356]]



                                   Table 6--Consumer Summary Statistics \388\
----------------------------------------------------------------------------------------------------------------
                                                                                               (3)  Obs. (unique
                                                                 (1)  Mean      (2)  Median       consumers)
----------------------------------------------------------------------------------------------------------------
Panel A: Over $500 Sample:
    No. medical collections.................................            2.24            1.00             266,147
    Months between date of last med. coll. and date of first           20.47            0.00             266,147
     med. coll..............................................
    No. credit card inquiries...............................            1.42            1.00             266,147
    No. mortgage inquiries..................................            0.21            0.00             266,147
    No. other inquiries.....................................            1.11            1.00             266,147
    Credit score at first inquiry...........................          594.52          588.00             214,485
    Missing credit score at first inquiry...................            0.19            0.00             266,147
    Consumer age at first inquiry...........................           40.29           38.00             261,488
    Northeastern share at first inquiry.....................            0.08            0.00             266,147
    Midwestern share at first inquiry.......................            0.15            0.00             266,147
    Southern share at first inquiry.........................            0.61            1.00             266,147
    Western share at first inquiry..........................            0.14            0.00             266,147
Panel B: Full sample:
    No. medical collections.................................            4.08            2.00             688,682
    Months between date of last med. coll. and date of first           35.77           10.92             688,682
     med. coll..............................................
    No. credit card inquiries...............................            1.89            1.00             688,682
    No. mortgage inquiries..................................            0.31            0.00             688,682
    No. other inquiries.....................................            1.52            1.00             688,682
    Credit score at first inquiry...........................          596.10          590.00             558,362
    Missing credit score at first inquiry...................            0.19            0.00             688,682
    Consumer age at first inquiry...........................           41.89           40.00             676,075
    Northeastern share at first inquiry.....................            0.10            0.00             688,682
    Midwestern share at first inquiry.......................            0.19            0.00             688,682
    Southern share at first inquiry.........................            0.54            1.00             688,682
    Western share at first inquiry..........................            0.16            0.00             688,682
----------------------------------------------------------------------------------------------------------------

    Table 6 provides summary statistics at the consumer level, using 
the first observation for each consumer observed in the inquiry 
dataset. On average, a consumer in the over-$500 sample experiences 
2.24 medical collections that appear within 180 days of an inquiry. 
These medical collections are, on average, approximately 20 months 
apart from the earliest to the latest reported. Nineteen percent of the 
consumers in the sample do not have a credit score in the month before 
their first inclusion in the sample; for consumers who do have a credit 
score, it is most often subprime.\389\ More than 60 percent of 
consumers in the sample are located in Southern States, reflecting the 
disproportionate share of consumers with medical debt in the South 
documented in prior research.\390\ These summary statistics support the 
generalizability of the results, as the sample of consumers is 
generally similar to the overall population of consumers with medical 
collections during this time period.\391\
---------------------------------------------------------------------------

    \388\ Each panel in the table includes one observation per 
consumer. All values are means. Panel A limits the sample to 
consumers with at least one inquiry that is associated with a 
medical collection over $500 and includes no medical collections 
under $500 on the consumer report when the inquiry is made. Panel B 
includes the full sample. ``No. medical collections'' provides the 
number of unique medical collections in the sample for each 
consumer. Because each observation in the analysis dataset 
corresponds to an inquiry, consumers may have additional medical 
collections that are not represented in the sample if there were no 
inquiries made in the 180 days before or after those medical 
collections were first reported. ``Months between date of last med. 
coll. and date of first med. coll.'' provides the number of months 
between each consumer's medical collections, for those medical 
collections that are represented in the sample. The ``No. 
inquiries'' variables only include inquiries made in the 180 days 
before or after a medical collection was first reported; consumers 
may have other inquiries that are not included in the data if they 
did not fall within these 361-day windows. Variables ``at first 
inquiry'' are provided for each consumer's earliest inclusion in the 
sample, as they may change within consumers over time. There are 
fewer consumer observations corresponding to average credit scores 
than for the other statistics in both panels because average credit 
score is only calculated using data from consumers whose credit 
scores are non-missing. There are also some consumers with missing 
birth year that are not included in the calculation of average age. 
State regional shares were calculated using Census Regions; see U.S. 
Census Bureau, Geographic Levels, https://www.census.gov/programs-surveys/economic-census/guidance-geographies/levels.html (last 
revised Oct. 8, 2021).
    \389\ Consumer Fin. Prot. Bureau, Borrower risk profiles, 
https://www.consumerfinance.gov/data-research/consumer-credit-trends/student-loans/borrower-risk-profiles/ (last visited May 9, 
2024).
    \390\ U.S. Census Bureau, 19% of U.S. Households Could Not 
Afford to Pay for Medical Care Right Away (Apr. 7, 2021), https://www.census.gov/library/stories/2021/04/who-had-medical-debt-in-united-states.html.
    \391\ 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/.
---------------------------------------------------------------------------

    One debt collector commenter stated that the CFPB should have 
instead considered all inquiries associated with medical collections 
over $500 instead of making the restriction, in the proposed rule, that 
these inquiries are not made when a medical collection under $500 is 
included on the consumer report. The CFPB chose not to change its 
construction of the over-$500 subsample because the relevant question 
is how inquiries would be evaluated under the rule, relative to the 
baseline, in which no medical collections under $500 are included on 
consumer reports. The over-$500 sample, as initially constructed, is 
the closest approximation for estimating the effects of the rule. 
Results are included for the full sample to show that the estimated 
effects are broadly similar for all inquiries associated with medical 
collections of any size. Furthermore, the summary statistics for 
consumers in the full sample are similar to those for the over-$500 
sample, but consumers in the over-$500 have nearly two fewer medical 
collections reported within 180 days of an inquiry in the sample. 
Though this at first may seem counterintuitive, this is because 
consumers with several medical collections often have at least one 
medical collection under $500 which removes them from the over-$500 
subsample.

[[Page 3357]]

6. Empirical Strategy

    The CFPB used a regression discontinuity in time (RDiT) design to 
estimate the effect of reported medical collections on consumers' 
access to credit and the performance of credit account tradelines 
resulting from creditors' inquiries. Regression discontinuity is a 
quasi-experimental design that, under certain assumptions, allows 
estimation of the causal effect of a treatment or intervention where a 
treatment is assigned by a threshold value of that variable.\392\ In 
the present context, inquiries are ``treated'' when a medical 
collection tradeline is added to the NCRA's database. The date that a 
medical collection is added to a consumer report is the ``threshold'' 
that potentially creates a discontinuous effect on the studied 
dependent variables: inquiry success and two-year serious delinquency. 
Before this date, creditors cannot observe the medical collection on 
the consumer report at the time an inquiry is made, but the CFPB can 
observe using the CCIP that the consumer did have a medical debt in 
collections that would eventually be reported. The proximity of each 
inquiry to the threshold, referred to as the ``running variable'' in 
regression discontinuity terminology, is equal to the number of days 
between the date that the collection was first included on the consumer 
report and the date that the inquiry was made. When the inquiry date 
occurred after the medical collection reported date (or in other words, 
the medical collection was included on the consumer report before the 
inquiry was made), this running variable is greater than or equal to 
the ``threshold'' zero; for values less than or equal to zero, the 
medical collection was not included on the consumer report when the 
inquiry was made. The key assumption of a regression discontinuity 
analysis is that nothing is changing discontinuously across the 
threshold besides the treatment.
---------------------------------------------------------------------------

    \392\ Guido W. Imbens & Thomas Lemieux, Regression discontinuity 
designs: A guide to practice, 142(2) J. Econometrics, at 615-35 
(Feb. 2008), https://www.sciencedirect.com/science/article/abs/pii/S0304407607001091.
---------------------------------------------------------------------------

    To analyze inquiry success, the CFPB estimated Equation 1 using the 
inquiry dataset:

Yijk = [alpha] + [gamma]Dijk + 
[beta]Zijk + [delta]Dijk x Zijk + 
[epsi]ijk (1)

    Where i is a consumer, j is an inquiry, and k is the medical 
collection associated with the inquiry. Yijk is a binary 
variable equal to one if the inquiry is successful, i.e., if a 
tradeline is originated within 14 days for a credit card or auto loan, 
120 days for a mortgage, or 30 days for other loans. Dijk is 
the running variable, i.e., the number of days after medical collection 
k was added to the consumer report that inquiry j was made. 
Dijk is negative if the inquiry was made before the medical 
collection was added, and positive if the inquiry was made after. 
Zijk is a binary variable equal to one if the inquiry j was 
made after the date when collection k was reported. The coefficient of 
interest, [beta], represents the difference in the likelihood that an 
inquiry is successful for inquiries made after a medical collection is 
added, relative to inquiries made before. The intercept [alpha] allows 
estimation of a more flexible linear form.
    The CFPB also estimated Equation 1 for the performance dataset, 
using the two-year performance of tradelines that can be traced to an 
inquiry included in the inquiry dataset as the dependent variable. The 
estimating equation is largely unchanged, though j is interpreted as a 
tradeline associated with an inquiry in the inquiry dataset (rather 
than the inquiry itself), and Yijk is a binary variable 
equal to one if the account is at least 90 days delinquent on the 
tradeline at any point within the first two years after the tradeline 
is originated (rather than if the inquiry is associated with a 
tradeline origination, as in the inquiry dataset regression).
    In the results described below, the CFPB estimated six 
specifications to estimate impacts on inquiry success and account 
performance. The first specification is limited to the over-$500 
sample, as defined above. The second and third specifications separate 
the over-$500 sample into two groups: inquiries that were made when the 
consumer had no nonmedical collections on their consumer report, and 
inquiries made when consumers had nonmedical collections on their 
consumer report. These specifications test whether reported medical 
collections affect inquiry success and better predict account 
performance for consumers with fewer other signals of negative 
information. The hypothesis is that the effects of a reported medical 
collection should be larger for inquiries made without nonmedical 
collections on the consumer report. If a consumer already has 
nonmedical collections, the appearance of a medical collection likely 
implies a smaller marginal change in expected delinquency risk. 
Finally, the CFPB then estimated each of these three specifications for 
all inquiries in the sample.
    The CFPB only reports its estimates of the parameter b, which 
provides the effect of medical collection furnishing on inquiry success 
and account performance. Combined across the main results and balance 
tests described later, the CFPB estimated a total of 192 b 
coefficients, so the reported standard errors were adjusted using the 
Benjamini-Hochberg procedure, a method for accounting for multiple 
comparisons (under which it is more likely to find a statistically 
significant result by chance than in a one-off analysis).\393\
---------------------------------------------------------------------------

    \393\ See Yoav Benjamini & Yosef Hochberg, Controlling the False 
Discovery Rate: A Practical and Powerful Approach to Multiple 
Testing, 57(1) J. of the Royal Stat. Soc'y Series B 
(Methodological), at 289-300 (1995), http://www.jstor.org/stable/2346101.
---------------------------------------------------------------------------

    To justify the robustness of the main specification, the CFPB 
considers the potential threats to identification that can arise from 
RDiT specifications. RDiT varies from a standard regression 
discontinuity design because the running variable is not generally 
continuous. As summarized by an academic paper, RDiT designs can be 
biased if observations far from the threshold time period are used for 
identification, as there may be autoregressive properties or 
unobservable confounders.\394\ This is often required in RDiT designs 
that have little cross-sectional variation, as the sample size can only 
grow by adding observations further from the threshold, rather than by 
adding additional cross-sectional units. A researcher commenter cited 
this concern in their critique of the CFPB's analysis. However, the 
data underlying the analysis discussed in this document contains ample 
cross-sectional variation, with 663,678 unique inquiries in the inquiry 
dataset and 401,027 unique tradelines in the performance dataset for 
the over-$500 sample. Furthermore, the analysis considers observations 
that are no more than 180 days from the threshold, minimizing the 
extent of possible autoregression.
---------------------------------------------------------------------------

    \394\ Catherine Hausman & David S. Rapson, Regression 
Discontinuity in Time: Considerations for Empirical Applications, 10 
Ann. Rev. of Res. Econ. (2018), https://www.annualreviews.org/content/journals/10.1146/annurev-resource-121517-033306.
---------------------------------------------------------------------------

    In addition to these features of the datasets that limit the 
potential for bias arising from the RDiT design, the CFPB estimates the 
regressions using econometric best practices as implemented by a 
practitioner software package.\395\ Standard errors are

[[Page 3358]]

clustered by consumer to account for correlation within consumer 
observations over time. Additionally, the CFPB conducted several 
robustness checks to support the validity of the main design, described 
in detail after the discussion of the main results.
---------------------------------------------------------------------------

