Consumer Financial Protection Bureau releases proposed rule on medical debt

Consumer Financial Protection Bureau releases proposed rule on medical debt

On June 11, the Consumer Financial Protection Bureau (CFPB) released a proposed rule that would prohibit lenders from making lending decisions based on medical financial information. The proposed rule would also prohibit the consideration of unpaid medical bills in the credit reporting process and would prohibit repossession of medical devices or use of a medical device as collateral for a loan. This is one component of the Biden administration’s broad initiative to reduce the burden of medical debt. The Biden administration estimates that the proposed rule would remove medical debt from credit reports for approximately 15 million Americans.

The proposed rule would alleviate barriers that patients face when attempting to obtain a loan or mortgage when they have medical debt. However, there is concern that the proposed rule does not include sufficient safeguards to allow medical practices to make reasonable efforts to collect debt from patients who are able to provide payment.

If the proposed rules are passed, how will they affect your practice?  Take our two-minute survey to help inform the College’s comments on the proposed rules.

Key provisions of the proposed rule on medical debt

The proposed rule builds upon the Fair and Accurate Credit Transactions Act of 2003, which restricted creditors’ ability to use certain medical information when making credit eligibility determinations. While the regulations implementing this law prohibited lenders from using medical information when making credit determinations, the regulations included an exception for medical financial information, which could still be considered by lenders. The proposed rule aims to remove this exception and the use of medical financial information in credit decision-making by:

  1. Prohibiting lenders from making lending decisions based on medical information: This proposed rule states that lenders could no longer use medical debt information when making credit eligibility determinations. To be considered medical debt, the debt must relate to a debt owed directly to a health care provider, including when such debt is sold or resold to a debt buyer. For allergists, this means that any debt owed by a patient to the practice would not be considered in any future lending decisions pertaining to the patient.The CFPB cited inaccuracies and errors in information concerning medical debt and the lack of the predictive value of using medical debt in credit underwriting as reasons for prohibiting the use of this information.
  2. Removing medical bills from credit reports: Under the proposed rule, consumer reporting agencies would no longer be able to provide medical debt information on a consumer report to another company. Such credit reports are often used for employment, housing, and insurance coverage decision-making purposes. This means that debt owed to an allergy practice would not appear in a consumer report.
  3. Prohibiting lenders from repossessing medical devices or using medical devices as collateral: The proposed rule would prohibit lenders from considering a patient’s medical device when assessing expenses, assets, and collateral to secure a loan. It also aims to prohibit creditors from repossessing medical devices when consumers are unable to pay back a loan.

What allergy practices can do now

If passed, this rule may make it more difficult for allergy practices to collect payments from patients after a service has been provided. It puts even greater emphasis on the importance of collecting payments up front to avoid potential uncollectible accounts receivable. Make sure your practice has processes in place to check patient eligibility, benefits and deductibles before each appointment. Collect copays and coinsurance on the front end and consider implementing a credit card on file program. (A credit card on file program enables you to safely store patient credit cards and automatically charge patients for their portion of the bill after receiving an EOB from the payer).

The College’s free Allergy Office Essentials package has two 15-minute educational modules to help: Credit Card on File and Front Desk Training.  Our Collections Toolkit has all the resources you need to get started!

You can access the full text of the proposed rule and a summary fact sheet. The Advocacy Council will update members on any additional implications for allergists if the proposed rule is finalized.