The exchange for the debt economy
Dr. Andrew Rodrigo Nigrinis is an economist specializing in economic analysis and expert testimony for complex litigation, regulatory matters, and public policy challenges. He is currently an Economist at Legal Economics LLC, a leading economic and quantitative consulting firm.
Dr. Nigrinis previously served as the first and only enforcement economist for five years at the Consumer Financial Protection Bureau (CFPB). In this role, he led the economic analysis for over 70 enforcement matters across a wide spectrum of consumer finance issues, including unfair and deceptive practices, fair lending violations, mortgage and student loan servicing, credit card fees, debt collection, and the detection of dark patterns. He also contributed to the economic evaluation of consumer finance regulations and designed sampling and data analysis frameworks for large-scale investigations. His work involved close collaboration with the Department of Justice, state attorneys general, and the Office of the Comptroller of the Currency.
Dr. Nigrinis holds a Ph.D. in Economics from Stanford University, an M.A. in Economics from Queen’s University, and a B.A. from the University of Alberta, where he received the Economics Gold Medal. He was also named a Carmichael Fellow at Queen’s University. His current work continues to focus on the economic analysis of consumer finance markets and regulatory policy.
Hiding Medical Debt Won’t Solve America’s Healthcare Crisis
For more than 100 million Americans, medical debt is an undeniable reality. Policymakers are right to be concerned about the burden it places on individuals and families. However, the Consumer Financial Protection Bureau’s (CFPB) proposed rule banning the inclusion of medical debt on credit reports was a misguided response. The CFPB’s emotionally charged justification for its proposed rule relies on disputed data and anecdotal narratives while ignoring the practical role of credit reporting in healthcare finance, ultimately risking a shift from cooperative repayment toward more aggressive enforcement strategies like litigation and reduced access to financing.
The Role of Credit Reporting
Credit reports exist because they help lenders assess the likelihood that a borrower will repay a loan. Removing material information from credit reports degrades the quality of risk assessment. Credit markets rely on accurate, comprehensive data to set interest rates appropriately, determine eligibility, and allocate capital efficiently.
Medical debt is not exempt from this reality. While no one plans to accumulate it, the fact remains that unpaid debts—medical or otherwise—signal a degree of financial strain relevant to lending decisions. Medical debt, although less predictive than credit card or mortgage debt, still correlates with future defaults. The CFPB’s study, cited in their final rule, reveals this, even as the Biden-era Bureau under Director Chopra downplayed the findings.
Eliminating medical debt from reports does not erase the underlying financial obligation, it just removes a signal that helps lenders assess repayment risk. Without that information, lenders must treat borrowers with unpaid medical bills the same as those without them, forcing them to price loans for a riskier pool overall. Imagine a lender with 100 applicants but no way to tell who is likely to repay. To avoid losing money, they must charge enough interest across all borrowers to cover the losses from defaults, meaning that if only a fraction repay, the interest rate must be dramatically higher for everyone. By reducing visibility into a borrower’s financial history, this rule doesn’t reduce hardship but rather it redistributes it through higher borrowing costs, particularly burdening low-risk borrowers who are indistinguishable from high-risk ones. This will be particularly true for low-risk borrowers, who may end up subsidizing higher-risk individuals when medical debt information is removed and risk pooling occurs without sufficient data to distinguish between them. Instead of a targeted benefit to those struggling with medical bills, the rule threatens to raise costs across the board, or reduce access to credit, further squeezing hard working Americans.
Flawed Empirical Justifications
The CFPB and supporters of the rule argue that medical debt is an “unfair” indicator of creditworthiness. Yet their research is deeply flawed. The Bureau’s 2023 study, which forms the backbone of the proposed rule, is methodologically flawed: it draws conclusions from a group of consumers already experiencing financial distress—akin to studying the effects of a medication by only observing patients who were already admitted to the ICU. By failing to account for other drivers of poor credit outcomes, like job loss, chronic illness, or unstable income, the analysis mistakes correlation for causation. As a result, it cannot credibly support the claim that removing medical debt from credit reports will improve consumer outcomes.
Even the frequently cited 2014 study—already outdated by major healthcare reforms like Medicaid expansion, the No Surprises Act, and Regulation F—is riddled with methodological errors. It fails to address the two critical questions that are actually relevant to credit reporting: Are consumers with medical debt more likely to default on other loans? Does the presence of medical debt affect lender behavior and pricing?
The bottom line is that no robust, unbiased evidence has been produced to justify removing medical debt from credit reports. Is it “unfair” that healthcare is expensive, and that the need to consume it and incur debt is often completely outside an individual’s ability to control? Sure. But you don’t solve that problem by hiding the financial distress that medical debt is causing a consumer–that is unfair to the person considering whether to lend them money, and to every consumer who looks like the debtor in every other way, wants a loan, and is not in financial distress. If you are concerned about the high cost of healthcare and surprise medical bills that create debt go solve that problem. Public policy should not be based on anecdotal stories or incomplete studies, no matter how sympathetic individual cases may be.
