Administration Goes After Laws on Consumers' Medical Debt

The Trump administration is moving to overrule state laws that may protect consumers' credit reports from medical debt and other debt issues. The Consumer Financial Protection Bureau has drafted a rule related to the Fair Credit Reporting Act that interprets the law in a way that says the act should preempt any state laws or regulations when it comes to how debt should be reported to the credit bureaus like Experian, Equifax, and Trans Union. This repeals Biden-era rules and regulations that allowed states to implement their own credit reporting bans, the AP reports. More than a dozen states prohibit the reporting of medical debt on a consumers' credit report.

More than a dozen states prohibit the reporting of medical debt on a consumer's credit report. Medical debt is often the most disputed part of the report, because insurance payments can take time, and oftentimes patients do not have the means to fully pay a medical bill if insurance is not covering a procedure that has already taken place. The three credit bureaus jointly announced in 2023 they would no longer track medical debts below $500, which at the time the bureaus said would eliminate 70% of all medical debts reported on consumers' credit files. But some states have gone further. New York, Delaware, and others passed laws saying medical debts can no longer be reported to the credit bureaus.

The CFPB, which is not operating at the moment with the exception of actively repealing rules written under President Biden or earlier, says in its rule that Congress intended to "create national standards for the credit reporting system" under the FCRA and that state laws run afoul of that intention. The Kaiser Family Foundation estimates that Americans owe roughly $220 billion in medical debt. In Republican-controlled states like South Dakota, Mississippi, West Virginia, and Georgia, roughly 1 in 6 Americans have outstanding medical debt, according to the foundation. Having outstanding, delinquent medical debt can impact the ability for an individual to get a mortgage, a credit card, or an auto loan.