In brief
Changes proposed by the Consumer Financial Protection Bureau (CFPB) indicate that state protections against medical debt reporting will be nullified under the Fair Credit Reporting Act. This policy shift endangers regulations established by states like New York and Delaware that prohibit medical debt from appearing on credit reports, a move that could have far-reaching impacts on millions of Americans already struggling with medical expenses.
NEW YORK (AP) — The Trump administration is moving to overrule state laws that protect consumers' credit reports from the impacts of medical debt.
The Consumer Financial Protection Bureau (CFPB) has drafted an interpretative rule concerning the Fair Credit Reporting Act (FCRA), stating that the FCRA should take precedence over state laws regarding debt reporting to major credit bureaus like Experian, Equifax, and TransUnion.
This action reverses Biden-era regulations, which permitted states to impose their own bans on reporting medical debt. More than a dozen states including New York and Delaware had enacted laws prohibiting medical debt from being reported, aiming to alleviate financial pressure on consumers.
Medical debt constitutes a significant challenge for many consumers’ credit reports due to delays in insurance payments. In many cases, patients are unable to pay bills fully before insurance coverage is processed.
The three major credit bureaus announced in 2023 that they would cease tracking medical debts below $500, which reportedly eliminates about 70% of all medical debts reflected in credit files. However, some states, like New York and Delaware, have advanced further by completely barring the reporting of medical debts on credit reports.
The CFPB claims that Congress intended to develop national standards for the credit reporting system via the FCRA, arguing that state laws undermine this purpose.
According to the Kaiser Family Foundation, an estimated $220 billion in medical debt is owed by Americans nationwide. In Republican-led states like South Dakota, Mississippi, West Virginia, and Georgia, approximately one in six residents carry unresolved medical debt, which can severely limit their eligibility for mortgages, credit cards, or auto loans.
A spokesperson for the CFPB has not provided a comment regarding this rule change.