Real-World Consequences
Supporters of the CFPB rule imagine a world where eliminating medical debt from credit reports unlocks new opportunities: more mortgages, more small business loans, and greater financial freedom. But they ignore the unintended consequences. They ignore basic economics.
First, restricting information will almost certainly lead lenders to tighten credit standards. When risk assessment becomes harder, lenders either raise prices (higher interest rates) or restrict access (fewer loans approved). Ironically, the people the rule intends to help—low- and moderate-income consumers—could face higher costs or fewer financing options.
Second, hospitals and healthcare providers rely on collections to stay solvent, especially in rural areas. If debt collectors lose a primary tool—reporting to credit bureaus—they may resort to more aggressive and costly methods, such as litigation. These alternatives are not only more expensive than the credit reporting system but also far less efficient, with additional intermediaries—lawyers, courts, and collection agencies—taking payments and fees. Instead of a black mark on a credit report, consumers could face lawsuits, wage garnishments, and court judgments. As I pointed out in my opposition to this rule to the CFPB,1 these legal remedies are far harsher and more damaging than a notation on a credit file.
Third, healthcare providers may respond by requiring more upfront payments, increasing reliance on third-party financing, or raising prices. These changes would further disadvantage low-income patients, creating additional barriers to care that function as an information tax placed on all consumers.
Fourth, defining what constitutes “medical debt” is difficult, which raises significant concerns for any policy prohibiting its reporting to credit bureaus. Many consumers use general-purpose credit products—like credit cards, personal loans, or home equity lines—to pay for healthcare. Still, lenders typically cannot determine whether these funds were used for medical purposes. They do not receive itemized receipts; they only receive transaction amounts and merchant names. Requiring lenders to access detailed medical billing information would compromise consumer privacy and create compliance challenges. While the CFPB’s recent rule under the Biden administration excludes debts owed to lenders and applies only to those owed directly to providers, it also admits there’s no consistent way to determine which health-related purchases qualify as medical expenses. Consumers, lenders, and the CFPB recognize the distinction between provider-based debt and financing through third parties, highlighting the definitional and practical flaws in broad bans on reporting so-called medical debt.
In short, while hiding medical debt from credit reports may feel compassionate, it risks unleashing a cascade of economic harm that leaves consumers worse off. The most vulnerable consumers would suffer the most.
The Broader Economic Context
Medical debt is a symptom of broader policy failures: inadequate health insurance coverage, opaque billing practices, and soaring healthcare costs. The 2024 Commonwealth Fund report reveals that 40% of those with medical debt drained their savings to pay bills, and 28% saw their credit scores drop. These alarming statistics point to healthcare system reform, not credit reporting reform, as the appropriate remedy.
Hiding symptoms never cures the disease. Policymakers serious about addressing medical debt should focus on expanding insurance coverage, enforcing transparent billing standards, capping surprise medical bills, and creating financial assistance programs for vulnerable patients. Only by attacking the root causes can we hope to reduce the incidence of medical debt meaningfully and lastingly.
Misrepresenting Public Sentiment
Polling cited by the rule’s supporters claims that three-quarters of voters back removing medical debt from credit reports. But the way a question is framed matters. If voters are asked, “Do you want to help people struggling with medical bills?” the answer will almost always be yes.
However, if voters are asked, “Would you support a policy that could raise your mortgage or auto loan interest rates to help others?” the answer might differ. Public opinion polling is not a substitute for rigorous policy analysis.Policymakers have a responsibility to make decisions based on long-term consequences, not just emotional appeals or superficial surveys.
Conclusion: A Symptom Misdiagnosed
The CFPB’s rule banning medical debt reporting on credit files is a dangerous and ill-conceived attempt to “fix” a problem that has nothing to do with the accuracy of credit reports. Rather than addressing the underlying causes of medical debt, it merely obscures the financial realities that lenders need to make sound decisions.
By degrading the accuracy of credit reports, the rule threatens to raise borrowing costs, reduce access to credit, push medical providers toward more aggressive collections, and ultimately harm the consumers it seeks to protect.
Real reform demands hard work: strengthening healthcare coverage, enhancing billing transparency, supporting financial literacy, and building safety nets for medical emergencies. This rule only delays meaningful change and risks lasting damage to the consumer financial system.
Good intentions are no substitute for good policy. Americans deserve solutions that confront the real challenges of healthcare affordability, not measures that hide the evidence of a broken system.
The opinions shared in this article are the author’s own and do not reflect the views of any organization they are affiliated with.
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The exchange for the debt economy