Under its current leadership, the CFPB has long been eyeing the use of medical debt information in credit underwriting, which has now culminated in the recent issuance of a proposed rule to eliminate the exception in Regulation V (which implements the Fair Credit Reporting Act) that allows creditors to obtain and use medical debt information in connection with credit eligibility determinations. The proposed rule would also generally prohibit consumer reporting agencies (CRAs) from including medical debt information on consumer reports. Comments on the proposal are due by August 12, 2024.
The proposed rule would make a few critical changes to Regulation V. First, Regulation V currently contains a definition of âmedical information.â While the existing âmedical informationâ definition covers information about medical debts, the proposal would add âmedical debt informationâ as a newly defined term. Regulation V currently contains a âfinancial information exception for obtaining and using medical informationâ that generally allows creditors to obtain and use information about medical debts âin connection with any determination of the consumerâs eligibility, or continued eligibility, for creditâ so long as certain conditions are met. The proposal would remove that exception and add a new exception that would allow a creditor to use âmedical informationâ for credit eligibility determinations only if the following three conditions are met:
- The medical information relates to income, benefits, or the purpose of the loan, including the use of proceeds. Medical information about income and benefits includes, for example, the dollar amount and continued eligibility for disability income, workersâ compensation income, or other benefits related to a health or medical condition that is relied on as a source of repayment;
- The medical information is used in a manner and to an extent that is no less favorable than the creditor would use comparable information that is not medical information in a credit transaction, and
- The creditor does not consider the consumerâs physical, mental, or behavioral health, condition or history, type of treatment, or prognosis when determining the consumerâs eligibility or continued eligibility for credit.
The proposal would add a new provision to Regulation V that would prohibit CRAs from furnishing a consumer report that includes medical debt information to a creditor unless the following two conditions are met:
- The CRA has reason to believe the creditor intends to use the medical debt information consistent with one of the specific exceptions, and
- The CRA is not otherwise prohibited, such as by state law, from furnishing information in a consumer report that would meet the definition of âmedical debt information.â
Under the current financial information exception in Regulation V, a creditor can consider medical information relating to expenses, assets, and collateral, including the value, condition, and lien status of a medical device that may be collateral for a loan when making credit eligibility decisions. The effect of the proposed removal of the financial information exception from Regulation V would be to prohibit creditors from obtaining and using medical information relating to expenses, assets, or collateral in making credit eligibility decisions unless a specific exception applies.
The CFPB has said that it will publish separate proposed rules on the other FCRA changes under consideration later this year. Those include broadening the definition of consumer reporting agency to include data brokers, limiting the permissible purposes for which credit reports can be furnished, and changing the rules governing the resolution of consumer disputes about their credit reports.1