Consumer Finance Litigation

On September 21, 2023, the CFPB announced it is undertaking a rulemaking process to remove medical bill tradelines from consumer reports and prohibit creditors from relying on medical bills during underwriting.

Under the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) and the Dodd-Frank Act, the CFPB is required to consult with representatives of small entities that would likely be directly impacted by the CFPB’s proposed regulations. To that end, the Small Business Advisory Review Panel for Consumer Reporting Rulemaking was formed to address consumer reporting rulemaking, and the CFPB’s proposal is included in the recent Small Business Advisory Panel’s Outline of Proposals and Alternatives Under Consideration. The CFPB is convening a panel of small entity representatives to obtain feedback on the proposal and complete a report. The CFPB is also soliciting feedback from other stakeholders, and any such feedback must be submitted no later than October 30, 2023.

Although the Fair Credit Reporting Act restricted creditors’ ability to use medical debts in credit decisions, Congress authorized the Federal banking agencies and National Credit Union Administration to create regulatory exemptions to that restriction. Until now, the CFPB has left this exemption relatively undisturbed. If the CFPB finalizes its proposal to remove medical debt, the proposal would (1) remove medical bill tradelines from consumer credit reports; and (2) prohibit creditors from relying on medical collections information for underwriting decisions. However, creditors would be able to use medical bill information for purposes such as verifying the need for medical forbearances or evaluating loan applications to pay for medical services.

Burr & Forman will continue to monitor this sweeping proposal and provide updates as they arise.