    \395\ Specifically, the regressions are estimated using the 
Stata package rdrobust, implemented with a triangular kernel, a 
common mean-square-error-optimal bandwidth selector, and adjustments 
for mass points. Sebastian Calonico et al., rdrobust: Software for 
regression-discontinuity designs, 17:2 Stata J. (2017), https://rdpackages.github.io/references/Calonico-Cattaneo-Farrell-Titiunik_2017_Stata.pdf.
---------------------------------------------------------------------------

    A researcher commenter stated that a consumer may take steps to 
improve their credit profile near the threshold time period, 
introducing bias into the model if the effects of these changes are 
erroneously attributed to the medical collection report. The CFPB finds 
it implausible that a consumer would choose to improve markers of their 
financial wellbeing over the short amount of time near the appearance 
of a medical collection on their consumer report. It estimates balance 
tests to test for this phenomenon in Tables 9 and 10 and finds no 
supporting evidence. Even if a consumer did improve their credit 
profile near the date that the medical collection is added to their 
consumer report, this would only attenuate results, as consumers with 
reported medical collections would look like better risks than they 
would absent this behavior. This would shrink the difference, from a 
creditor's perspective, between consumers with reported and unreported 
medical collections.
    One researcher commenter stated that the CFPB should not have 
included the Dijk x Zijk term in its regression 
equation because it is highly correlated with other variables in the 
regression equation, leading to multicollinearity bias. In fact this 
term, which is standard in RDiT equations, does not lead to 
multicollinearity bias and instead increases the precision of the 
estimated parameters. The term allows the relationship between the 
running variable and the outcome variable to change across the 
reporting threshold. Because some medical collections appear on a 
consumer report for fewer than 180 days, the slope between the running 
variable Dijk and inquiry success Yijk may be positive for positive 
values of Dijk because inquiries made farther from the medical 
collection report date are less likely to occur when the medical 
collection appears on the consumer report, likely leading to a greater 
likelihood of inquiry success. There is no similar expectation of a 
positive relationship in the 180 days before the medical collection is 
reported, i.e., for negative values of Dijk. The estimated parameter 
[gamma] would conflate these two relationships if the interaction term 
is omitted from the regression equation.
    A researcher commenter stated that the CFPB should have considered 
more heterogeneity between groups in the Technical Appendix of the 
proposed rule, such as a consumer's age, their number of medical 
collections, and whether their medical collection has been disputed. 
While specific effects on these groups may be of general interest, the 
rule is not limited to certain subpopulations or types of medical 
collections, so the parameter of primary interest to the CFPB is the 
average effect taken over the entire population that has medical 
collections over $500, which mimics the current reporting environment.
    One researcher commenter stated that the CFPB did not provide 
measures that can be used to assess model quality, primarily concerning 
a hypothetical in which consumers far from the regression discontinuity 
threshold receive too much weight in the analysis. The CFPB included 
just 180 days before and after the threshold to mitigate this concern, 
as well as using econometric best practices in its regression equation 
as described above. The commenter did not describe specific, actionable 
examples of the measures that would assuage their concern.
    One NCRA commenter stated that the CFPB should have studied 
differences between consumers with medical collections and consumers 
without medical collections in the Technical Appendix of the proposed 
rule instead of limiting its focus to consumers with reported and 
unreported medical collections. The commenter stated that it was 
important to distinguish between consumers with and without medical 
collections because these groups have different payment performance.
    The CFPB does not agree that a comparison between all consumers 
with medical collections and all consumers without medical collections 
is relevant to understanding the impacts of the rule. Although 
consumers with medical collections may have a different delinquency 
risk than consumers without medical collections, the rule will not 
change which consumers have outstanding medical collections. The rule 
instead changes whether medical collections appear on a consumer report 
that a creditor receives for the purpose of a credit eligibility 
determination. The analysis discussed in this part considers whether 
creditors use medical collection information that appears on a consumer 
report to deny consumers with medical collections access to credit and 
limit their delinquency risk. This provides the closest understanding 
of the environment that would be created by the rule: consumers with 
reported medical collections are like the baseline while consumers with 
unreported medical collections are like the post-rule environment, and 
the CFPB's analysis compares them.
    A researcher commenter stated that the CFPB should have used 
propensity score matching instead of a RDiT approach in the Technical 
Appendix of the proposed rule. The commenter suggested a design that 
would compare consumers with ``hidden'' medical debts, or consumers in 
the 180 days before their medical collection is added to their consumer 
report, to similar consumers without medical debt on their consumer 
reports.
    The CFPB does not agree that a propensity score matching approach 
as suggested by the commenter would be appropriate. The CFPB could 
control for information included on consumer reports, but not 
unobservable variables like outstanding medical debt, as most medical 
debt is not included on consumer reports. Therefore, the consumers with 
hidden medical debt would be compared to consumers who, for the most 
part, do not have medical debt. Differences between these groups would 
not be related to the inclusion of a medical collection on consumer 
reports but would instead be driven by the presence of medical debt. 
This analysis would not be as relevant to the rule as the CFPB's 
analysis.

7. Results on Inquiry Success

    The CFPB first uses the inquiry dataset to consider how medical 
collection reporting affects inquiry success. Importantly, an 
unsuccessful inquiry does not necessarily imply that the lender denied 
the credit application. Consumers may be approved for credit with worse 
terms than they would have received absent medical collection reporting 
and decline the offer of credit as a result, or consumers may choose 
not to take up approved credit for idiosyncratic reasons. The CCIP does 
not include data on the terms of originated accounts or on credit 
approvals that do not lead to originated accounts. However, this is 
less likely to be an issue with credit cards because the CFPB 
understands that credit card accounts are generally issued 
automatically if the creditor approves an application, with little 
opportunity for a consumer to decline. The CFPB assumes that consumers' 
underlying demand for credit is unaffected by medical collection 
reporting, so changes in inquiry success across the reporting threshold 
can be attributed to creditors' denial of credit account applications 
or provision of worse terms, rather than

[[Page 3359]]

changes in who applies. The CFPB justifies this assumption below.

                                      Table 7--The Effect of Medical Collection Reporting on Inquiry Success \396\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       (2) Over $500, no
                                     (1) Over $500            NMC         (3) Over $500, NMC        (4) All           (5) No NMC            (6) NMC
--------------------------------------------------------------------------------------------------------------------------------------------------------
Panel A: Credit cards:
    RD Estimate.................           ***-0.047           ***-0.072           ***-0.029           ***-0.033           ***-0.049           ***-0.022
                                             (0.006)             (0.009)             (0.006)             (0.003)             (0.005)             (0.003)
                                    [-0.059, -0.036]    [-0.090, -0.055]    [-0.041, -0.018]    [-0.038, -0.027]    [-0.059, -0.040]    [-0.028, -0.017]
    Avg. success................               0.294               0.381               0.222               0.275               0.364               0.214
    Observations................             601,230             267,276             333,954           3,026,355           1,233,571           1,792,784
Panel B: Mortgages:
    RD Estimate.................             *-0.026             *-0.040              -0.003              -0.014              -0.013              -0.005
                                             (0.012)             (0.018)             (0.012)             (0.009)             (0.015)             (0.006)
                                    [-0.049, -0.004]    [-0.074, -0.006]     [-0.027, 0.022]     [-0.031, 0.004]     [-0.043, 0.017]     [-0.016, 0.006]
    Avg. success................               0.186               0.248               0.098               0.167               0.235               0.089
    Observations................              79,372              46,003              33,369             439,685             237,413             202,272
Panel C: Other credit accounts:
    RD Estimate.................             *-0.014             *-0.020              -0.010           ***-0.015           ***-0.024            **-0.010
                                             (0.006)             (0.009)             (0.007)             (0.003)             (0.005)             (0.004)
                                    [-0.026, -0.003]    [-0.038, -0.002]     [-0.024, 0.004]    [-0.021, -0.009]    [-0.033, -0.015]    [-0.017, -0.003]
    Avg. success................               0.242               0.307               0.197               0.246               0.316               0.205
    Observations................             469,290             190,942             278,348           2,484,030             908,849           1,575,181
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standard errors in parentheses, 95 percent confidence intervals in brackets.
* p < 0.1, ** p < 0.05, *** p < 0.01.

    Table 7 provides the results of the main regression discontinuity 
analysis on inquiry success. Each panel represents a different loan 
type, as products generally have different underwriting procedures. At 
a high level, several summary observations can be made. First, just 
over half of the inquiries in the full sample of the inquiry dataset 
are for credit cards. Only 7.4 percent of the inquiries in this sample 
are for mortgages, compared to almost 17 percent of all inquiries in 
the CCIP. This likely reflects the fact that most consumers in the 
sample have thin credit files \397\ and subprime credit scores, and 
therefore may be less likely to apply for mortgages than for other 
types of credit, given the higher underwriting standards of 
mortgages.\398\ Inquiry success rates are higher for all loan types 
when inquiries are made without nonmedical collection tradelines on the 
consumer report than when nonmedical collection tradelines are present, 
with differences as large as 15.9 percentage points. This is expected 
because consumers with less negative information on their consumer 
reports are more likely to be approved for credit or receive favorable 
terms. Perhaps less intuitively, average success rates for credit cards 
and mortgages are also generally higher for the subsample of inquiries 
made by consumers who only have medical collection tradelines over 
$500, if they have any. As discussed above, inquiries made by consumers 
with many medical collection tradelines are often excluded from the 
over-$500 sample because at least one of those medical collection 
tradelines is under $500. The average number of medical collection 
tradelines on a consumer report when an inquiry is made in the full 
sample, in Column 4, across all loan types, is 5.03. Conversely, the 
average number of medical collection tradelines on a consumer report 
when an inquiry is made, for inquiries made with all medical collection 
tradelines greater than $500, in Column 1 is 1.08. Thus, the over-$500 
sample is positively selected, i.e., consumers in this sample have less 
negative information than consumers in the full sample, at least as 
measured by the number of medical collection tradelines present on 
their consumer reports. Despite the positive selection into the over-
$500 sample, the CFPB expects these results to most closely represent 
the effects of removing all medical collection tradelines from consumer 
reports given the parallel with the NCRAs' current practice for under-
$500 medical collection tradelines.
---------------------------------------------------------------------------

    \396\ The table provides the regression discontinuity estimates 
for the inquiry dataset, separately by credit account type. Each 
coefficient (RD Estimate) estimates a percentage point effect of 
having an additional medical collection reported on inquiry success. 
These effects can be represented as percent changes by comparing to 
the baseline ``Avg. success'', which is calculated as the success 
rate of all inquiries made to the left of the regression 
discontinuity threshold (or without medical collection reporting). 
Column 1 limits the sample to inquiries associated with medical 
collection tradelines over $500 made when the consumer had no 
medical collection tradelines under $500 on their consumer report, 
which is then subset into Columns 2 and 3. Column 2 limits the 
sample to inquiries made when the consumer did not have a nonmedical 
collection tradeline (NMC) on their consumer report; Column 3, when 
consumers did have a nonmedical collection tradeline on their 
consumer report. Column 4 includes the full sample. Columns 5 and 6 
are defined equivalently to Columns 2 and 3 for the full sample. 
Standard errors are clustered by consumer and adjusted using the 
Benjamini-Hochberg procedure.
    \397\ A thin credit file is a consumer report that contains 
fewer than five credit accounts. Jennifer White, Experian, What is a 
Thin Credit File? (May 25, 2022), https://www.experian.com/blogs/ask-experian/what-is-a-thin-credit-file-and-how-will-it-impact-your-life/.
    \398\ Consumers with credit scores below 500 may not be approved 
for a mortgage but can usually access secured credit cards. Louis 
DeNicola, Experian, How to Buy a House with Bad Credit (Oct. 7, 
2023), https://www.experian.com/blogs/ask-experian/how-to-get-a-home-loan-with-bad-credit/; Consumer Fin. Prot. Bureau, How to 
rebuild your credit (July 2020), https://files.consumerfinance.gov/f/documents/cfpb_how-to-rebuild-your-credit.pdf.
---------------------------------------------------------------------------

    Turning to the regression estimates in Table 7, Column 1 of Panel A 
(credit cards) shows that a medical collection being reported causes a 
4.7 percentage point decline in the likelihood of inquiry success for 
the over-$500 sample. This represents a 16.0 percent decline from 
relative to the average success rate for inquiries to the left of the 
regression discontinuity threshold (i.e., inquiries made before the 
medical collection was reported). The effect is larger in absolute 
value for inquiries made when the consumer had no nonmedical collection 
tradelines on their consumer report, shown in Column 2, than when 
consumers had nonmedical collection tradelines on their consumer 
report, shown in Column 3. This supports the hypothesis that medical 
collection reporting has a larger effect on consumers without 
outstanding nonmedical collections. Columns 4 through 6 repeat the 
groups from Columns 1 through 3 but include the full sample. The 
regression result shown in Column 4 of Panel A describes a 3.3 
percentage point, or 12.0 percent,

