Trump’s team takes aim at state laws that protect consumers’ credit scores from medical debt

The Trump administration took another step Tuesday to weaken protections for Americans with medical debt, issuing new guidance that threatens the state’s ongoing efforts to keep that debt off consumers’ credit reports.

More than a dozen states, including Washington, Oregon, California, Colorado, Minnesota, Maryland, New York and most of New England, have enacted laws in recent years to prevent medical debt from affecting consumers’ credit.

And more states — including many conservative areas in the Midwest and Mountain West — It has been considered Similar protections, driven by bipartisan concerns that medical debt on a credit report could make it harder for people to get a home, a car, or a job.

At the national level, About 100 million people They have a form of health care debt, saddled millions with unpaid bills of $10,000 or more.

but In the new directiveThe Consumer Financial Protection Bureau asserts that federal law prohibits states from restricting medical debt from credit reports, arguing that only the federal government has that authority.

“Congress intended to occupy the business of consumer reporting and displace state laws,” the bureau concluded, in an “interpretive rule” signed by Russell Vought, White House budget director and acting head of the CFPB.

The guidance, which provides a new interpretation of the Fair Credit Reporting Act, mirrors policies introduced under former President Joe Biden that sought to enable states to expand protections for people with medical debt.

The Trump administration’s latest move will not immediately roll back existing government protections.

But patient and consumer advocates warn that the new guidance could hinder progress elsewhere, just as millions of Americans prepare to lose federal aid that helps them buy health insurance through the Affordable Care Act. The aid is linked to the current budget confrontation between Republicans and Democrats in Congress.

“You would be hard-pressed to find a harsher regulatory interpretation,” said Elizabeth Benjamin, vice president of the Community Service Association of New York. The nonprofit has pushed for medical debt protection in that state.

Lucy Culp, who oversees nationwide lobbying efforts by Blood Cancer United, formerly known as the Leukemia and Lymphoma Society, warned that the Trump administration’s directives could reverberate across the country. “This rule will have a chilling effect on states’ willingness to pass these important patient protections,” she said.

The CFPB did not respond to a request for comment.

New CFPB guidance may spur more lawsuits challenging state restrictions on medical debt credit reporting.

Trade groups representing credit reporting agencies and debt collectors went to court early this year to challenge Regulations issued by the Biden administration It would remove medical debt from credit reports nationwide. They argued that the department exceeded its authority in issuing the credit reporting restrictions.

The federal restrictions could have helped an estimated 15 million people. But the Trump administration chose not to defend the new regulations, and a Trump-appointed federal judge in Texas ruled that the regulations should be overturned. It never went into effect.

The Consumer Data Industry Association, which represents credit bureaus, did not respond to a request for comment on the new CFPB rule, but the industry group argued that regulating medical debt should be left to the federal government.

“Only uniform national standards can achieve the dual goals of protecting consumers and maintaining accurate credit reports,” said Zachary Taylor, the group’s director of government relations. Lawmakers warned in Maine this year before that state banned medical debt from credit reports there.

Broader health insurance protections could prevent more Americans from falling into debt and lowering their credit scores.

But millions of Americans It is expected to lose health coverage in future years as a result of the tax and spending bill the president signed in July.

“Millions of Americans are avoiding medical care, putting off needed surgeries, and skipping essential treatments,” said Allison Siso, president and CEO of Undue Medical Debt, a nonprofit that buys and retires patient debt and advocates for broader patient protections.

“This is not just a health care issue,” Sisso added. “It’s an economic crisis that prevents families from building wealth and fully participating in the economy. When credit scores drop because of medical bills, everyone loses.”