The Biden administration on Tuesday will propose broad rules that will block medical debt from appearing on borrowers' credit reports, according to multiple outlets.

The proposed rules from the Consumer Financial Protection Bureau would make it easier for millions of Americans to apply for mortgages, credit cards and other types of loans. Vice President Kamala Harris and Consumer Financial Protection Bureau Director Rohit Chopra will announce the proposal Tuesday, ABC News reported.

"Our research shows that medical bills on your credit report aren't even predictive of whether you'll repay another type of loan. That means people's credit scores are being unjustly and inappropriately harmed by this practice," Chopra told the outlet in an interview.

CFPB began the rulemaking process to remove medical bills from credit reports in September. The regulatory board estimates the new rule will allow 22,000 more people to get approved for a mortgage each year, ABC reported.

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Although major credit report companies including Equifax, Experian and TransUnion have already taken steps to remove medical bills from their scoring process, CFPB research shows 15 million Americans still have medical bills on their credit reports. These Americans collectively have more than $49 billion in outstanding medical bills in collections, CFPB said in April.

The people most affected live in low-income communities and the southern United States, where on average they have the most medical bills in collections and for the highest dollar amount, according to CFPB. The board has also said Black and Hispanic households are disproportionately impacted when medical debt is counted in credit reports. 

The proposed rule would require all credit score companies to take medical debt off consumer's credit reports.

"As of April 2024, the CFPB said 15 million Americans had $49 billion in medical bills on credit reports. That's about 6% of the U.S. adult population. So it's not a huge deal in the grand scheme of things, but potentially very significant for those affected," said Ted Rossman, a senior industry analyst with Bankrate. 

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"If you have otherwise excellent credit, a medical collection (any sort of debt collection) could decimate your credit score. We're talking a drop of 100+ points, potentially," Rossman explained. "Studies have shown medical debt isn't as predictive as other types of debt. As in, your credit score is supposed to predict your likelihood of paying late. Medical bills can be life-or-death situations and one-time events that pop up out of nowhere. That's different from forgetting to pay your credit card bill." 

CFPB's proposed rule would also take steps to address inaccuracies in medical bills that can cause conflict between patients and their doctors' billing departments, ABC reported.

"Too often, we see that people are receiving bills that are inaccurate. Many patients are fighting over these bills for months, only to find that it then appears on their credit report," Chopra said.

While the proposed rule may initially benefit consumers, the Association of Credit and Collection Professionals has warned patients could be worse off if they are incentivized to stop paying their medical bills.

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"The proposal, which includes, among other things, a directive to remove all medical debt from credit reports, would result in negative unintended consequences for medical providers and lenders throughout the country," CEO Scott Purcell said in November when ACA filed a response to CFPB's proposed rule-making. 

The industry group pointed to an economic analysis by Andrew Rodrigo Nigrinis, who showed the bureau has not studied whether healthcare providers will refuse to provide credit and cut consumers off from health services, or raise prices on everyone to compensate for those that don't pay their bills. Nigrinis, a Ph.D., previously was the sole enforcement economist at the CFPB in consumer financial services. 

"Proponents say medical debt doesn't belong on credit reports because it's not all that predictive about credit risk and it represents bad luck, not a conscious choice," Rossman told FOX Business.

"Detractors will say this is a handout that means people don't need to pay their medical bills. The CFPB's rule won't explicitly forgive medical debt, but it will remove it from credit reports." 

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Chopra told ABC that people will face penalties if they don't pay their medical bills and appeared dismissive of the idea that large swaths of Americans will default on their debt.

"Those individuals will still be subject to collection actions, lawsuits and more. There are plenty of ways that people get penalized for not paying their bills. I just don't want to see the credit reporting system be weaponized against people who already paid them," Chopra said.