[[Page 3360]]

decline in inquiry success for inquiries made with these larger medical 
collections reported relative to inquiries made without these medical 
collections reported. Again, effects are larger in absolute value for 
inquiries made when consumers did not have nonmedical collection 
tradelines on their consumer report than when nonmedical collection 
tradelines were present.
    The first three Columns of Panel B (mortgages) find relatively 
small and no more than marginally significant effects of medical 
collection reporting on mortgage inquiry success. Medical collection 
reporting reduces mortgage inquiry success by 2.6 percentage points, or 
14.0 percent of its baseline level. The effect appears to be driven by 
inquiries made when there were no nonmedical collection tradelines on 
the consumer report, as the coefficient in Column 3 is statistically 
insignificant and small. However, the estimates in Columns 1 and 2 are 
only statistically significant at the 10 percent level.\399\ All 
estimates for the full sample in Columns 4 through 6 are statistically 
insignificant. Using the 95 percent confidence interval for the 
coefficient in Column 4 of Panel B, it is possible to reject effects 
larger than a 3.1 percentage point, or 18.6 percent, decline in inquiry 
success for the full sample.\400\
---------------------------------------------------------------------------

    \399\ That is, given the variability in the data, if medical 
collections had no effect on inquiry success, one would expect an 
estimate as large as those show in Columns 1 and 2 less than 10 
percent of the time, but more than 5 percent of the time, through 
chance alone.
    \400\ The confidence intervals provided in brackets in the 
tables contain the true value of the parameter being estimated with 
95 percent confidence, i.e., if the CFPB had sufficient data to run 
this regression with 100 different samples, and estimated 100 
different confidence intervals, one would expect 95 of these 
confidence intervals would contain the true value of the parameter. 
Therefore, the CFPB can reject coefficients outside of the bounds of 
its estimated confidence intervals as unlikely to be consistent with 
the true effect of medical collections reporting on inquiry success 
with 95 percent confidence.
---------------------------------------------------------------------------

    Panel C provides results for all other types of credit accounts. 
The estimated effects are all smaller in magnitude than the results for 
credit cards and vary in statistical significance. The coefficients 
imply that medical collection reporting causes a 1.4 percentage point 
decline in the likelihood of inquiry success for non-mortgage and non-
credit-card credit accounts for the over-$500 sample, or a 5.8 percent 
decline from the baseline inquiry success rate. Estimated effects are 
similar for the full sample. As with the effects on credit cards and 
mortgage inquiries, effects for both samples are larger for consumers 
without nonmedical collection tradelines.
---------------------------------------------------------------------------

    \401\ The table provides the regression discontinuity estimates 
for the performance dataset, separately by credit account type. The 
results estimate effects on two-year 90-day delinquency rate for all 
accounts originated from a successful inquiry in the inquiry 
dataset. Each coefficient (RD Estimate) estimates a percentage point 
effect of having an additional medical collection reported on 
inquiry success. These effects can be represented as percent changes 
using the baseline ``Avg. D90+'', which is calculated as the 90-day 
delinquency rate of all inquiries made to the left of the regression 
discontinuity threshold (or without medical collection reporting). 
Column 1 limits the sample to inquiries associated with medical 
collection tradelines over $500 made when the consumer had no 
medical collection tradelines under $500 on their consumer report, 
which is then subset into Columns 2 and 3. Column 2 limits the 
sample to inquiries made when the consumer did not have a nonmedical 
collection tradeline (NMC) on their consumer report; Column 3, when 
consumers did have a nonmedical collection tradeline on their 
consumer report. Column 4 includes the full sample. Columns 5 and 6 
are defined equivalently to Columns 2 and 3 for the full sample.
---------------------------------------------------------------------------

8. Results on Account Performance

    The estimated effects on inquiry success show that the underwriting 
procedures for many credit types penalize consumers for having medical 
collection tradelines on their consumer reports, with generally larger 
effects for consumers with medical collection tradelines over $500. The 
CFPB next considered whether this use of medical collection tradelines 
protects creditors from delinquency risk. If creditors use medical 
collection information to accurately predict whether consumers have 
high delinquency risk and deny their applications, then originated 
accounts resulting from a successful inquiry for a consumer with an 
unreported medical collection at the time of the inquiry would be more 
likely to be seriously delinquent than those resulting from a 
successful inquiry for a consumer with a reported medical collection. 
However, to the extent that creditors provide worse credit terms to 
consumers with reported medical collections and such worse credit terms 
increase the likelihood of serious delinquency, one might expect the 
opposite: Originated accounts resulting from an inquiry for a consumer 
with an unreported medical collection could be less likely to be 
seriously delinquent (because they received more affordable credit 
terms) than those resulting from an inquiry for a consumer with a 
reported medical collection (because they received worse credit terms). 
These opposing effects make it impossible to determine how the 
underlying delinquency risk of consumers with and without unreported 
medical collections varies. However, the results of this analysis are 
still informative as to how two-year delinquency rates are affected by 
medical collection reporting, net of the effects of application denials 
and the provision of worse terms.

                            Table 8--The Effect of Medical Collection Reporting on Two-Year Credit Account Performance \401\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       (2) Over $500, no
                                     (1) Over $500            NMC         (3) Over $500, NMC        (4) All           (5) No NMC            (6) NMC
--------------------------------------------------------------------------------------------------------------------------------------------------------
Panel A: Credit cards:
    RD Estimate.................              -0.000               0.002              -0.003               0.002               0.004              -0.005
                                             (0.012)             (0.014)             (0.021)             (0.006)             (0.007)             (0.008)
                                     [-0.023, 0.023]     [-0.026, 0.031]     [-0.045, 0.038]     [-0.009, 0.013]     [-0.010, 0.018]     [-0.021, 0.011]
    Avg. D90+...................               0.231               0.190               0.293               0.223               0.171               0.284
    Observations................              96,297              56,423              39,874             565,680             305,980             259,700
Panel B: Mortgages:
    RD Estimate.................              -0.011              -0.021               0.033               0.004              -0.006               0.034
                                             (0.014)             (0.014)             (0.034)             (0.007)             (0.006)             (0.019)
                                     [-0.039, 0.017]     [-0.049, 0.007]     [-0.033, 0.100]     [-0.009, 0.017]     [-0.018, 0.007]     [-0.003, 0.071]
    Avg. D90+...................               0.035               0.025               0.069               0.038               0.029               0.065
    Observations................              10,177               7,944               2,233              56,976              43,106              13,870
Panel C: Other credit accounts:
    RD Estimate.................              -0.012              -0.011              -0.009              -0.001              -0.002              -0.002
                                             (0.014)             (0.015)             (0.021)             (0.006)             (0.006)             (0.009)
                                     [-0.040, 0.015]     [-0.041, 0.019]     [-0.050, 0.033]     [-0.012, 0.011]     [-0.014, 0.011]     [-0.019, 0.016]
    Avg. D90+...................               0.182               0.135               0.235               0.171               0.120               0.216
    Observations................              71,760              36,951              34,809             459,094             213,481             245,613
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standard errors in parentheses, 95 percent confidence intervals in brackets.
* p < 0.1, ** p < 0.05, *** p < 0.01.


[[Page 3361]]

    Table 8 shows the results of the main regression discontinuity 
analysis in the performance dataset. Across all loan types and 
subsamples, the estimated effects of medical collection reporting on 
serious delinquency are small and statistically insignificant. Column 1 
of Panel A shows that, in the over-$500 sample, the CFPB can reject 
effects larger in absolute value than 2.3 percentage points, or 10.0 
percent of the baseline delinquency rate, with 95 percent confidence. 
That is, it would be highly unlikely to find an estimate as small as 
what is reported in Table 8 through chance alone if having an 
unreported medical collection was associated with an increase in the 
rate of serious delinquency by 10 percent or more. The confidence 
interval is tighter and the central estimate more positive (i.e., 
unreported medical collections associated with less delinquency) for 
inquiries made when consumers did not have nonmedical collection 
tradelines on their consumer report than when these collection 
tradelines were present. This means that the true effects for inquiries 
made without nonmedical collection tradelines are more likely to be 
positive. Further, if there is a difference in delinquency rate for 
consumers with unreported medical collections, these consumers are less 
likely to be delinquent than consumers with reported medical 
collections. This also holds for the full subsample in Columns 4 
through 6.
    These results broadly find that credit card lenders use medical 
collection information in underwriting, but do not reduce their two-
year serious delinquency risk for originated credit account tradelines 
by doing so. Fewer accounts are originated to consumers with reported 
medical collections, but those that are originated are no less likely 
to be delinquent than accounts originated to consumers with unreported 
medical collections. This suggests that removing medical collections 
information from credit card underwriting would increase access to 
credit without negatively impacting the likelihood of serious 
delinquency for consumers with medical collections, all else equal.
    The results in Panel B show qualitatively similar estimates for 
mortgages, but with less precisely estimated effects. The effects are 
less precise because the average serious delinquency rate is much lower 
for mortgages than for credit cards: only 3.5 percent of mortgages in 
the over-$500 sample are seriously delinquent within two years, 
compared to 23.1 percent of credit cards. The lower frequency in the 
dependent variable as well as the smaller sample size will naturally 
lead to wider confidence intervals. Column 1 shows that the CFPB can 
only reject marginal reductions in mortgage delinquency rates with 
reported medical collections that are larger in absolute value than 3.9 
percentage points, or 111.4 percent of the baseline delinquency rate, 
with 95 percent confidence. For the full sample, the CFPB can reject 
marginal reductions larger in absolute value than 0.9 percentage 
points, or 23.7 percent of baseline delinquency rate. Though these 
results are too imprecise to allow the rejection of large effects, 
their statistical insignificance can be interpreted as suggestive that 
removing larger medical collection tradelines from mortgage 
underwriting would not cause increases in serious delinquency risk.
    As for credit cards, the results for non-mortgage and non-credit-
card accounts, shown in Table 8, are mostly statistically insignificant 
and small in magnitude. Again, the CFPB concludes that the use of 
medical collections information in underwriting does not reduce the 
delinquency risk of accounts originated to people with reported medical 
collections.
    These results suggest that, absent consumer reporting of medical 
collections, the additional credit accounts that creditors provide to 
consumers whose medical collections would no longer be reported would 
be no more likely to be delinquent than the credit accounts creditors 
provide at baseline. In line with economic theory, the CFPB expects 
that creditors only provide credit if the account's expected profit is 
positive. Under this expectation, creditors would not provide accounts 
to consumers with unreported medical collections at baseline if they 
were not profitable. However, it is possible that creditors currently 
provide those accounts not because they are profitable, but because 
they have no other mechanism for identifying and either denying the 
credit applications of, or changing the terms provided to, applicants 
with unreported medical collections. In this case, the rule would 
reduce profit for creditors by increasing the number of unprofitable 
loans in their portfolio.
    The CFPB illustrates this concern with a simple example. Suppose 
that a creditor's applicant pool is equally divided across three 
nonoverlapping groups of consumers, which are identical in all 
attributes except for the presence of collections and delinquency risk. 
Assume that applicants with no collections have a delinquency risk of 1 
percent and applicants with medical collections have a delinquency risk 
of 1.25 percent. Suppose for simplicity that a lender seeks to minimize 
their delinquency risk and is unwilling to provide loans if the 
expected delinquency rate is 1.2 percent or higher. If half of 
consumers with medical collections (or one-sixth of the total 
population) have those medical collections included on their consumer 
report at baseline, the lender provides loans to consumers with no 
collections and those with unreported medical collections, for an 
overall delinquency risk of 1.08 percent. If no medical collections 
were included on consumer reports, creditors would provide accounts to 
all consumers with no collections and with medical collections, for an 
overall delinquency risk of 1.13 percent.
    Under this line of reasoning, the above results related to account 
performance would be unrelated to the consequences of the rule. It 
would be unsurprising that consumers with reported medical collections 
have the same underlying delinquency risk as consumers with unreported 
medical collections, because in the example delinquency risk is 
determined by the medical collection itself, and not as a consequence 
of consumer reporting. Instead, the relevant question would be whether 
consumers with medical collections have a higher delinquency risk than 
consumers without medical collections, holding all else equal.
    However, this example presupposes that delinquency risk is an 
inherent quality of consumers, rather than in part determined by the 
terms of credit extended to consumers. The dollar amounts and interest 
rates impact the likelihood of delinquency, as well as creditor 
revenue. These levers remain available to creditors under the rule and 
can be used to attenuate reductions in revenue that result from any 
increases in delinquency risk. Indeed, unlike in this simple example, 
the performance results in Table 8 show that creditors willingly 
provide accounts to people with reported medical collections at 
baseline. This requires that there exist terms for which credit 
accounts can be profitably, on expectation, provided to consumers with 
medical collections. Because creditors will not be able to 
differentiate between consumers with and without medical collections 
using information provided on consumer reports under the rule, any 
changes in terms of credit under the rule may impact all consumers, not 
just those with medical collections.
    Furthermore, if the credit extended to consumers with unreported 
medical collections were unprofitable at the pre-rule baseline, the 
CFPB expects that

