Trump CFPB aims to nix laws that ban medical debt on credit reports
President Donald Trump’s administration is taking aim at state laws that prohibit medical debt from being included on consumers’ credit reports.
In late October, the Consumer Financial Protection Bureau interpretive rulestating that Laws banning medical debt reporting in 15 states It takes precedence under the Fair Credit Reporting Act.
While the move is not legally binding, it marks an abrupt turnaround from CFPB guidance during former President Joe Biden’s administration that allowed states to create their own credit rules as long as they were not “inconsistent” with federal law. For example, a state that requires every credit agency to provide consumers with two free credit reports per year would not conflict with the FCRA, which requires one.
Consumer credit advocates are sounding the alarm. Millions of Americans already face the possibility of rising health premiums, which could push more people into medical debt, says Chi Chi Wu, senior attorney at the National Consumer Law Center.
If medical debt protections drop, “we’ll now make it worse by ruining your credit record,” Wu says. “This is just adding insult to injury. Adding salt to the wound.”
What’s at stake?
Medical debt is a significant source of financial insecurity among U.S. consumers. According to a 2024 analysis by the Kaiser Family Foundation, Americans had approximately $220 billion in medical debt; About 14 million people owed more than $1,000, and 3 million people owed more than $10,000.
The three major credit bureaus stopped reporting medical debt under $500 in April 2023. For the 15 states that have taken things a step further by banning any medical debt on credit reports, Wu says the rationale is simple: Adding data to credit reports is unnecessarily punitive.
The CFPB declined to comment on the reasoning behind the guidance. But the agency’s previous version explained why medical debt reporting harms consumers.
“People who get sick should not have their financial futures disrupted,” former CFPB Director Rohit Chopra said earlier this year. He added that reporting debt “allows debt collectors to abuse the credit reporting system to force people to pay medical bills they don’t even owe.”
Essentially, allowing medical debt to show up on credit reports (its associated scores determine whether consumers can access credit or buy a home) puts the burden on consumers to handle debt that is often sudden and elusive.
For those who advocate including medical debt on credit reports, “the argument is that the credit report is more accurate because there’s more information, and you don’t want to lend money to someone who has a lot of medical debt,” Wu says.
But an April 2025 study from the National Bureau of Economic Research found that removing medical data from credit reports “is unlikely to impact credit outcomes.” Wu says this is generally because people with high levels of medical debt are paying other types of debt for treatment.
“If you’re really struggling financially because of medical debt, if you started out with a halfway decent credit score, the first thing that happens is your credit card balance runs out,” he says.
In other words, lenders can probably have all the information they need to determine your creditworthiness just by looking at your credit card usage; It makes up a big part of your score. Adding medical debt to credit reports is meant to kick consumers when they’re feeling down, Wu says.
‘This is in the hands of the judges, not the CFPB’
Although the CFPB’s interpretive rule is perhaps the administration’s first step toward eliminating medical debt reporting bans, the guidance itself is not legally binding. Brad Lipton, the former general counsel of the CFPB whose name appears in the Biden-era guidance, says these laws should instead be challenged in court.
“Ultimately, that decision is up to the judges, not the CFPB,” he says. The final guideline, like the guideline it contradicts, consists solely of evidence that a judge must consider.
Meanwhile, he says state bans are “not very controversial.” That’s because credit reporting for medical debt isn’t a big factor in paying medical bills, he says.
“If someone isn’t paying off their medical debt, it’s usually because they don’t have money,” he says. “The government and the system can torture them all they want, but you won’t get much money out of it. This is water from a rock.”
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