The Trump administration is taking steps to restrict state initiatives aimed at removing medical debt from consumers’ credit reports. This decision comes as millions of Americans grapple with rising healthcare premiums due to congressional Republicans’ refusal to extend subsidies linked to the Affordable Care Act.
On Tuesday, the Consumer Financial Protection Bureau (CFPB), led by Russell Vought, will issue a nonbinding interpretive rule asserting that federal law generally preempts state laws concerning credit reporting. This guidance echoes the sentiments of a federal judge in Texas, appointed by Donald Trump, who recently invalidated a rule from the Biden administration that sought to prohibit the reporting of medical debt on credit profiles.
Medical debt has become a pressing issue in the United States, with approximately 14 million adults owing more than $1,000 in medical bills. An estimated 20% of Americans have medical debt listed on their credit reports. Advocates for eliminating medical debt from credit reporting argue that it does not accurately reflect an individual’s creditworthiness. The Center for Consumer Law & Economic Justice at UC Berkeley highlights that medical debt often results from unexpected health issues and the complexities of navigating an often challenging healthcare system.
In response to the growing crisis, over a dozen states, including California, Colorado, and New York, have implemented measures to limit the reporting of medical debt, recognizing its significant contribution to personal bankruptcies in the country.
As reported by The Lever, the Trump administration’s assertion that federal law supersedes state regulations is being used by industry groups to challenge existing legal frameworks in various states. For instance, the Consumer Data Industry Association, which represents major credit reporting agencies such as Equifax, Experian, and TransUnion, is advocating that federal laws invalidate state-level regulations concerning medical debt.
Chi Chi Wu, an attorney at the National Consumer Law Center, expressed concern to Bloomberg Law about the implications of the CFPB’s stance, describing it as adding “salt to the wound” for millions facing increasing healthcare costs.
Writing for MSNBC, Julie Margetta Morgan, president of the Century Foundation, warned that the impending spike in healthcare premiums will further exacerbate the medical debt crisis. She stated, “The spike in premiums won’t just blow an even bigger hole in families’ future budgets. It will pour gasoline on the already raging fire of medical debt in this country,” emphasizing the lack of preparedness among government leaders to address this issue.
In summary, the Trump administration’s recent actions signal a significant shift in the regulatory landscape surrounding medical debt reporting, posing challenges to state efforts aimed at better protecting consumers’ financial health.