[[Page 3362]]

creditors could request this information on credit applications to 
ensure they do not provide loans to these applicants or provide 
different terms. Credit applications commonly request information from 
consumers that may not be available on their consumer reports, such as 
their employment status or income. Given the relatively small share of 
medical debt that is included on consumer reports, creditors could 
request this information from consumers directly if it were a key 
determinant of account profitability. At baseline, however, mortgage 
creditor applications, for example, ordinarily do not specifically 
request medical information.
    A researcher commenter described these results in the proposed 
rule, equivalent to Table 8, as showing that not having nonmedical 
debt, including products like student loans and auto loans, leads to 
higher rates of delinquency than having a product like a credit card. 
The commenter stated that these results suggested a problem with the 
CFPB's methodology for the Technical Appendix overall, as one would 
expect nonmedical debt to be associated with a greater rate of 
delinquency.
    While the CFPB agrees with the general principle that 
counterintuitive results of any statistical analysis may warrant 
additional scrutiny, the commenter does not accurately characterize the 
analysis above, and the results are not counterintuitive in the way the 
commenter suggests, much less indicating a problem with the CFPB's 
methodology. The CFPB's analysis does not compare delinquency rates 
between consumers with and without nonmedical debt in general. Rather, 
as discussed above, the results in Table 8 include versions with the 
sample split by the presence or absence of nonmedical collections 
tradelines. Nonmedical collections are not equivalent to nonmedical 
forms of debt such as student loans or auto loans, as a debt only goes 
to collections after it is seriously delinquent. Further, comparing 
Columns 2 and 3 or Columns 5 and 6 shows that credit products 
originated to people with nonmedical collections have higher 
delinquency rates, on average, than credit products originated to 
people without nonmedical collections, as would be expected.
    The researcher commenter also stated that the results in the 
proposed rule equivalent to Table 8 showed that there was a near-
significant impact of nonmedical debt on mortgage delinquency. Again, 
this is an inaccurate characterization of the analysis presented above. 
The CFPB did not estimate the effect of nonmedical debt on delinquency 
at all. Instead, the CFPB found one subsample--consumers with non-
medical collections tradelines and medical collections of any dollar 
amount--for which the effect of having a medical collections tradeline 
reported on mortgage delinquency is positive and close to being 
statistically significant at 95 percent. This is shown in Column 6 of 
Panel B of Table 8. If the effect were estimated with statistical 
significance, it would suggest that consumers with reported medical 
collections in this subsample are more likely to become seriously 
delinquent on mortgages. Differences in the terms provided to consumers 
with reported and unreported medical collections could lead to these 
higher delinquency rates, but the CFPB expects that this result is more 
likely attributed to statistical noise, given the inconsistency with 
the results from the other subsamples studied.
    The CFPB also considered whether to compare different credit 
scoring models, constructed with and without medical information, as a 
way to determine how well such models predict account performance. Such 
an approach, however, would call on the CFPB to design its own credit 
scoring models and determine what types and magnitude of differences 
between the results of the models were meaningful, and may depend more 
on the specifications of the models constructed than the actual rate of 
default in any studied population. The CFPB finds its regression 
discontinuity design and balance tests a more appropriate and reliable 
measure for how medical information improves creditors' ability to 
minimize their risk of default. The results of the CFPB's analysis of 
the performance of actual accounts indicate that creditors who use 
medical information do not reduce risk by doing so.\402\
---------------------------------------------------------------------------

    \402\ E.g., Fannie Mae, Uniform Residential Loan Application 
(Form 1003), https://singlefamily.fanniemae.com/delivering/uniform-mortgage-data-program/uniform-residential-loan-application (last 
visited Nov. 25, 2024).
---------------------------------------------------------------------------

9. Results Related to Credit Demand and Selection

    The results described in the previous two subsections suggest that 
creditors use medical collections information in their underwriting 
procedures, but this information does not enable them to originate 
accounts that are less likely to become seriously delinquent. This 
interpretation of the regression discontinuity results relies on the 
identifying assumption discussed above: the only difference between the 
inquiries made before and after a medical collection tradeline is added 
to a consumer report is the medical collection reporting itself, rather 
than that the application delinquency risk (quality) is lower for 
consumers with reported medical collections. This section discusses 
evidence supporting this identifying assumption.
    Though the analysis benefits from ample observations near the 
threshold, as discussed above, RDiT specifications may still be 
affected by anticipation or selection effects if cross-sectional 
observations can sort themselves on either side of the threshold. In 
this setting, consumers may be less likely to apply for credit after a 
medical collection tradeline is added to their consumer report. If 
consumers with lower delinquency risk have more knowledge about when a 
medical collection tradeline will be added to their consumer report, 
they may be more likely to apply for credit immediately to the left of 
the threshold (i.e., just before the medical collection tradeline is 
added to the consumer report). The CFPB first considered how the 
magnitude of credit demand changes across the reporting threshold by 
plotting the number of inquiries made in each week relative to the week 
of the medical collection tradeline's addition to the consumer report.

[[Page 3363]]

Figure 1: Inquiry Distribution Across Weeks 403
[GRAPHIC] [TIFF OMITTED] TR14JA25.000

    Figure 1 plots the number of inquiries made in each week relative 
to the week before the date a medical collection tradeline was added to 
a consumer report, represented as week zero. For all credit account 
products, credit demand is largely stable through the 25 weeks before 
the medical collection is reported, but there is an immediate reduction 
in the week that the medical collection is reported. Credit demand 
rebounds quickly from this initial drop but remains persistently lower 
for the 25 weeks after the medical collection is reported, only 
approaching its pre-report level by the final considered week for 
credit cards and mortgages. Though the reduction in credit demand is 
sharp around the week of the medical collection's first report, it is 
not large; at most, credit demand falls by 8 percent of the baseline 
(for mortgages).
---------------------------------------------------------------------------

    \403\ This figure plots the number of inquiries made in each 
week within 180 days of the medical collection's first reported 
date. The number of inquiries is provided as a ratio, relative to 
the number of inquiries made in the week before the associated 
medical collection's first reported date. The first and last week of 
the 180-day window include only six days and are not plotted.
---------------------------------------------------------------------------

    Any reduction in credit demand corresponding to medical collection 
reporting may appear to threaten the identifying assumption, which 
requires that applications for credit made by consumers with reported 
medical collections only differ from those made by consumers whose 
medical collections were not yet reported because of the medical 
collection reporting itself, and not because application quality 
differs. However, credit demand may fall for reasons that do not 
simultaneously affect credit application quality. For example, many 
NCRAs provide credit monitoring services that alert a consumer when a 
collection is added to their consumer report.\404\ A consumer who 
planned to apply for credit may no longer do so if they are aware of a 
medical collection tradeline's negative effect on their credit score, 
which would affect their access to credit. The causality may also flow 
in the other direction if debt collectors track consumer reports and 
use ``collection triggers'' to focus their medical collection reporting 
after consumers apply for or open new credit accounts.\405\ These 
mechanisms cannot be observed in the data but could explain the 
observed discontinuous decline in credit demand around medical 
collection reporting.
---------------------------------------------------------------------------

    \404\ See, e.g., Equifax, Equifax Complete \TM\, https://www.equifax.com/personal/products/credit/monitoring-and-reports/ 
(last visited May 15, 2024).
    \405\ See, e.g., Experian, Collection Triggers \SM\: Monitoring 
your collections accounts, https://www.experian.com/business/products/collection-triggers (last visited May 15, 2024).
    \406\ The table includes balance tests for the inquiry sample. 
Panel A limits the sample to inquiries associated with a medical 
collection tradeline over $500 and no medical collection tradelines 
under $500 on the consumer report when the inquiry is made. Panel B 
includes the full sample. These balance tests estimate Equation 1 
using characteristics from the consumer's consumer report in the 
month before the creditor makes an inquiry. ``RD Estimate'' provides 
the estimate for [beta] when the dependent variable is the variable 
whose average is provided. Each column limits the sample by inquiry 
type. ``Any D90+'' describes whether any open or closed account on 
the consumer report is at least 90 days delinquent, and ``tot. past 
due am.'' describes the total amount past due or charged off across 
all accounts. Standard errors are clustered by consumer and adjusted 
using the Benjamini-Hochberg procedure.
---------------------------------------------------------------------------

    To estimate if credit application quality changes across the 
threshold, the CFPB estimated balance tests using Equation 1, where 
Yijk is equal to one of several variables that describe the 
consumer report at the time of the inquiry j. This estimates how 
inquiries made with reported medical collections differ from inquiries 
made with unreported medical collections. If such differences are large 
in absolute value and statistically significant, one might be concerned 
that there are underlying differences in the types of credit 
applications made when medical collections are reported that could be 
driving the regression discontinuity results, instead of the medical 
collection reporting itself. Finding small or imprecise coefficients 
would support the identifying assumption that the only difference in 
inquiries across the regression discontinuity threshold is the addition 
of a medical collection tradeline to the consumer report.

                                      Table 9--Inquiry Balance Tests \406\
----------------------------------------------------------------------------------------------------------------
                                                                                                    (3) Other
                                                               (1) Credit card    (2) Mortgage   credit accounts
----------------------------------------------------------------------------------------------------------------
Panel A: Over $500 sample:
    RD Estimate..............................................            0.117            0.257            0.118
                                                                       (0.172)          (0.464)          (0.172)
    Avg. consumer age........................................           39.295           41.430           38.637
    RD Estimate..............................................         **-3.208            4.034           -0.540

[[Page 3364]]

 
                                                                       (1.192)          (3.572)          (1.255)
    Avg. credit score........................................          576.254          617.565          569.366
    RD Estimate..............................................         ** 0.012           -0.001            0.008
                                                                       (0.005)          (0.009)          (0.005)
    Avg. missing credit score................................            0.197            0.074            0.151
    RD Estimate..............................................            0.032            0.050            0.026
                                                                       (0.035)          (0.115)          (0.039)
    Avg. num. open loans.....................................            1.328            1.997            1.275
    RD Estimate..............................................           -0.001           -0.010           -0.008
                                                                       (0.005)          (0.012)          (0.006)
    Avg. any D90+............................................            0.265            0.256            0.268
    RD Estimate..............................................           49.549        *-259.894           29.122
                                                                      (63.234)        (149.575)         (72.823)
    Avg. tot. past due am....................................        1,131.626        1,155.664        1,276.969
Panel B: Full sample:
    RD Estimate..............................................            0.072           -0.111           -0.077
                                                                       (0.077)          (0.235)          (0.087)
    Avg. age.................................................           41.092           43.078           40.784
    RD Estimate..............................................          *-1.472            1.868           -0.817
                                                                       (0.590)          (1.990)          (0.642)
    Avg. credit score........................................          569.811          606.276          561.472
    RD Estimate..............................................         ** 0.007            0.002          * 0.005
                                                                       (0.003)          (0.004)          (0.003)
    Avg. missing credit score................................            0.171            0.073            0.134
    RD Estimate..............................................           -0.010           -0.092           -0.010
                                                                       (0.020)          (0.047)          (0.018)
    Avg. num. open loans.....................................            1.122            1.749            1.065
    RD Estimate..............................................            0.001           -0.000            0.000
                                                                       (0.003)          (0.006)          (0.004)
    Avg. any D90+............................................            0.262            0.260            0.267
    RD Estimate..............................................          -33.152          -72.382           70.836
                                                                      (42.478)         (76.899)         (40.274)
    Avg. tot. past due am....................................        1,073.628        1,135.919        1,190.611
----------------------------------------------------------------------------------------------------------------
Standard errors in parentheses.
* p < 0.1, ** p < 0.05, *** p < 0.01.


