Trump Administration Halts Medical Debt Reforms, Threatening Consumer Protections
TL/DR –
The Trump administration’s halt on new regulations could hamper efforts to reform medical debt. Despite the popularity of such reforms, and fears of bankruptcy due to healthcare costs among half of Americans, Republicans have resisted the changes. This includes Elon Musk, who has expressed a desire to “delete” the Consumer Financial Protection Bureau, which is responsible for protecting consumers against predatory debt collectors, and is enacting rules to prevent the impact of medical debt on credit scores.
Trump Administration’s Halt on New Regulations May Impact Medical Debt Reforms
The Trump administration’s decision to pause new regulations could jeopardize reforms aimed at easing the burden of medical debt. These reforms are widely supported, yet Republicans have opposed their advancement, despite half of Americans fearing bankruptcy due to major health events.
Musk’s Influence and the Future of the CFPB
Amidst this uncertainty, billionaire Elon Musk has been working to gain access to federal payment systems and has threatened to abolish the Consumer Financial Protection Bureau (CFPB). This federal agency, responsible for consumer protection, has been crucial in safeguarding consumers from predatory debt collectors and the weaponization of medical debt.
The Burden of Medical Debt and its Impact on Credit Reports
Approximately 46 million Americans had medical debt on their credit report in 2020, which can have severe repercussions like hindering their ability to secure loans, housing, and jobs. The Biden administration was aiming to eliminate medical debt on credit reports by prohibiting creditors from reporting delinquent debt to credit agencies.
Uncertainty Looms Over Consumer Protection
Consumer protection came into question with the inception of the Trump administration, which halted all forthcoming regulations. More doubt was added when the new treasury secretary, Scott Bessent, directed the CFPB to halt work and upcoming regulations. These reforms were set to be implemented in March.
Opposition from the Debt Collection Industry
The debt collection industry, benefiting from medical debt collections, strongly opposed the rule. ACA International, an industry group, lobbied Bessent to halt the medical debt reforms. Scott Purcell, ACA International’s CEO, labelled the CFPB’s targeting of ACA members as misguided, and asked that two recent CFPB actions be delayed or revoked.
Upcoming Rulings and the Practice of “Upcoding”
Purcell also requested Bessent to halt the enforcement of a second rule, due for October, that would require debt collectors to independently analyze each medical debt sent for collection. This is to prevent “upcoding”, a practice believed to be widespread in the healthcare industry, where patients are billed for more complex and costly services than they received.
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