The administration of President Donald Trump is taking aim at state laws that ban the inclusion of medical debt on consumers’ credit reports.
In late October, the Consumer Financial Protection Bureau released what’s known as an interpretive rule, stating that laws prohibiting medical debt reporting in 15 states are preempted by the Fair Credit Reporting Act.
Though the move is not legally binding, it marks an abrupt about-face from CFPB guidance during former President Joe Biden’s administration, which allowed states to make their own credit rules as long as they weren’t “inconsistent” with the federal law. A state requiring each credit agency to provide consumers with two free credit reports per year, for instance, would not be at odds with the FCRA, which requires one.
Consumer credit advocates are sounding the alarm. Millions of Americans are already facing the possibility of rising health-care premiums, a reality that could force more people into medical debt, says Chi Chi Wu, a senior attorney at the National Consumer Law Center.
Should medical debt protections fall, “now we’re going to make it even worse by ruining your credit record,” Wu says. “It’s just insult to injury. It’s rubbing salt in the wound.”
What’s at stake
Medical debt is a major source of financial insecurity among U.S. consumers. Americans owed about $220 billion in medical debt, according to a 2024 analysis from the Kaiser Family Foundation, with around 14 million people owing a debt of more than $1,000 and 3 million people owing more than $10,000.
The three major credit bureaus stopped reporting medical debts below $500 in April 2023. For the 15 states that have taken things a step further by banning any medical debt on credit reports, the rationale is simple, say Wu: Adding the data to credit reports is unnecessarily punitive.
The CFPB declined to comment on the reasoning behind the guidance. But the previous iteration of the agency spelled out why it says medical debt reporting hurts consumers.
“People who get sick shouldn’t have their financial future upended,” former CFPB Director Rohit Chopra said earlier this year. Reporting the debt, he continued, “has allowed debt collectors to abuse the credit reporting system to coerce people into paying medical bills they may not even owe.”
Essentially, allowing medical debt to appear on credit reports — whose related scores determine whether consumers can access credit or buy a home — puts the burden on consumers to navigate debt that is often sudden and difficult to understand.
For proponents of 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 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 was “unlikely to affect credit outcomes.” That’s generally because people who have high levels of medical debt often rack up other kinds of debt to pay for treatment, Wu says.
“If you really are financially struggling from your medical debts, if you started off with an even halfway decent credit score, the first thing that happens is your credit card balances run up,” she says.
In other words, credit issuers likely have all the information they need to determine your creditworthiness, simply by looking at your credit card usage, which makes up a huge part of your score. Adding medical debt to credit reports amounts to kicking consumers when they’re down, says Wu.
‘It’s up to judges, not the CFPB’
Though the CFPB’s interpretive rule is perhaps the first step on the administration’s part to unravel medical debt reporting bans, the guidance itself isn’t legally binding. Rather, those laws would have to be challenged in court, says Brad Lipton, a former general counsel for the CFPB whose name appears on the Biden-era guidance.
“It’s ultimately up to judges, not the CFPB,” he says. The recent guidance, just like the one it contradicts, are merely pieces of evidence for a judge to consider.
In the meantime, the state bans “haven’t been super controversial,” he says. The reason, he says, is that credit reporting of medical debt is not a big driver of payment of medical bills.
“If someone doesn’t pay their medical debt, it’s usually because they simply don’t have the money,” he says. “The government and the system can torture them all they want, but you’re just not going to get much money out of it. It’s water from a stone.”
Want to level up your AI skills? Sign up for Smarter by CNBC Make It’s new online course, How To Use AI To Communicate Better At Work. Get specific prompts to optimize emails, memos and presentations for tone, context and audience.
Plus, sign up for CNBC Make It’s newsletter to get tips and tricks for success at work, with money and in life, and request to join our exclusive community on LinkedIn to connect with experts and peers.