                                    Table 10--Performance Balance Tests \407\
----------------------------------------------------------------------------------------------------------------
                                                                                                    (3) Other
                                                               (1) Credit card    (2) Mortgage   credit accounts
----------------------------------------------------------------------------------------------------------------
Panel A: Over $500 sample:
    RD Estimate..............................................            0.261            0.294            0.200
                                                                       (0.296)          (0.894)          (0.366)
    Avg. consumer age........................................           41.404           42.692           40.184
    RD Estimate..............................................           -3.694            7.807            0.502
                                                                       (2.012)          (7.099)          (2.608)
    Avg. credit score........................................          618.329          668.427          601.025
    RD Estimate..............................................           -0.005            0.005            0.002
                                                                       (0.006)          (0.010)          (0.007)
    Avg. missing credit score................................            0.078            0.014            0.099
    RD Estimate..............................................        *** 0.286          * 0.564            0.089
                                                                       (0.092)          (0.340)          (0.092)
    Avg. num. open loans.....................................            1.884            2.834            1.804
    RD Estimate..............................................            0.017           -0.019           -0.002
                                                                       (0.009)          (0.027)          (0.013)
    Avg. any D90+............................................            0.248            0.191            0.268
    RD Estimate..............................................          175.228         -332.580           16.765
                                                                     (112.690)        (302.978)        (180.777)
    Avg. tot. past due am....................................        1,034.492          673.171        1,220.532
Panel B: Full sample:
    RD Estimate..............................................         ** 0.411            0.871            0.068
                                                                       (0.154)          (0.630)          (0.200)
    Avg. consumer age........................................           43.264           44.083           42.246
    RD Estimate..............................................           -1.670           -0.602           -1.194
                                                                       (0.921)          (3.340)          (1.197)
    Avg. credit score........................................          611.625          660.599          590.484
    RD Estimate..............................................           -0.001            0.002           -0.000
                                                                       (0.003)          (0.005)          (0.004)

[[Page 3365]]

 
    Avg. missing credit score................................            0.057            0.016            0.087
    RD Estimate..............................................           -0.027           -0.162            0.029
                                                                       (0.042)          (0.157)          (0.045)
    Avg. num. open loans.....................................            1.671            2.588            1.530
    RD Estimate..............................................            0.003           -0.028            0.007
                                                                       (0.005)          (0.016)          (0.007)
    Avg. any D90+............................................            0.256            0.189            0.274
    RD Estimate..............................................           82.685         -135.890           35.141
                                                                      (88.985)        (138.828)         (76.515)
    Avg. tot. past due am....................................        1,005.487          609.676        1,191.860
----------------------------------------------------------------------------------------------------------------
Standard errors in parentheses.
* p < 0.1, ** p < 0.05, *** p < 0.01.

    Table 9 provides results for the inquiry dataset and Table 10 
provides results for the performance dataset. Nearly all coefficients 
are not statistically significant, and where there is statistical 
significance, the magnitude of the coefficient is never larger than 20 
percent of the mean value. This implies that credit applications 
submitted by consumers with reported medical collections are similar to 
those submitted by consumers whose medical collections are not yet on 
their consumer reports at the time of application, and differences in 
inquiry success and account performance can be attributed to the 
medical collection reporting itself.
---------------------------------------------------------------------------

    \407\ The table includes balance tests for the performance 
sample. Panel A limits the sample to inquiries associated with a 
medical collection tradeline over $500 and no medical collection 
tradelines under $500 on the consumer report when the inquiry is 
made. Panel B includes the full sample. These balance tests estimate 
Equation 1 using characteristics from the consumer's consumer report 
in the month before the creditor makes an inquiry. ``RD Estimate'' 
provides the estimate for [beta] when the dependent variable is the 
variable whose average is provided. Each column limits the sample by 
inquiry type. ``Any D90+'' describes whether any open or closed 
account on the consumer report is at least 90 days delinquent, and 
``tot. past due am.'' describes the total amount past due or charged 
off across all accounts. Standard errors are clustered by consumer 
and adjusted using the Benjamini-Hochberg procedure.
---------------------------------------------------------------------------

    If all credit accounts were equivalent in their terms, and 
delinquency risk was an immutable characteristic of consumers, one may 
instead expect creditors to require applicants with reported medical 
collections to have credit profiles that reflect lower risk than those 
without reported medical collections, because consumers with reported 
medical collections have an additional, potentially negative, signal on 
their consumer report. Consider, under these assumptions, a simple 
example in which a creditor only provides credit to applicants whose 
expected delinquency risk is less than 10 percent. Suppose also that 
the presence of at least one medical collection increases an 
applicant's true delinquency risk by 1 percentage point. In this case, 
creditors will provide accounts to consumers whose true delinquency 
risk is between 0 and 11 percent for applicants with unreported medical 
collections, and between 0 and 10 percent for applicants with reported 
medical collections. If risk is equally distributed across the 
population, on average, a consumer offered credit with unreported 
medical collections would be 0.5 percentage points more likely to be 
delinquent than a consumer offered credit with reported medical 
collections.\408\
---------------------------------------------------------------------------

    \408\ In this example, the average delinquency rate for credit 
recipients with unreported medical collections is 5.5 percent, 
compared to 5 percent for credit recipients with reported medical 
collections.
---------------------------------------------------------------------------

    To the contrary, the balance tests estimated in Table 10 show that 
there are no sizable and statistically significant differences between 
the credit profiles of consumers with reported or unreported medical 
collections that open credit accounts, for the considered possible 
differentiating variables. These balance tests suggest two possible 
explanations:
    First, some creditors could use medical collection information to 
deny all applicants with such information, while other creditors could 
disregard this information. In this case, creditors that ignore medical 
collections information would provide credit to the same types of 
consumers on either side of the regression discontinuity threshold, 
thus not causing a discontinuous change in the delinquency risk of 
approved consumers. The findings in Table 7 would be explained by 
creditors that deny all consumers with reported medical collections, 
but these creditors would not contribute to estimating the delinquency 
risk of consumers with reported medical collections; there is no 
delinquency rate to measure because these consumers did not open an 
account. These differences in creditors' understanding of the 
usefulness of medical collection information could explain the 
statistically insignificant differences in delinquency rates across the 
regression discontinuity threshold shown in Table 8.
    Second, creditors could provide different terms to consumers with 
reported medical collections, which may impact their delinquency risk. 
Consumers with reported medical collections may appear to be better 
credit risks than consumers with unreported medical collections (on a 
differentiating variable for which the balance tests were not estimated 
because the CFPB does not have the relevant data), but if they are 
provided worse terms, those terms may increase their delinquency risk 
above what it would have been had they received the terms provided to 
consumers with unreported medical collections. Additionally, consumers 
with lower delinquency risk may be less likely to take up an offered 
loan with worse terms. If, in the example above, consumers with a 
delinquency risk between 0 and 1 percent choose not to take up an 
offered credit account when their medical collection is reported and 
they are provided worse terms, the average delinquency rate would be 
5.5 percent for consumers with reported medical collections, as in the 
sample of consumers with unreported medical collections.\409\
---------------------------------------------------------------------------

    \409\ In this example, consumers with reported medical 
collections that originate an account have a delinquency rate 
between 1 and 10 percent, and consumers with unreported medical 
collections that originate an account have a delinquency rate 
between 0 and 11 percent. The average delinquency rate for both 
groups is 5.5 percent.
---------------------------------------------------------------------------

    The CFPB does not have information about the terms of credit 
provided to

[[Page 3366]]

consumers with reported or unreported medical collections, or 
information about credit application approvals that are not taken up by 
consumers, and therefore cannot estimate the extent to which the 
delinquency results are driven by either possible explanation. 
Regardless of the underlying mechanism, the CFPB concludes that even 
when creditors, at baseline, use medical collection information, they 
do not reduce their underlying delinquency risk by doing so. This 
suggests that differences in inquiry success and account performance 
can be attributed to the medical collection reporting itself, rather 
than a change in the consumer's risk of default arising from the 
underlying medical debt. Therefore, removing this information under the 
rule will lead creditors to provide more credit accounts to consumers 
that are similar in delinquency risk to the credit accounts they 
already provide.
    Two researcher commenters stated that the CFPB needed to include 
control variables in its regressions, specifically suggesting State of 
residence, credit score, or credit balances. One of these commenters 
stated these variables may need to be controlled for if they are 
correlated with either inquiry success or account performance and 
change discontinuously around the medical collection reporting 
threshold date, citing academic literature.\410\
---------------------------------------------------------------------------

    \410\ Catherine Hausman & David S. Rapson, Regression 
Discontinuity in Time: Considerations for Empirical Applications, 10 
Ann. Rev. of Res. Econ. (2018), https://www.annualreviews.org/content/journals/10.1146/annurev-resource-121517-033306.
---------------------------------------------------------------------------

    The CFPB does not agree that including controls for State of 
residence, credit score, or credit balances is necessary or 
appropriate. If these control variables were correlated with inquiry 
success or account performance and changed discontinuously across the 
threshold date, estimating balance tests on these control variables 
would lead to statistically significant and large effects, but Tables 9 
and 10 find no evidence in support of this hypothesis. The CFPB did not 
estimate balance tests for State of residence but finds it implausible 
that sufficiently many consumers would change States in response to a 
medical collection (so that a consumer's State correlated with the time 
between the inquiry and the medical collection report) that the move 
would discontinuously impact either inquiry success or account 
performance. Instead, the CFPB interprets its coefficients as an 
average of effects across all states, weighted by the number of 
inquiries included in the sample from each State. Additionally, the 
CFPB included in the Notice of Proposed Rulemaking, and reproduced 
below, a version of its results including control variables for day-of-
week effects. These are the only effects mentioned as likely needed 
control variables in the academic literature cited by a commenter, but 
they do not meaningfully change the results.\411\
---------------------------------------------------------------------------

    \411\ Id.
    \412\ The table provides regression discontinuity estimates for 
the inquiry and performance datasets, separately by credit account 
type, and omitting all inquiries made within seven days of the 
associated medical collection's reporting date, making a 14-day 
``donut hole'' of omitted inquiries. Each coefficient (RD Estimate) 
estimates a percentage point effect of having an additional medical 
collection reported on inquiry success (in Columns 1 and 3) using 
the inquiry dataset or 90-day delinquency (in Columns 2 and 4) using 
the performance dataset. These effects can be represented as percent 
changes by comparing to a baseline ``Avg. dep. var.'', which is 
calculated as the success rate or 90-day delinquency rate of all 
inquiries made to the left of the regression discontinuity threshold 
(or without medical collection reporting). Columns 1 and 2 limit the 
sample to inquiries associated with medical collection tradelines 
over $500 made when the consumer had no medical collection 
tradelines under $500 on their consumer report. Columns 3 and 4 
include the full sample. Standard errors are clustered by consumer 
and adjusted using the Benjamini-Hochberg procedure.
---------------------------------------------------------------------------

    To further test for the presence of anticipation or selection 
effects, the CFPB estimated a ``donut'' regression that removes from 
the sample all inquiries made within seven days of their associated 
medical collection's addition to the consumer report. If the regression 
estimates are driven by anticipation or selection, the effects would be 
much smaller when estimated without observations near the reporting 
threshold, as application quality would be less selected from the 
threshold. In addition, medical collections may not be reported to all 
three NCRAs on precisely the same date. The creditors that make 
inquiries to the NCRA that provides the CFPB's CCIP may observe a 
medical collection on an inquiry they make to a different NCRA and use 
this information, even though it appears in the CCIP that the medical 
collection was not reported. Additionally, the construction of inquiry 
shopping windows and inherent imprecision in connecting inquiries to 
opened tradelines may further limit the accuracy of calculating the 
running variable to a precise day. This is especially important near 
the reporting threshold because a one-day error in assigning the date a 
medical collection was reported or an inquiry was made could be 
sufficient to erroneously categorize the medical collection reporting 
status of an inquiry. The CFPB further considered variation in dates 
within inquiry shopping windows below.

 Table 11--The Effect of Medical Collection Reporting on Inquiry Success and Credit Account Performance, Using a
                                               14-Day Donut \412\
----------------------------------------------------------------------------------------------------------------
                                    (1) Over $500,      (2) Over $500,
                                        success              D90+          (3) All, success      (4) All, D90+
----------------------------------------------------------------------------------------------------------------
Panel A: Credit cards:
    RD Estimate.................           ***-0.060              -0.006           ***-0.041               0.008
                                            (0.0080)             (0.015)             (0.005)             (0.008)
                                    [-0.075, -0.045]     [-0.036, 0.024]    [-0.050, -0.032]     [-0.009, 0.024]
    Avg. dep. var...............               0.294               0.232               0.275               0.223
    Observations................             578,088              92,708           2,908,047             543,865
Panel B: Mortgages:
    RD Estimate.................            **-0.037              -0.022           ***-0.043              -0.003
                                             (0.017)             (0.025)             (0.008)             (0.011)
                                    [-0.071, -0.004]            [-0.071]    [-0.060, -0.027]     [-0.026, 0.019]
    Avg. dep. var...............               0.186               0.035               0.167               0.038
    Observations................              76,358               9,797             422,584              54,818
Panel C: Other Credit Accounts:
    RD Estimate.................              -0.009              -0.038             *-0.010               0.008
                                             (0.009)             (0.025)             (0.004)             (0.010)
                                     [-0.027, 0.009]     [-0.087, 0.012]    [-0.018, -0.002]     [-0.012, 0.027]

[[Page 3367]]

 
    Avg. dep. var...............               0.242               0.182               0.245               0.171
    Observations................             451,474              69,159           2,387,333             441,523
----------------------------------------------------------------------------------------------------------------
Standard errors in parentheses, 95 percent confidence intervals in brackets.
* p < 0.1, ** p < 0.05, *** p < 0.01.

