BPI and CBA Comment on CFPB’s Proposed Changes to Medical Debt Reporting

Dear Director Chopra:

The Bank Policy Institute^[1] and the Consumer Bankers Association^[2] are providing these comments in response to the Consumer Financial Protection Bureau's proposed amendments to Regulation V, the implementing regulation for the Fair Credit Reporting Act (FCRA). The CFPB proposes to substantially limit 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. This important exception was established by the prudential banking agencies and the National Credit Union Administration in 2005 and adopted by the CFPB pursuant to the Dodd-Frank Act's transfer of authorities to the CFPB. The CFPB proposes to retain only certain elements of the exception related to income, benefits, and loan purpose. The Proposal also would limit the circumstances under which consumer reporting agencies (CRAs) are permitted to furnish medical debt information to creditors in connection with credit eligibility determinations.

Overview

We support and share the CFPB's mission to protect consumers in the markets for financial products and services. While the Proposal raises several fundamental concerns, as described further herein, should the CFPB proceed with the rulemaking, we strongly support the CFPB's exclusion of debt owed to a third-party lender, including a credit card issuer, as proposed. However, the CFPB should not attempt to eliminate any other categories of debt from credit reports. In addition, lenders will require further guidance from the CFPB regarding how to comply with existing ability-to-repay requirements in light of the proposed removal of medical debt from such reports.

The Proposal suffers from several problems. The CFPB does not have the authority to prohibit credit reporting agencies from providing medical debt information in consumer reports. Moreover, the Proposal would ultimately harm consumers, particularly low-and-moderate income and underserved consumers, financial institutions, medical providers, and the market for consumer financing more generally. By significantly limiting creditors' visibility into and consideration of a consumer's medical debts and expenses in underwriting decisions, consumers may be extended more credit than they can afford, which could lead to default. This would, in turn, ultimately increase the cost and decrease the availability of credit, harming all consumers. Furthermore, because the Proposal would increase the likelihood that creditors may extend credit on which borrowers are more likely to default, lenders' safety and soundness controls could be affected, which would be detrimental to the overall health of the financial system.

Ultimately, the Proposal is a misguided attempt to address the CFPB's fundamental concerns about the high cost of medical care, inaccurate or inflated medical bills, and unlawful medical industry debt collection and reporting.^[3] While these may be valid policy concerns, these issues cannot be addressed by restricting the ability of creditors to consider medical debts in making underwriting decisions; rather, the concerns that underlie this Proposal can only be changed by those entities themselves or by legislators or other policymakers with authority over those entities. Indeed, the CFPB has relevant authority under the FCRA and the Fair Debt Collections Practices Act (FDCPA), for example, to directly address practices that are illegal, such as misrepresentations by debt collectors about whether and how much a consumer owes. Addressing such practices head-on would be more effective than the indirect approach the CFPB has proposed, which would not only be ineffective, but also would have negative collateral consequences for consumers and creditors. However, the CFPB has failed to explain why alternative options would not achieve the CFPB's goals. For these reasons, we urge the CFPB to withdraw the Proposal.

To read the full comment letter, please click here, or click on the download button below.

[1] The Bank Policy Institute is a nonpartisan public policy, research and advocacy group, representing the nation's leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation's bank-originated small business loans, and are an engine for financial innovation and economic growth.

[2] The Consumer Bankers Association (CBA) is the only national trade association focused exclusively on retail banking. Established in 1919, the association is a leading voice in the banking industry and Washington, representing members who employ nearly two million Americans, extend roughly $3 trillion in consumer loans, and provide $270 billion in small business loans.

[3] Indeed, CFPB officials and prior CFPB regulatory actions have made the CFPB's concerns about these issues clear, and the CFPB has undertaken these efforts in connection with a broader effort by the Administration to "Lessen the Burden of Medical Debt and Increase Consumer Protection." White House Fact Sheet: "The Biden Administration Announces New Actions to Lessen the Burden of Medical Debt and Increase Consumer Protection" (April 11, 2022), FACT SHEET: The Biden Administration Announces New Actions to Lessen the Burden of MedicalDebt and Increase Consumer Protection | The White House. For example, the CFPB's General Counsel has previously stated that "federal law and the law of many states require non-profit hospitals to have financial assistance programs for people who cannot afford to pay, and require hospitals to let people know about these programs," but has criticized the administration by hospitals of charity and reduced-cost care benefits and suggests that consumers are being harmed by the ways in which hospitals communicate with consumers about those benefits, which may result in consumers having medical bills or debt that they do not actually owe or for which they could receive assistance. The CFPB articulated similar concerns in its RFI on medical payment products. Request for Information Regarding Medical Payment Products, 88 Fed. Reg., 44,281 (July 12, 2023).

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