Federal Gov’t Instructs Agencies to Remove Medical Debt from Loan Underwriting Factors

The federal government, noting it has “a responsibility to set the standard for how medical debt is treated,” announced yesterday that it is instructing its agencies with direct loan and guarantee programs to “wherever possible” reduce the impact of medical debt when making underwriting decisions. The announcement is the latest in a string of decisions this year aimed at de-emphasizing the impact that medical debt has on the financial situations of individuals.

A copy of the memo, issued by the Director of the Office of Management and Budget, can be accessed by clicking here.

Back in April, the White House announced a plan to crack down on “malicious” and “predatory” billing practices related to medical debts.

Noting that other departments and agencies within the federal government have taken steps “remedy the impact of the issue of medical debt as an indicator for creditworthiness,” the memo says that those steps have not gone far enough. Thus, for any program related to consumer loans, or small or medium businesses where a consumer’s credit history is a factor, medical debt must be eliminated from the underwriting criteria, the memo announced.

Consumer advocates praised yesterday’s announcement.

“Today, the White House has emphasized the Administration’s commitment to eliminating the harmful impacts of medical debt on consumers,” said Jenifer Bosco, staff attorney at the National Consumer Law Center, in a statement. “We appreciate the transparency that the Administration is providing by issuing a public memo, which will encourage accountability, and we urge speedy action by the agencies to ensure that medical debt does not bar people and small business owners from accessing federal loan programs.”

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