    Table 11 provides the ``donut'' specification regression results. 
By comparing Column 1 of Table 7 to Column 1 of Table 11 and comparing 
Column 4 of Table 7 to Column 3 of Table 11, one can observe that 
effects on inquiry success are larger in absolute magnitude and more 
statistically significant for credit cards and mortgages in the donut 
specification than in the main specification. This shows that the main 
results using the inquiry data are not driven by selection or 
anticipation effects. Instead, the results in the main specification 
may be attenuated by fuzziness in the date that the medical collection 
was reported or that the inquiry was made, as discussed above.
    Despite the modest differences between Table 11 and Table 7 for the 
inquiry dataset, there are no meaningful differences in the magnitude 
or statistical significance of effects for the performance datasets, as 
shown by comparing Column 1 of Table 8 to Column 2 of Table 11 and 
comparing Column 4 of Table 8 to Column 4 of Table 11. This provides 
further evidence that the use of medical collection reporting in 
underwriting does not improve account performance.
    A final concern is that it could be problematic if there is 
bunching at certain values of the running variable because the 
likelihood of a medical collection being reported, or an inquiry being 
made, differs across days of the week. For example, fewer than 4 
percent of the medical collection tradelines associated with inquiries 
in the inquiry dataset were reported on a Sunday, compared to nearly 28 
percent reported on a Tuesday. The distribution of inquiries in the 
inquiry dataset (across all inquiry product types) is more even, with a 
low of 8.5 percent on Sunday, just over 15 percent on Monday through 
Friday, and nearly 14 percent on Saturday. Combining these two 
features, an inquiry made on a Monday is more likely to correspond to a 
medical collection tradeline on the subsequent day than an inquiry made 
on a Saturday. If the types of inquiries made on Mondays differ from 
those made on Saturdays, there may be disproportionately more inquiries 
made on Monday for the running variable value immediately before the 
threshold (equal to -1), which could cause selection bias in the 
estimated effect. To test whether this selection biases the regression 
results, the CFPB estimated an additional specification that adds 
binary indicator variables to the main specification for the day of the 
week of each observation's inquiry date and date of the medical 
collection report.
---------------------------------------------------------------------------

    \413\ The table provides regression discontinuity estimates for 
the inquiry and performance datasets, separately by credit account 
type, and including binary control variables for the day of the week 
that the inquiry was made (or the inquiry shopping window's last 
date) and the day of the week of the associated medical collection 
tradeline's addition to the consumer report. Each coefficient (RD 
Estimate) estimates a percentage point effect of having an 
additional medical collection reported on inquiry success (in 
Columns 1 and 3) in the inquiry dataset or 90-day delinquency (in 
Columns 2 and 4) in the performance dataset. These effects can be 
represented as percent changes by comparing to a baseline ``Avg. 
dep. var.'', which is calculated as the success rate or 90-day 
delinquency rate of all inquiries made to the left of the regression 
discontinuity threshold (or without medical collection reporting). 
Columns 1 and 2 limit the sample to inquiries associated with 
medical collections over $500 made when the consumer had no medical 
collection tradelines under $500 on their consumer report. Columns 3 
and 4 include the full sample. Standard errors are clustered by 
consumer and adjusted using the Benjamini-Hochberg procedure.

     Table 12--The Effect of Medical Collection Reporting on Inquiry Success and Credit Account Performance,
                                    Controlling for Day-of-Week Effects \413\
----------------------------------------------------------------------------------------------------------------
                                    (1) Over $500,      (2) Over $500,
                                        success              D90+          (3) All, success      (4) All, D90+
----------------------------------------------------------------------------------------------------------------
Panel A: Credit cards:
    RD Estimate.................           ***-0.048              -0.002           ***-0.034               0.001
                                             (0.006)             (0.012)             (0.003)             (0.006)
                                    [-0.059, -0.038]     [-0.024, 0.021]    [-0.039, -0.028]     [-0.010, 0.012]
    Avg. dep. var...............               0.294               0.231               0.275               0.223
    Observations................             601,230              96,297           3,026,355             565,680
Panel B: Mortgages:
    RD Estimate.................             *-0.027              -0.017              -0.014               0.005
                                             (0.011)             (0.015)             (0.009)             (0.007)
                                    [-0.049, -0.004]     [-0.045, 0.012]     [-0.032, 0.003]     [-0.008, 0.018]
    Avg. dep. var...............               0.186               0.035               0.167               0.038
    Observations................              79,372              10,177             439,685              56,976
Panel C: Other credit accounts:
    RD Estimate.................             *-0.014              -0.015           ***-0.015              -0.002
                                             (0.006)             (0.014)             (0.003)             (0.006)
                                    [-0.026, -0.003]     [-0.042, 0.013]    [-0.021, -0.010]     [-0.013, 0.010]
    Avg. dep. var...............               0.242               0.182               0.246               0.171
    Observations................             469,290              71,760           2,484,030             459,094
----------------------------------------------------------------------------------------------------------------
Standard errors in parentheses, 95 percent confidence intervals in brackets.
* p < 0.1, ** p < 0.05, *** p < 0.01.


[[Page 3368]]

    Table 12 provides the regression results for a version of Equation 
1 that includes day-of-the-week controls. Results are very similar to 
the main specification, as can be seen by comparing Column 1 of Table 7 
to Column 1 of Table 12, Column 4 of Table 7 to Column 3 of Table 12, 
Column 1 of Table 8 to Column 2 of Table 12 and comparing Column 4 of 
Table 8 to Column 4 of Table 12. The CFPB concluded that the main 
results are not caused by bias in the distribution of inquiry or 
medical collection timing across days of the week.

10. Results Related to Credit Shopping

    As described above, the main specification defines the running 
variable using the date of the last inquiry observed within the inquiry 
shopping window. This creates imprecision in the measurement of the 
inquiry date for inquiry observations that reflect shopping windows 
with multiple inquiries if they were not made on the same date.\414\ 
Because this imprecision could attenuate results, the CFPB estimated 
Equation 1 separately for inquiry observations that reflect multi-
inquiry-date shopping windows (Shopping) and for inquiry observations 
that reflect shopping windows that only contain one inquiry date (No 
Shopping). The CFPB estimated this robustness check for the inquiry 
dataset first, and then for the performance dataset.
---------------------------------------------------------------------------

    \414\ Note that there may be imprecision in assignment of 
inquiry date for all inquiries, even those associated with no other 
inquiries within a shopping window, because the CFPB's CCIP only 
contains inquiries made to one NCRA.

  Table 13--The Effect of Medical Collection Reporting on Inquiry Success, Separated by Shopping Behavior \415\
----------------------------------------------------------------------------------------------------------------
                                    (1) Over $500,     (2) Over $500, no                          (4) All, no
                                       shopping            shopping        (3) All, shopping       shopping
----------------------------------------------------------------------------------------------------------------
Panel A: Credit cards:
    RD Estimate.................              -0.043           ***-0.050               0.000           ***-0.035
                                             (0.020)             (0.005)             (0.013)             (0.003)
                                    [-0.082, -0.003]    [-0.060, -0.039]     [-0.025, 0.026]    [-0.040, -0.030]
    Avg. success................               0.445               0.279               0.422               0.262
    Observations................              51,481             549,749             250,319           2,776,036
Panel B: Mortgages:
    RD Estimate.................              -0.019              -0.022           ***-0.041              -0.002
                                             (0.028)             (0.011)             (0.014)             (0.011)
                                     [-0.074, 0.037]    [-0.043, -0.001]    [-0.068, -0.014]     [-0.024, 0.020]
    Avg. success................               0.329               0.123               0.308               0.111
    Observations................              24,266              55,106             126,393             313,292
Panel C: Other credit accounts:
    RD Estimate.................               0.002              -0.016              -0.015           ***-0.015
                                             (0.015)             (0.006)             (0.007)             (0.003)
                                     [-0.030, 0.027]    [-0.029, -0.004]    [-0.029, -0.001]    [-0.021, -0.008]
    Avg. success................               0.391               0.213               0.394               0.217
    Observations................              77,603             391,687             400,620           2,083,410
----------------------------------------------------------------------------------------------------------------
Standard errors in parentheses, 95 percent confidence intervals in brackets.
* p < 0.1, ** p < 0.05, *** p < 0.01.

    Table 13 shows results for inquiry success for inquiries associated 
with multi-date versus single-date shopping windows. For credit cards 
and other non-mortgage accounts, the results are only statistically 
significant for single-date shopping windows and are also larger in 
absolute magnitude. Fewer than 10 percent of credit card inquiries are 
associated with multi-date shopping windows, which is expected given 
the small average shopping windows for credit cards shown in Table 5. 
Alternatively, the only statistically significant result for mortgages 
appears for inquiries associated with multi-date shopping windows in 
the full sample. This limited ability to identify a precise effect is 
reflected in the main specification as well, as shown in Table 7. The 
CFPB concluded that, for non-mortgage products, the inability to 
observe the exact date that an inquiry was made may attenuate the 
results in the main specification, and the true effect of having a 
medical collection reported may be a larger decrease in inquiry success 
than what is reported in Table 7.
---------------------------------------------------------------------------

    \415\ The table provides regression discontinuity estimates for 
the inquiry and performance datasets, separately by credit account 
type, and separately by shopping behavior. Each coefficient (RD 
Estimate) estimates a percentage point effect of having an 
additional medical collection reported on inquiry success (in 
Columns 1 and 3) in the inquiry dataset or 90-day delinquency (in 
Columns 2 and 4) in the performance dataset. These effects can be 
represented as percent changes by comparing to a baseline ``Avg. 
dep. var.'', which is calculated as the success rate or 90-day 
delinquency rate of all inquiries made to the left of the regression 
discontinuity threshold (or without medical collection reporting). 
Columns 1 and 2 limit the sample to inquiries associated with 
medical collection tradelines over $500 made when the consumer had 
no medical collections under $500 on their consumer report. Columns 
3 and 4 include the full sample. Columns 1 and 3 include only 
inquiries with shopping windows that contained inquiries made on 
different dates. Columns 2 and 4 include only inquiries with sole-
inquiry shopping windows or inquiry shopping windows where all 
inquiries were made on the same date. Standard errors are clustered 
by consumer and adjusted using the Benjamini-Hochberg procedure.

[[Page 3369]]



    Table 14--The Effect of Medical Collection Reporting on Two-Year Credit Account Performance, Separated by
                                             Shopping Behavior \416\
----------------------------------------------------------------------------------------------------------------
                                    (1) Over $500,     (2) Over $500, no                          (4) All, no
                                       shopping            shopping        (3) All, shopping       shopping
----------------------------------------------------------------------------------------------------------------
Panel A: Credit cards:
    RD Estimate.................              -0.010              -0.000               0.023              -0.001
                                             (0.035)             (0.013)             (0.018)             (0.006)
                                     [-0.079, 0.059]     [-0.025, 0.025]     [-0.013, 0.059]     [-0.013, 0.011]
    Avg. D90+...................               0.320               0.218               0.313               0.210
    Observations................              12,288              84,009              70,222             495,458
Panel B: Mortgages:
    RD Estimate.................              -0.005              -0.025               0.009               0.001
                                             (0.020)             (0.020)             (0.011)             (0.008)
                                     [-0.045, 0.036]     [-0.063, 0.014]     [-0.012, 0.030]     [-0.015, 0.018]
    Avg. D90+...................               0.041               0.027               0.046               0.030
    Observations................               5,673               4,504              30,756              26,220
Panel C: Other credit Accounts:
    RD Estimate.................              -0.013              -0.003              -0.000              -0.001
                                             (0.026)             (0.014)             (0.012)             (0.007)
                                     [-0.065, 0.039]     [-0.030, 0.025]     [-0.023, 0.023]     [-0.014, 0.012]
    Avg. D90+...................               0.216               0.170               0.207               0.158
    Observations................              19,879              51,881             122,953             336,141
----------------------------------------------------------------------------------------------------------------
Standard errors in parentheses, 95 percent confidence intervals in brackets.
* p < 0.1, ** p < 0.05, *** p < 0.01.

