In brief
The Consumer Financial Protection Bureau (CFPB) under the Trump administration is set to implement a new rule that would negate existing state laws prohibiting the reporting of medical debt on credit reports. This change signals a significant shift from the previous Biden administration's regulations, which empowered states like New York and Delaware to shield consumers from adverse credit impacts due to medical debt. As a result, millions of Americans could face heightened difficulties in obtaining credit. The Kaiser Family Foundation highlights that approximately $220 billion in medical debt exists nationally, exacerbated by delays in insurance payments and individuals unable to pay due to unforeseen medical expenses.
NEW YORK (AP) — The Trump administration is moving to overrule any state laws that may protect consumers’ credit reports from medical debt and other debt issues.
The Consumer Financial Protection Bureau has drafted what’s known as an interpretative rule related to the Fair Credit Reporting Act, interpreting the law in a way that says the FCRA 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 previous Biden-era rules and regulations that allowed states to implement their own credit reporting bans. More than a dozen states like New York and Delaware prohibit the reporting of medical debt on a consumers’ credit report.
Medical debt is often the most disputed part of a consumer’s credit 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 announced in 2023 they would no longer track any medical debts below $500, which they claimed would eliminate 70% of all medical debts reported on consumers’ credit files. However, several states have gone further; New York, Delaware, and others have passed laws prohibiting the inclusion of medical debts on their credit bureaus.
The CFPB, mostly inactive lately aside from repealing prior regulations, states in its new rule that Congress aimed to create national standards for the credit reporting system under the FCRA, which state laws contradict.
Reports from the Kaiser Family Foundation estimate Americans owe roughly $220 billion in medical debt. In many Republican-controlled states, one in six Americans is burdened by outstanding medical debt.
Outstanding medical debt can severely affect an individual’s ability to secure mortgages, credit cards, or auto loans.
A spokesperson for the Bureau did not immediately respond to a request for comment.
