On June 11, 2024, the Consumer Financial Protection Bureau (CFPB) published a Notice of Proposed Rulemaking (NPRM) to amend Regulation V‒ which implements the Fair Credit Reporting Act (FCRA) ‒ limiting the inclusion of medical bills in consumer financial reports. This amendment, while providing significant benefits to Americans suffering significant medical debts, also may alter and reduce risk for employers who lawfully consider credit information as part of the pre-employment process.

The consideration of medical debt information in making employment decisions has always been a concern of workplace regulatory agencies. The Equal Employment Opportunity Commission (EEOC), along with the Federal Trade Commission (FTC), released guidance to U.S. employers in 2014 on criminal and financial background checks. This guidance emphasizes how credit reports and criminal histories may influence employment decisions. Often, background checks can display an applicant’s race, ethnicity, gender, financial record, criminal history, genetic information, or disability. Because of the myriad of federal, state, and local laws and regulations, employers must be mindful of any “disparate impact” the practice of conducting background checks may impose on applicants if such information were to influence an adverse employment decision such as job rejection.

Employers must also be aware of the risk of potential disparate treatment claims, i.e., intentional discrimination, arising out information learned during the background check process. Relevant to accessing medical debt information, importantly, the EEOC reminds employers not to try to obtain genetic information or family medical history, as those inquiries violate the Genetic Information Nondiscrimination Act (GINA). The 2014 guidance also encourages employers to “[b]e prepared to make exceptions for problems revealed during a background check that were caused by a disability.”

The FTC, in that same 2014 guidance, reminds employers that they must provide notice (with specific reasons as to the rejection) and a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act” before taking adverse action based on information revealed in a credit report. The CFPB’s proposed regulation therefore can reduce the risk of an employer having knowledge of potentially protected information. 

Until recently, medical debt has had damaging affects to millions of working-age Americans. A study conducted by the CFPB showed that Black and Latino Americans aged 30-44, as well as Americans living in southern states, are most likely to have medical debt reported on their credit history.

CFPB’s newly proposed amendment to Regulation V, if adopted in its entirety, will alter the access to medical debt information in consumer financial reports. The proposal includes three major amendments to Regulation V: (1) the definition of medical debt information; (2) a removal of the financial information exception; and (3) restricting credit reporting agencies for consideration of medical debt in eligibility determinations. That said, credit reports will still include medical debts that are in default.

What impact does this potential amendment have on employers? Considering a government guidance has been in place for over ten years by the EEOC and FTC, prudent employers are already minimizing their exposure to potential claims by considering mitigating factors relating to medical debts or not considering that factor at all. As such, the underlying information in medical bills that reveal genetic information, family medical history, or a disability should be considered confidential and not be considered when evaluating the qualifications of a job applicant. If CFPB’s amendments are therefore implemented, employers and job applicants benefit alike – employers will ensure they are making decisions based on what is job related and consistent with business necessity irrespective of possible protected status, while the applicant no longer has to explain what might fall under a protected category when credit has been impacted by significant medical debt. Medical payments in default can still be considered, however the prudent employer can consider mitigating circumstances without delving into the underlying medical history. 

Special thanks to Giuseppina Mammoliti for her assistance with this article.