    Table 14 provides the same robustness check as Table 13 but 
estimates effects on serious delinquency using the performance dataset. 
As in previous robustness checks, the estimated results on account 
performance are all statistically insignificant, and nearly all are 
small in comparison to the baseline average delinquency rate. The CFPB 
considers these results as evidence that imprecision in assigning 
inquiry dates does not drive the lack of statistical significance in 
the main specification.
---------------------------------------------------------------------------

    \416\ The table provides regression discontinuity estimates for 
the performance dataset, separately by credit account type, and 
separating the sample by shopping behavior. Each coefficient (RD 
Estimate) estimates a percentage point effect of having an 
additional medical collection reported on inquiry success. These 
effects can be represented as percent changes by comparing to a 
baseline ``Avg. D90+'', which is calculated as the 90-day 
delinquency rate of all inquiries made to the left of the regression 
discontinuity threshold (or without medical collection reporting). 
Columns 1 and 2 limit the sample to inquiries associated with 
medical collection tradelines over $500 made when the consumer had 
no medical collections under $500 on their consumer report. Columns 
3 and 4 include the full sample. Columns 1 and 3 include only 
inquiries with shopping windows that contained inquiries made on 
different dates. Columns 2 and 4 include only inquiries with sole-
inquiry shopping windows or inquiry shopping windows where all 
inquiries were made on the same date. Standard errors are clustered 
by consumer and adjusted using the Benjamini-Hochberg procedure.
    \417\ The table provides regression discontinuity estimates for 
the inquiry and performance datasets, separately by credit account 
type, and using the date of the first inquiry observed within an 
inquiry shopping window instead of the date of the last inquiry 
observed, as in the primary specification. The sample is limited to 
inquiries whose first date of the inquiry shopping window was within 
180 days of the medical collection's inclusion on the consumer 
report. Each coefficient (RD Estimate) estimates a percentage point 
effect having an additional medical collection reported on inquiry 
success (in Columns 1 and 3) in the inquiry dataset or 90-day 
delinquency (in Columns 2 and 4) in the performance dataset. These 
effects can be represented as percent changes by comparing to a 
baseline ``Avg. dep. var.'', which is calculated as the success rate 
or 90-day delinquency rate of all inquiries made to the left of the 
regression discontinuity threshold (or without medical collection 
reporting). Columns 1 and 2 limit the sample to inquiries associated 
with medical collection tradelines over $500 made when the consumer 
had no medical collection tradelines under $500 on their consumer 
report. Columns 3 and 4 include the full sample. Standard errors are 
clustered by consumer and adjusted using the Benjamini-Hochberg 
procedure.
---------------------------------------------------------------------------

    Finally, the CFPB tested whether classifying the timing of an 
inquiry shopping window using the last inquiry makes a difference to 
the results. Although it makes intuitive sense to focus on the last 
inquiry--a consumer finishes shopping, then either gets a new account 
or does not--this could impact whether a consumer is considered treated 
or not by having a medical collection reported or not. For example, if 
a consumer applied for accounts that created inquiries on March 5 and 
March 17, had an account opened on March 19, and had a medical 
collections tradeline reported on March 15, in the main specification 
described above, they would be considered to have a medical collection 
at the time of the inquiry. This may be accurate, if the March 17 
inquiry (or another inquiry after March 15 that was made with a 
different NCRA) resulted in the open account, but it also may be 
inaccurate, and influence the results reported above. To further test 
how the definition of shopping windows may affect the main results, the 
CFPB estimated a version of the analysis using the first date of the 
shopping window instead of its last date to define the running 
variable.

     Table 15--The Effect of Medical Collection Reporting on Inquiry Success and Credit Account Performance,
                            Classifying Shopping Windows by First Inquiry Date \417\
----------------------------------------------------------------------------------------------------------------
                                    (1) Over $500,      (2) Over $500,
                                        success              D90+          (3) All, success      (4) All, D90+
----------------------------------------------------------------------------------------------------------------
Panel A: Credit cards:
    RD Estimate.................          *** -0.049               0.002          *** -0.035               0.004
                                             (0.004)             (0.012)             (0.003)             (0.006)

[[Page 3370]]

 
                                    [-0.058, -0.041]     [-0.021, 0.025]    [-0.040, -0.030]     [-0.008, 0.016]
    Avg. dep. var...............               0.294               0.231               0.275               0.222
    Observations................             600,209              95,973           3,021,234             563,942
Panel B: Mortgages:
    RD Estimate.................              -0.010               0.003              -0.010               0.003
                                             (0.012)             (0.013)             (0.008)             (0.006)
                                     [-0.033, 0.014]     [-0.022, 0.028]     [-0.026, 0.006]     [-0.009, 0.015]
    Avg. dep. var...............               0.182               0.033               0.163               0.035
    Observations................               74674                8836              415412               49986
Panel C: Other credit Accounts:
    RD Estimate.................              -0.010              -0.020           ***-0.012              -0.003
                                             (0.006)             (0.014)             (0.003)             (0.006)
                                     [-0.021, 0.002]     [-0.048, 0.008]    [-0.018, -0.006]     [-0.015, 0.008]
    Avg. dep. var...............               0.242               0.182               0.246               0.171
    Observations................             467,949              71,401           2,476,494             456,828
----------------------------------------------------------------------------------------------------------------
Standard errors in parentheses, 95 percent confidence intervals in brackets.
* p < 0.1, ** p < 0.05, *** p < 0.01.

    The results in Table 15 are very similar in size to those in the 
main specification, as seen by comparing Column 1 of Table 7 to Column 
1 of Table 15, Column 4 of Table 7 to Column 3 of Table 15, Column 1 of 
Table 8 to Column 2 of Table 15 and comparing Column 4 of Table 8 to 
Column 4 of Table 15. The coefficients in Column 1 of Table 15, 
estimating the impact of medical collection reporting on inquiry 
success, are no longer marginally significant for mortgages and other 
credit accounts. This may be because the last inquiry observed within 
an inquiry shopping window is a better proxy for the date that the 
creditor observed the consumer report for these products, which is 
sensible if consumers continue to shop when they reject an earlier 
credit offer, or their application is rejected. The CFPB considers 
these results as evidence that, given the inherent challenges in 
assigning inquiry dates, the method of using the last date that an 
inquiry was observed within a shopping window is the best available 
classification.
---------------------------------------------------------------------------

    \418\ The table provides regression discontinuity estimates for 
the performance dataset, separately by credit account type, and 
using the credit limit or loan principal at time of origination as 
the dependent variable. Each coefficient (RD Estimate) estimates a 
percentage point effect of having an additional medical collection 
reported on the account's credit limit or loan principal. These 
effects can be represented as percent changes by comparing to a 
baseline ``Avg. credit am.'', which is calculated as the average of 
the credit limit or loan principal for all inquiries made to the 
left of the regression discontinuity threshold (or without medical 
collection reporting). Column 1 limits the sample to inquiries 
associated with medical collection tradelines over $500 made when 
the consumer had no medical collection tradelines under $500 on 
their consumer report. Column 2 includes the full sample. The 
dependent variable is equal to the credit limit at the time of 
account origination for credit cards and other revolving accounts. 
The dependent variable is equal to the loan principal at the time of 
account origination for mortgages and other installment products. 
Standard errors are clustered by consumer and adjusted using the 
Benjamini-Hochberg procedure.
---------------------------------------------------------------------------

11. Results Related to Alternative Measures of Account Performance and 
Inquiry Success

    Moving on from statistical and data construction considerations, 
the CFPB returns to the applicability of the results to the considered 
equilibrium in which all medical collection tradelines are removed from 
consumer reports. Creditors may respond to reported medical collections 
by providing lower amounts of credit, especially for products whose 
applications do not typically request a certain amount of credit, such 
as credit cards (and unlike mortgages). The CCIP does not contain data 
on the dollar amount of credit that consumers were offered if consumers 
decided not to open an account, but it can observe credit limits and 
loan principals for originated accounts. Moreover, the CFPB understands 
that credit card accounts are typically opened automatically if 
approved by the creditor, such that consumers do not have an 
opportunity to decline an offer of credit with a lower limit than they 
prefer. The CFPB estimated Equation 1 using the account's credit limit 
(for revolving accounts) or loan principal (for installment accounts) 
as the dependent variable. This regression can only be run for the 
performance dataset because credit limits and loan principals cannot be 
observed for unsuccessful inquiries.

     Table 16--The Effect of Medical Collection Reporting on Credit Account Limits and Loan Principals \418\
----------------------------------------------------------------------------------------------------------------
                                                                  (1)  Over 500                 (2)  All
----------------------------------------------------------------------------------------------------------------
Panel A: Credit cards:
    RD Estimate...........................................                ***-384.312                ***-247.492
                                                                             (80.367)                   (33.855)
                                                                 [-541.829, -226.795]       [-313.848, -181.137]
    Avg. credit am........................................                  1,481.169                  1,312.252
    Observations..........................................                     96,208                    565,222
Panel B: Mortgages:
    RD Estimate...........................................                -12,746.532                -15,734.984
                                                                         (11,952.690)  .........................
                                                              [-36173.374, 10680.309]     [-33208.174, 1738.206]

[[Page 3371]]

 
    Avg. credit am........................................                232,565.905                225,877.236
    Observations..........................................                     10,163                     56,918
Panel C: Other credit accounts:
    RD Estimate...........................................                    254.621                   -195.017
                                                                            (398.877)                  (220.971)
                                                                 [-527.164, 1036.407]        [-628.113, 238.078]
    Avg. credit am........................................                 20,994.097                 20,380.048
    Observations..........................................                     71,739                    458,968
----------------------------------------------------------------------------------------------------------------
Standard error in parentheses, 95 percent confidence intervals in brackets.
* p < 0.1, ** p < 0.05, *** p < 0.01.

    Table 16 provides estimates for the effect of medical collection 
reporting on credit limits and loan principals. The results in Panel A 
show that medical collection reporting leads to lower credit limits for 
originated credit cards, with an average reduction in provided credit 
limits of $384 for the over-$500 sample and $247 for the full sample. 
This represents a meaningful reduction in consumer access to credit, as 
baseline average credit limits are lower than $1,500 for both samples. 
As expected, the CFPB does not find statistically significant effects 
for mortgages or other non-credit-card account types. Consumers 
generally apply for a specific dollar amount of credit for installment 
products, and the dollar amount of credit provided is not a margin that 
would generally be affected by medical collection reporting.
---------------------------------------------------------------------------

    \419\ The table provides regression discontinuity estimates for 
the performance dataset, separately by credit account type, and 
using alternative classifications of account performance. Each 
coefficient (RD Estimate) estimates a percentage point effect of 
having an additional medical collection reported on the account's 
credit limit or loan principal. These effects can be represented as 
percent changes by comparing to a baseline ``Avg. credit am.'', 
which is calculated as the average of the credit limit or loan 
principal for all inquiries made to the left of the regression 
discontinuity threshold (or without medical collection reporting). 
Columns 1 through 3 limit the sample to inquiries associated with 
medical collection tradelines over $500 made when the consumer had 
no medical collection tradelines under $500 on their consumer 
report. Columns 4 through 6 includes the full sample. The dependent 
variable in Columns 1 and 4, ``D30+'', is whether the account was 
ever at least 30 days delinquent within two years of its 
origination. The dependent variable in Columns 2 and 5, ``D90+ 
alt.'', is whether the account was at least 90 days delinquent 
exactly two years after the origination date, in contrast to the 
primary classification which considers whether the account was ever 
at least 90 days delinquent within two years of the origination 
date. The dependent variable in Columns 3 and 6 is the total amount 
past due or charged off on the account exactly two years after the 
account's origination date if either value is positive and non-
missing. If accounts have positive and non-missing past-due amounts 
and charged-off amounts, the classification uses the charged-off 
amount. Standard errors are clustered by consumer and adjusted using 
the Benjamini-Hochberg procedure.
---------------------------------------------------------------------------

    The CFPB understands that the classification of serious delinquency 
is not the sole determinant of account performance. Three other 
measures of performance are considered in this final set of 
regressions, estimated on the performance dataset: whether the account 
is ever 30 days or more delinquent within two years of its origination, 
whether the account is 90 days or more delinquent at the end of its 
first two years after origination (instead of whether it was ever 90 
days or more delinquent within that two-year period), and the dollar 
amount past due or charged off for accounts with nonzero past due or 
charged off amounts at the end of its first two years after 
origination. If the primary classification of serious delinquency is a 
good proxy for account performance, then results for the first two 
alternative measures should be similar to their counterparts in the 
main performance results in direction and statistical significance. The 
results for past due amounts may be more nuanced, as Table 16 above 
shows that medical collection reporting lowers the credit limits of 
credit cards. This may cause lower past due amounts in response to 
medical collection reporting because consumers cannot borrow as much as 
they can absent medical collection reporting.

