The Trump administration took another step Tuesday to weaken protections for Americans with medical debt, issuing new guidance that threatens the government's ongoing efforts to keep that debt on consumers' credit reports.
More than a dozen states, including Washington, Oregon, California, Colorado, Minnesota, Maryland, New York and much of New England, have passed laws in recent years to prevent medical debt from affecting consumer credit.
And even more states, including several in conservative regions of the Midwest and Mountain West, considered similar protections prompted by bipartisan concerns that medical debt on a credit report could make it harder for people to get a home, car or job.
All over the country about 100 million people have some form of medical debt, with millions of dollars saddled with unpaid bills of $10,000 or more.
But in the new managementThe Consumer Financial Protection Bureau argues that federal law prohibits states from limiting medical debt from credit reports, arguing that only the federal government has such authority.
“Congress intended to occupy the realm of consumer information and supersede state laws,” the bureau concluded in an “interpretative rule” signed by Russell Vought, the White House budget director and acting head of the CFPB.
The guidance, which offers a new interpretation of the Fair Credit Reporting Act, reverses a policy under former President Joe Biden that sought to give states the ability 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 the new guidelines could set back progress in other countries, just as millions of Americans risk losing the federal aid that helps them buy health insurance under the Affordable Care Act. The aid comes amid the ongoing budget standoff between Republicans and Democrats in Congress.
“You’d be hard-pressed to find a more robust regulatory interpretation,” said Elizabeth Benjamin, vice president of the Public Works Society of New York. The nonprofit has pushed for medical debt protection in the state.
Lucy Culp, who oversees statewide lobbying efforts for Blood Cancer United, formerly known as the Leukemia and Lymphoma Society, warned that the Trump administration's recommendations could reverberate across the country. “This rule will have a chilling effect on states’ willingness to take these important patient protection measures,” she said.
The CFPB did not respond to a request for comment.
The CFPB's new guidance could spark more litigation challenging government restrictions on medical debt reporting.
Trade groups representing credit reporting agencies and debt collectors went to court earlier this year challenging regulations issued by the Biden administration it would eliminate medical debt from credit reports nationwide. They argued that the administration exceeded its authority by imposing restrictions on credit reporting.
Federal restrictions would help about 15 million people. But the Trump administration chose not to defend the new rules, and a federal judge in Texas, appointed by Trump, ruled that the rules should be thrown out. They never came into force.
The Consumer Data Industry Association, which represents credit bureaus, did not respond to requests for comment on the CFPB's new rule, but the industry group argues that regulating medical debt should be left to the federal government.
“Only national uniform standards can achieve the dual goals of protecting consumers and ensuring accurate credit reporting,” said Zachary Taylor, the group's director of government affairs. warned lawmakers in Maine, the state earlier this year banned medical debt from being listed on credit reports.
Broader health insurance protections could prevent more Americans from falling into debt and lowering their credit scores.
But millions of Americans expected will lose health insurance in the coming years as a result of the tax and spending bill signed by the president in July.
“Millions of Americans are avoiding health care, delaying needed surgeries, skipping needed treatments,” said Allison Sesso, president and CEO of Undue Medical Debt, a nonprofit that buys and settles patient debt and advocates for broader patient protections.
“This is not just a health issue,” Sesso added. “This is an economic crisis that makes it difficult for families to build wealth and fully participate in the economy. When credit scores suffer due to medical bills, everyone loses.”
