In brief
The Consumer Financial Protection Bureau (CFPB) is set to enact a new interpretative rule that will preempt state laws preventing the reporting of medical debts, contrary to recent protections established by states like New York and Delaware. This move revokes policies from the Biden administration and may lead to increased challenges for individuals dealing with medical debt, a major factor affecting credit scores and access to financial services.
NEW YORK (AP) — The Trump administration is moving to overrule state laws that protect consumers’ credit reports from the adverse effects of medical debt and other debt issues.
The Consumer Financial Protection Bureau (CFPB) has drafted an interpretative rule concerning the Fair Credit Reporting Act (FCRA), asserting that the FCRA should override any conflicting state laws regarding how debt is reported to credit bureaus like Experian, Equifax, and TransUnion.
This action effectively reverses policies implemented during the Biden administration that allowed states to enforce their own bans on the reporting of such debts. States like New York and Delaware have passed laws prohibiting the reporting of medical debts on consumers' credit reports.
Medical debt often generates disputes in credit reporting due to delays in insurance payments and the financial constraints individuals face when bills exceed coverage. Some states are going beyond guidelines set by credit bureaus, which announced they would stop recording medical debts under $500, thus eliminating around 70% of such debts from consumer reports.
The CFPB, which has mainly focused on unwinding previous regulations since the change in administration, contends that Congress aimed to establish universal standards for credit reporting, which conflict with state regulations.
According to the Kaiser Family Foundation, Americans collectively owe about $220 billion in medical debt, with one in six individuals in several Republican-controlled states facing outstanding medical obligations. Delinquent medical debts can significantly affect an individual’s capacity to secure mortgages, credit cards, or auto loans.
A spokesperson for the CFPB has not responded to inquiries regarding this new rule.