             Table 17--The Effect of Medical Collection Reporting on Two-Year Credit Account Performance, Alternative Classifications \419\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                 (1)  Over $500,   (2)  Over $500,    (3)  Over $500, past                      (5)  All, D90+
                                      D30+            D90+ alt.             due am.           (4)  All, D30+         alt.         (6)  All, past due am.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Panel A: Credit cards:
    RD Estimate...............             0.008            -0.006               **-215.199             0.002            -0.003                **-62.830
                                         (0.013)           (0.011)                 (86.597)           (0.006)           (0.005)                 (29.197)
                                 [-0.017, 0.032]   [-0.027, 0.015]      [-384.926, -45.472]   [-0.010, 0.015]   [-0.013, 0.008]       [-120.055, -5.604]
    Avg. dep. var.............             0.321             0.164                  713.724             0.316             0.153                  643.677
    Observations..............            96,297            96,297                   19,945           565,680           565,680                  111,342
Panel B: Mortgages:
    RD Estimate...............            -0.034             0.002                4,477.430             0.012             0.001                  261.686
                                         (0.027)           (0.010)              (2,894.862)           (0.012)           (0.005)              (1,682.921)
                                 [-0.087, 0.018]   [-0.018, 0.022]   [-1196.394, 10151.255]   [-0.012, 0.036]    [-0.009, 0012]    [-3036.779, 3560.152]
    Avg. dep. var.............             0.125             0.021                7,511.005             0.118             0.019                6,018.840
    Observations..............            10,177            10,177                      409            56,976            56,976                    1,954
Panel C: Other credit
 Accounts:
    RD Estimate...............            -0.006            -0.002                 -803.533            -0.000             0.000                 -562.913
                                         (0.016)           (0.013)                (732.117)           (0.008)           (0.005)                (301.400)
                                 [-0.037, 0.025]   [-0.027, 0.023]      [-2238.455, 631390]   [-0.016. 0.015]   [-0.009, 0.010]      [-1153.647, 27.821]
    Avg. dep. var.............             0.322             0.156                7,012.189             0.316             0.145                6,510.499

[[Page 3372]]

 
    Observations..............            71,760            71,760                   13,777           459,094           459,094                   81,546
--------------------------------------------------------------------------------------------------------------------------------------------------------
Standard errors in parentheses, 95 percent confidence intervals in brackets.
** p < 0.1, ** p < 0.05, *** p < 0.01.

    Table 17 estimates Equation 1 on the performance dataset using 
alternative measures of account performance. Columns 1, 2, 4, and 5 
show small and statistically significant effects of medical collection 
reporting on account performance, as in Columns 1 and 4 of Table 8. In 
Panel A, Columns 3 and 6 provide relatively small but at least 
marginally significant effects, suggesting that medical collection 
reporting may lead to lower past-due or charged-off amounts for credit 
cards, when those amounts are nonzero. This may be caused by the lower 
credit limits provided to consumers with reported medical collections, 
as shown in Table 16. Though credit cards originated to consumers with 
unreported medical collections may be no more likely to become 
seriously delinquent within two years, the dollar amount past due when 
the account is delinquent may be higher because consumers with 
unreported medical collections receive higher credit limits. The 
results in Panels B and C show no statistically significant effects on 
past-due or charged-off amounts for mortgages, as expected because 
there were no differences in serious delinquency or in the dollar 
amount of credit provided.
    A researcher commenter suggested that the CFPB incorporate a risk 
management framework in its interpretation of the results in Tables 16 
and 17, where a creditor's expected loss is modeled as:

Expected Loss = Probability of Default x Exposure at Default x Loss-
Given Default

    The commenter notes that the analysis in the Technical Appendix 
focuses on the Probability of Default, finding that this would be 
unchanged under the proposed rule. For credit cards, the commenter 
stated that the Exposure at Default, generally the entire credit limit 
for consumers defaulting on credit cards, may be higher under the 
proposed rule because credit limits and amounts past due are higher for 
accounts originated by consumers with unreported medical collections, 
as shown in Tables 16 and 17.
    The CFPB agrees that may be an appropriate theoretical framework to 
consider expected losses. However, the CFPB does not have the 
information needed to evaluate this formula.\420\ Additionally, the 
CFPB notes that what is ultimately important to creditors is profit, 
which includes both expected losses and expected revenue. Creditors can 
earn higher revenues when providing higher credit limits to consumers 
who revolve their balance from month-to-month and pay interest fees. 
Therefore, although expected loss for credit card lenders may be higher 
under the rule because the Exposure at Default is higher, the expected 
revenue may be higher, too.
---------------------------------------------------------------------------

    \420\ The commenter incorrectly interprets Loss-Given Default as 
Exposure at Default in his interpretation of the formula. Loss-Given 
Default is the percent of Exposure at Default that the creditor 
would lose if the consumer defaulted on the loan. The CFPB does not 
have any data that would allow it to estimate Loss-Given Default.
---------------------------------------------------------------------------

    The researcher commenter further stated that the Loss-Given 
Default, or the percent of the loss that could not be recouped by the 
creditor in the case of default, might be higher under the proposed 
rule because recoverable debt values would fall under the proposed 
rule.\421\ The commenter did not explain why recoverable debt values 
would fall, but the comment seemed to be based on an assumption that 
medical debt will become more challenging to collect under the rule. 
While the CFPB does not agree with this assumption, as discussed above 
in part VII.E.1, this is not relevant to the analysis here, which 
pertains to potential losses for credit cards. The CFPB is not aware of 
evidence indicating that recoverable debt values would fall for types 
of debt other than medical debt, and the commenter did not provide any 
evidence suggesting as much. As such, the CFPB does not expect that 
Loss-Given Default will change due the rule.
---------------------------------------------------------------------------

    \421\ The commenter describes Loss-Given Default as the average 
dollar amount of loss given default, which is not generally how 
Loss-Given Default is calculated, per the equation provided by the 
commenter and described above. The CFPB interprets the comment as 
being about Loss-Given Default conceptually, regardless of the exact 
calculation.
---------------------------------------------------------------------------

List of Subjects in 12 CFR Part 1022

    Banks, banking, Consumer protection, Credit unions, Holding 
companies, National banks, Privacy, Reporting and recordkeeping 
requirements, Savings associations.

Authority and Issuance

    For the reasons set forth in the preamble, the CFPB amends 
Regulation V, 12 CFR part 1022, as set forth below:

PART 1022--FAIR CREDIT REPORTING (REGULATION V)

0
1. The authority citation for part 1022 continues to read as follows:

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1681a, 1681b, 1681c, 
1681c-1, 1681c-3, 1681e, 1681g, 1681i, 1681j, 1681m, 1681s, 1681s-2, 
1681s-3, and 1681t; Sec. 214, Pub. L. 108-159, 117 Stat. 1952.

Subpart A--General Provisions

0
2. Amend Sec.  1022.3 by adding paragraph (j) to read as follows:


Sec.  1022.3  Definitions.

* * * * *
    (j) Medical debt information means medical information that 
pertains to a debt owed by a consumer to a person whose primary 
business is providing medical services, products, or devices, or to 
such person's agent or assignee, for the provision of such medical 
services, products, or devices. Medical debt information includes but 
is not limited to medical bills that are not past due or that have been 
paid.
* * * * *

Subpart D--Medical Information

0
3. Amend Sec.  1022.30 by:
0
a. Revising paragraph (c);
0
b. Removing and reserving paragraph (d);
0
c. Revising paragraphs (e)(1)(viii) and (ix); and
0
d. Adding paragraphs (e)(1)(x) and (e)(6) and (7).
    The revisions and additions read as follows:


Sec.  1022.30  Obtaining or using medical information in connection 
with a determination of eligibility for credit.

* * * * *
    (c) Rule of construction for obtaining and using unsolicited 
medical information--(1) In general. A creditor

[[Page 3373]]

does not obtain medical information in violation of the prohibition if 
it receives medical information pertaining to a consumer in connection 
with any determination of the consumer's eligibility, or continued 
eligibility, for credit without specifically requesting medical 
information.
    (2) Use of unsolicited medical information. A creditor that 
receives unsolicited medical information in the manner described in 
paragraph (c)(1) of this section may use that information in connection 
with any determination of the consumer's eligibility, or continued 
eligibility, for credit to the extent the creditor can rely on at least 
one of the exceptions in paragraph (e) of this section.
    (3) Examples. A creditor does not obtain medical information in 
violation of the prohibition if, for example:
    (i) In response to a general question regarding a consumer's debts 
or expenses, the creditor receives information that the consumer owes a 
debt to a hospital.
    (ii) In a conversation with the creditor's loan officer, the 
consumer informs the creditor that the consumer has a particular 
medical condition.
* * * * *
    (e) * * *
    (1) * * *
    (viii) To determine the consumer's eligibility for, the triggering 
of, or the reactivation of a debt cancellation contract or debt 
suspension agreement if a medical condition or event is a triggering 
event for the provision of benefits under the contract or agreement;
    (ix) To determine the consumer's eligibility for, the triggering 
of, or the reactivation of a credit insurance product if a medical 
condition or event is a triggering event for the provision of benefits 
under the product; or
    (x) So long as the conditions in paragraphs (e)(1)(x)(A) through 
(C) of this section are met:
    (A)(1) The medical information is 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; or
    (2) The medical information relates to income, benefits, or the 
purpose of the loan, including the use of proceeds. Medical information 
relating to income and benefits includes, for example, the dollar 
amount and continued eligibility for disability income, workers' 
compensation income, or other benefits related to health or a medical 
condition that is relied on as a source of repayment.
    (B) The creditor uses the medical information in a manner and to an 
extent that is no less favorable than it would use comparable 
information that is not medical information in a credit transaction.
    (C) 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 determination of the consumer's 
eligibility, or continued eligibility, for credit.
* * * * *
    (6) Example to comply with applicable requirements of local, State, 
or Federal laws. A consumer applies for a mortgage loan subject to 
Sec.  1026.43(c) or Sec.  1026.34(a)(4) of this chapter, or an open-end 
(not home-secured) credit card account subject to Sec.  1026.51(a) of 
this chapter. The application does not specifically request medical 
information, but the consumer provides unsolicited medical information 
on the application. The creditor or the card issuer is permitted under 
paragraph (e)(1)(ii) of this section to use such medical information in 
connection with any determination of the consumer's eligibility, or 
continued eligibility, for credit only to the extent required by the 
applicable Federal law and implementing regulation. For example, assume 
a consumer applies for a mortgage loan subject to Sec.  1026.43(c) of 
this chapter. Assume further that the creditor has not specifically 
requested medical information on the application, but the consumer 
provides information on a current debt obligation, such as a monthly 
medical payment plan, that is medical information. The creditor is 
permitted under paragraph (e)(1)(ii) of this section to consider the 
existence and the amount of the medical payment plan as required in 
considering factors under Sec.  1026.43(c)(2) of this chapter, such as 
the current debt obligations, consumer's monthly debt-to-income ratio, 
and residual income, in making the repayment ability determination 
required under Sec.  1026.43(c)(1) of this chapter. In this 
circumstance, the creditor would not be required to independently 
verify the existence and amount of the monthly medical payment plan, as 
provided for under Sec.  1026.43(c)(3)(iii) of this chapter. See also 
Regulation Z (12 CFR 1026.43(c)(3), comment 43(c)(3)-6), describing a 
situation in which a consumer provides a creditor with information on a 
debt obligation that is not listed on a consumer report. Further, a 
creditor or card issuer is not permitted under paragraph (e)(1)(ii) of 
this section to obtain or use any medical information from a consumer 
reporting agency to comply with the ability-to-repay rule under Sec.  
1026.43(c) of this chapter for closed-end mortgages, the repayment 
ability rule under Sec.  1026.34(a)(4) of this chapter for open-end, 
high-cost mortgages, or the ability-to-pay rule under Sec.  1026.51(a) 
of this chapter for open-end (not home-secured) credit card accounts, 
because the creditor or card issuer can comply with those rules using 
information provided by the consumer. This example only relates to the 
exception under paragraph (e)(1)(ii) of this section. 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 paragraph (e) of this section, as applicable.
    (7) Example of medical information relating to income and benefits. 
A consumer indicates on an application for a $200,000 mortgage loan 
that she receives $15,000 in long-term disability income each year from 
her former employer and has no other income. Annual income of $15,000, 
regardless of source, would not be sufficient to support the requested 
amount of credit. The creditor denies the application on the basis that 
the projected debt-to-income ratio of the consumer does not meet the 
creditor's underwriting criteria. The creditor has used medical 
information in a manner and to an extent that is no less favorable than 
it would use comparable non-medical information.

0
4. Amend 12 CFR part 1022 by adding reserved Sec. Sec.  1022.33 through 
1022.37 and by adding Sec.  1022.38 to subpart D to read as follows:


Sec.  Sec.  1022.33-1022.37  [Reserved]


Sec.  1022.38  Duty of consumer reporting agencies regarding medical 
debt information.

    (a) Scope. This section applies to any consumer reporting agency as 
defined in section 603(f) of the FCRA, 15 U.S.C. 1681a(f).
    (b) Limitation regarding prohibited medical debt information. A 
consumer reporting agency may include medical debt information, as 
defined in Sec.  1022.3(j), in a consumer report furnished to a 
creditor only if the consumer reporting agency:

[[Page 3374]]

    (1) Has reason to believe the creditor intends to use the medical 
debt information in a manner not prohibited by Sec.  1022.30; and
    (2) 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.

Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2024-30824 Filed 1-13-25; 8:45 am]
BILLING CODE 4810-25-P`