In brief
The Trump administration is poised to overrule state laws that protect consumers' credit reports from medical debt by interpreting the Fair Credit Reporting Act to preempt such regulations. This move rolls back protections enacted under the Biden administration. States like New York and Delaware, which prohibit the reporting of medical debts, may see these laws invalidated. With approximately $220 billion in medical debt affecting millions, this ruling could have significant repercussions on individuals’ creditworthiness and access to lending.
NEW YORK (AP) — The Trump administration is moving to overrule state laws that protect consumers’ credit reports from medical debt and other debt issues.
The Consumer Financial Protection Bureau (CFPB) has drafted what’s known as an interpretative rule concerning the Fair Credit Reporting Act (FCRA), stating that the FCRA should preempt any state laws regarding debt reporting to credit bureaus such as Experian, Equifax, and TransUnion.
This ruling dismantles previous Biden-era regulations that granted states the authority to impose their own credit reporting restrictions. Over a dozen states, including New York and Delaware, have laws preventing the reporting of medical debt on consumers’ credit reports. Medical debt often causes disputes due to insurance payment delays, leaving many patients unable to settle bills fully.
In a 2023 announcement, the three major credit bureaus agreed to stop tracking medical debts under $500, a decision they claimed would eliminate 70% of reported medical debts. However, certain states have taken more stringent measures, barring any medical debt from being reported.
The CFPB asserts that Congress aimed to establish national standards for the credit reporting system through the FCRA, claiming state laws undermine this intent.
According to the Kaiser Family Foundation, around $220 billion in medical debt exists across the U.S., significantly impacting individuals’ ability to acquire loans or credit cards. The rise in outstanding medical debts poses a decisive barrier for many who are economically disadvantaged.
The CFPB has not yet issued comments in response to requests for clarification about this new interpretation of the law.
