CFPB Abandonment of Medical Debt Rule Will Harm Small Businesses
Statement from Small Business Majority Founder & CEO John Arensmeyer about the consequences of the Consumer Financial Protection Bureau asking a federal judge to vacate a rule that bars medical debt from credit reports
“It’s both disappointing and disturbing that the Consumer Financial Protection Bureau (CFPB) is now undermining a rule finalized earlier this year that prohibits medical debt from appearing on an individual’s credit report. Ending this rule would harm entrepreneurs by making it even more difficult for them to borrow money for their businesses.
Small Business Majority’s research found that 75% of small business owners face challenges obtaining capital. This is partly because many entrepreneurs, especially those who are just starting out, must rely on personal credit scores to access the funding needed to finance their businesses. Therefore, personal medical debt can have a significant impact on small business growth even though the inclusion of medical debt on a credit report offers little to no benefit for lenders. In fact, a 2014 CFPB report found that medical debt is not a good predictor of an individual’s ability to repay a loan. What’s more, when medical debt poses barriers to obtaining responsible financing, entrepreneurs with lower credit scores due to non-predictive factors like medical debt may become more susceptible to working with predatory lenders that often target vulnerable borrowers.
CFPB is wrong to back away from its rule regarding medical debt on credit reports. Instead, it should vigorously defend a regulation that offers clear benefits to America’s entrepreneurs.”
About Small Business Majority
Small Business Majority is a national small business organization that empowers America's diverse entrepreneurs to build a thriving and equitable economy. We engage our network of more than 85,000 small businesses and 1,500 business and community organizations to advocate for public policy solutions and deliver resources to entrepreneurs that promote equitable small business growth. Our deep connections with the small business community along with our scientific research enable us to educate the public about key issues impacting America’s entrepreneurs, with a special focus on advancing the smallest businesses and those facing systemic inequalities. Learn more about us on our website and follow us on Twitter, Facebook and Instagram.
